ADVO Reports Preliminary Fourth Quarter and Fiscal 2006 Results.WINDSOR, Conn. -- ADVO, Inc. (NYSE NYSE See: New York Stock Exchange : AD) today reported preliminary results for its fourth quarter and full year fiscal 2006. The Company's final results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for fiscal 2006, expected to be filed in early December. On a preliminary basis, revenue for its fiscal year ended September 30, 2006 was a record $1,443.5 million versus $1,385.6 million in the prior fiscal year, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $37.9 million versus $69.1 million in the prior fiscal year, and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. E.P.S. was $0.66 versus $1.27 in the prior fiscal year. Fiscal 2006 contained a planned extra week versus the prior year period due to the Company's 52/53 week fiscal year, which occurred in the Company's third fiscal quarter. Full year fiscal 2006 results contained certain non-recurring and incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. totaling approximately $15.7 million, or $0.32 in E.P.S. Included in the full year results were litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and other costs related to the Company's pending merger with Valassis Communications, Inc. (NYSE: VCI VCI Verband Der Chemischen Industrie (German: federation of chemical Industries) VCI Virtual Channel Identifier (used in Asynchronous Transfer Mode) VCI Veterinary Council of India VCI Virtual-Circuit Identifier ) of $7.4 million and a charge of $3.0 million related to the previously announced closure of the Company's Memphis production facility, the newspaper agreements in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, , and the outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of the Company's graphics print services. In addition to these costs, the Company incurred incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. year-over-year expenses of $5.3 million related to the adoption of FAS123(R). On a preliminary basis, the Company's fourth quarter revenue was $343.8 million versus $343.2 million in the prior year period, operating income was a loss of ($5.7) million versus an operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $14.1 million in the prior year period, and diluted E.P.S. was a loss of ($0.12) versus a profit of $0.27 in the prior year period. The fourth quarter of fiscal 2006 contained certain non-recurring and incremental costs totaling approximately $7.4 million. The fourth quarter included litigation and other costs related to the pending merger with Valassis of $4.5 million. Also included in the fourth quarter results was a charge of $1.5 million related to the previously announced closure of the Company's Memphis production facility, the newspaper agreements in Southern California, and the outsourcing of the Company's graphics print services. In addition to these costs, the Company incurred incremental year-over-year expenses of $1.4 million related to the adoption of FAS123(R). Additionally, during the Company's fourth fiscal quarter, adjustments were made to client billings which related to advertising distributed during the Company's third fiscal quarter. These billing adjustments related to orders entered in the Company's new SDR See software defined radio. enterprise wide order-to-cash system, and were identified during the Company's fourth fiscal quarter. The billing adjustments totaled approximately 1.8% of the Company's quarterly revenue, and reduced fourth quarter revenue and operating income by approximately $6 million. Preliminary fourth quarter operating income as a percentage of revenue declined 5.8 percentage points versus the prior year period. The billing adjustments accounted for approximately 1.8 percentage points of operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: decline. Incremental costs related to the Valassis merger and litigation accounted for 1.3 percentage points of operating margin decline, and costs related to investment in Company strategic initiatives, specifically the Memphis production facility consolidation, Southern California newspaper agreements and graphics print outsourcing, accounted for 0.4 percentage points of operating margin decline. The adoption of FAS123(R) accounted for 0.4 percentage points of operating margin decline. Fourth quarter operating income as a percent to revenue was also impacted by decreases in zone products revenue (1.6 percentage points), transitional costs related to the Company's conversion to its new enterprise-wide SDR order-to-cash system (approximately 0.9 percentage points), and additional depreciation expense primarily due to placing the Company's new SDR system in service (0.5 percentage points). The Company's preliminary year-end balance sheet showed improvements during its fourth fiscal quarter. As expected, improvements in receivables collections drove increases in cash flow, enabling the Company to pay off the third quarter ending revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to balance of $21 million. This left $125 million of long-term notes outstanding at fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. , and provided a year-end book cash balance of $38 million. For the full fiscal year capital expenditures were $44 million, down $11 million from the prior year. In the fourth quarter the Company's shared advertising packages grew 1.6% to 1.050 billion, and pieces per package were 8.6, up 2.2%. Total shared advertising piece volumes grew 3.9% to 9.1 billion. This quarterly piece volume result was the highest in ADVO's history, reflecting continuing increases in demand for the Company's products and movement toward more targeted, measurable media across the advertising marketplace. Revenue per piece(a)declined 5.7%, driven by the billing adjustments, decreases in zone product revenue, and to a lesser extent declines in advertising piece weights and revenue per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. . Fourth quarter total zone products revenue declined $5.7 million year-over-year. Scott Harding Harding Starred in the 2006 NAB cup. , ADVO's Chief Executive Officer stated, "Like other companies in our industry, ADVO's performance was impacted by a decline in industry market conditions. Nevertheless I am proud of our efforts and believe that we are well positioned for success. I am particularly proud of our people as we are weathering the industry downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the face of the tremendous distraction Distraction Divination (See OMEN.) Porlock a “person from Porlock” interrupted Coleridge while he was recollecting the dream on which he based “Kubla Khan”. [Br. Lit.: Poems of Coleridge in Magill IV, 756] and time commitment involved with the Valassis merger announcement, the thousands of hours spent on due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. and Valassis-imposed integration planning activities, and the enormous burden of the ensuing en·sue intr.v. en·sued, en·su·ing, en·sues 1. To follow as a consequence or result. See Synonyms at follow. 2. To take place subsequently. litigation. Additionally, ADVO associates across our Company put forth a terrific effort during the implementation of our new SDR enterprise wide order-to-cash system. Despite these significant productivity drains, we were able to deliver revenue performance in excess of our peers. Our margins, while down, were consistent with declines realized across the industry." Mr. Harding continued, "This has been a year like no other, with management's time and energy devoted to several major initiatives. As we enter fiscal 2007, we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about our prospects for profitable growth, including continuing to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the marketplace trend towards more measurable, targeted media. Importantly, our efforts in 2007 will be focused on generating revenue within our existing in-home network, leveraging our cost base and delivering profitable growth. We are also looking forward to benefiting from the significant strategic initiatives in which we invested in this past year. These include the benefits from our Southern California newspaper agreements, graphics print outsourcing, Memphis facility consolidation, and redesigned Zone Products strategy." Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma impact of certain non-recurring expenses, one-time charges, and FAS123(R) adoption on operating income and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of *: [TABLE OMITTED] * This non-GAAP financial measure reconciliation is provided because fiscal 2006 preliminary operating income and E.P.S. includes incremental expenses the Company incurred as a result of litigation and other costs related to its pending merger with Valassis, charges related to various strategic initiatives, and the adoption of new accounting rules related to FAS123(R). Management believes that reconciling operating income and E.P.S. in this manner facilitates comparisons to prior period results and assists securities analysts and others when comparing actual results to their expectations. The above non-GAAP E.P.S. calculation should not be considered a substitute for GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). E.P.S. ** This non-GAAP financial measure does not adjust for estimated negative profit impact of an estimated $6 million in operating income and $0.14 in E.P.S. related to the transition to the Company's new order entry system during fiscal 2006. [TABLE OMITTED] (a) 4Q06 and FY06 revenue per thousand pieces have been estimated to provide materially comparable statistics versus the prior year period. (b) The impact of the 53rd week on revenue, advertising packages and pieces has been estimated to provide materially comparable statistics to the prior year period. The Company will hold a prerecorded pre·re·cord tr.v. pre·re·cord·ed, pre·re·cord·ing, pre·re·cords To record (a television program, for example) at an earlier time for later presentation or use. Adj. 1. analyst conference call to discuss its fiscal 2006 earnings today at 5:15-6:00 p.m. ET. The call in number is 1-800-818-5264, and the replay number is 1-888-203-1112 (access code #7937439). The replay will be available until midnight, December 6, 2006. The call will also be available via webcast through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of ADVO's website at www.advo.com. 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 a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . 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; fluctuations in interest rates; the outcome of litigation regarding ADVO's merger agreement with Valassis; and other general economic factors. Additonally, the information in this press release is presented on a preliminary basis, and represents management's best estimate of the Company's results for the fourth fiscal quarter and full fiscal year 2006. The results discussed herein are subject to the completion of the Company's year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006. 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 The U.S. Postal Service (USPS) processes and delivers mail to individuals and businesses within the United States. The service seeks to improve its performance through the development of efficient mail-handling systems and operates its own planning and engineering programs. in 1985. ADVO employs 3,700 people at its 23 mail processing facilities, 33 sales offices and headquarters in Windsor, CT. The company can be visited online at www.ADVO.com. [TABLE OMITTED] * The Company's final fourth quarter and year-end fiscal 2006 results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. [TABLE OMITTED] * The Company's final year-end fiscal 2006 results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. [TABLE OMITTED] * The Company's final year-end fiscal 2006 results are subject to the completion of year-end audit procedures, and final results will be reported in conjunction with the filing of the Company's Form 10-K for fiscal 2006, expected to be filed in early December. |
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