ADVO Reports First Quarter Results.

WINDSOR, Conn. -- ADVO, Inc. (NYSE: AD) today reported that revenue for its first fiscal quarter ended December 30, 2006 was $384.3 million versus $358.2 million in the prior year quarter, and operating income was $2.1 million versus $20.6 million in the prior year quarter. Diluted E.P.S. was $0.02 versus $0.38 in the prior year quarter. The quarter contained non-recurring costs related to the litigation and pending merger with Valassis, Inc. (NYSE: VCI) totaling $19.2 million in operating income and $0.37 in diluted E.P.S. Year-over-year growth in revenue was 7.3%, operating income declined 89.7% "as reported" and grew 3.4% excluding non-recurring costs, and E.P.S. declined 94.7% "as reported" and grew 2.6% excluding non-recurring costs.

During the first fiscal quarter of 2007 the Company's shared advertising packages grew 3.5% over the prior year period to 1.1 billion. Total shared advertising piece volumes grew 6.2% over the prior year period to 9.2 billion, and pieces per package grew 2.6% to 8.6. Revenue per piece(a) declined 2.9% to $37.00, driven by declines in zone products (ShopWise[R] Wrap and Missing Child Card) revenue, increased remnant insert volume and lighter weight advertising inserts. First quarter zone products revenue declined $5.3 million year-over-year.

Gross margin as a percentage of revenue declined 0.5 percentage points over the prior year period, to 22.4%. Total distribution cost as a percent of revenue increased 2.2 percentage points over the prior year period, to 50.5%, driven by increases in shared advertising packages. Print and paper declined 1.2 percentage points as a percent of revenue versus the prior year period, and all other direct costs netted a 0.5 percentage point improvement. SG&A was up $22.6 million over the prior year quarter, including the $19.2 million of non-recurring costs. Operating income as a percent of revenue for the first fiscal quarter of 2007 was 0.6% (down 5.2 percentage points) on an "as reported" basis, and 5.6% (down 0.2 percentage points) excluding non-recurring costs related to the transaction with Valassis.

The Company's debt balance at quarter-end was approximately $127 million and book cash was $24.8 million.

The Company will not be holding an analyst call to discuss its first quarter earnings due to the pending merger with Valassis.

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This press release may contain certain statements regarding ADVO's business outlook, prospects, future economic performance, anticipated profitability, revenues, expenses or other financial items, future contracts, market opportunities and other statements that are not historical facts. Such statements are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. Such forward looking statements are based on current information and expectations and are subject to risks and uncertainties which could cause ADVO's actual results to differ materially from those in the forward looking statements. ADVO's business is promotional in nature, and ADVO serves its clients on a "just in time" basis. As a result, fluctuations in the amount, timing, pages, weight, and kinds of advertising pieces can vary significantly from period to period, depending on its customers' promotional needs, inventories, and other factors. In any particular period these transactional fluctuations are difficult to predict, and can materially affect ADVO's revenue and profit results. ADVO's business contains additional risks and uncertainties which include, but are not limited to: general changes in customer demand and pricing; the possibility of consolidation in the retail sector; the impact of economic or political conditions on advertising spending and ADVO's distribution system; postal and paper prices; possible governmental regulation or legislation affecting aspects of ADVO's business; the efficiencies achieved with technology upgrades; the efficiencies realized with outsourcing and other cost saving initiatives; fluctuations in interest rates; the outcome of pending shareholder lawsuits; the completion of the pending merger with Valassis; and other general economic factors. Additional risks include, but are not limited to, those identified in the Company's form 10-K for fiscal 2006 and Form 10-Q for the first fiscal quarter of 2007.

ADVO is the nation's leading direct mail media company, with annual revenues of $1.4 billion. Serving 17,000 national, regional and local retailers, the company reaches 114 million households, more than 90% of the nation's homes, with its ShopWise([R])shared mail advertising.

The company's industry-leading targeting technology, coupled with its unparalleled logistics capabilities, enable retailers seeking superior return on investment to target, version and deliver their print advertising directly to consumers most likely to respond.

Demonstrating ADVO's effectiveness as a print medium, the company's "Have You Seen Me?([R])" missing child card, distributed with each ShopWise([R]) package, is the most recognized mail in America. This signature public service program has been responsible for safely recovering 143 children. The program was created in partnership with the National Center for Missing & Exploited Children and the U.S. Postal Service in 1985.

ADVO employs 3,800 people at its 23 mail processing facilities, 28 sales offices and headquarters in Windsor, CT. The company can be visited online at www.ADVO.com.

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