ADVO Revenue Grows 9%, E.P.S. Increases 28% in First Quarter of Fiscal 2001.

Business Editors

WINDSOR, Conn.--(BUSINESS WIRE)--Jan. 18, 2001

ADVO, Inc. (NYSE: AD) reported record revenues and profits for its first fiscal quarter, ended December 30, 2000. Revenues showed strong growth for the quarter, at $297.5 million, an increase of $23.3 million, or 8.5% versus the prior year period. Record diluted earnings per share were $0.73 versus $0.57 for the prior year period, an increase of 28.1%. Operating income of $28.5 million exceeded the prior year by $5.5 million, or 24.1%. Additionally, operating margins continued to expand, as operating income as a percentage of revenue reached 9.6%, an all-time first quarter high. Included in the prior year period was a one-time charge of $2.2 million relating to the expensing of a consulting agreement between the Company and its former Chairman. Excluding this charge, operating income and diluted earnings per share increased $3.3 million and $0.09, respectively.

Core shared mail revenue posted solid growth versus the prior year period, as first quarter shared mail revenues were up 7.5%. First quarter packages distributed were 790.4 million, up 7.1%, as the Company invested in additional mailings during the holiday season as a result of additional client demand. Revenue per piece was up 2.0%, to $40.05. As expected, shifts in calendar timing resulted in the inclusion of a seasonally soft final week in the first quarter of fiscal 2001, a week which fell into the Company's second fiscal quarter the prior year. As a result of this, as well as the demand-based increase in the number of advertising packages distributed, pieces per package were 8.55, down 1.5% versus the prior year period. Excluding December, the month affected by these factors, pieces per package were up 2.4%.

The Company continued to post record margin results. First quarter operating income of $28.5 million increased 1.2 percentage points as a percentage of revenue over the prior year period, to 9.6%. First quarter gross margin as a percentage of revenue of 28.4% was unfavorable to the prior year period by a modest 0.5 percentage points due to the quarter's additional mailings. However, SG&A was $56.1 million, or 18.8% of revenue, an improvement over prior year of 1.7 percentage points as reported, and 0.9 percentage points excluding the prior year's $2.2 million charge.

Gary Mulloy, ADVO's Chairman and Chief Executive Officer said, "We are pleased to report our eighteenth consecutive quarter of record earnings. Our strong revenue results continue to demonstrate our top-line momentum, driving substantial increases in E.P.S. We are also extremely pleased with our continued record margin results." Mr. Mulloy stated, "Looking forward into the remainder of fiscal 2001, we expect our revenue and profit momentum to continue, and as a result remain comfortable with current E.P.S. expectations."

ADVO is the nation's largest full-service targeted direct mail marketing services company with annual revenues of over $1 billion. The Company's core ShopWise branded shared mail program is distributed nationally to approximately 60 million households weekly. Approximately 30 million additional households can be reached, on a shared mail basis, through ADVO's National Network Extension (A.N.N.E.). Additionally, the Company's consumer web site, ShopWise.com, provides targeted internet access to consumers. ADVO's subsidiary, MailCoups, Inc., produces Super Coups, a direct mail-based advertising solution for local neighborhood businesses in an envelope format. ADVO has 21 mail processing facilities and 60 sales offices nationwide. ADVO's corporate headquarters are located at One Univac Lane, Windsor, Connecticut 06095. The Company can be visited at its Web site at www.advo.com.

The forward-looking statements in this report are based upon current information and expectations and are subject to risks and uncertainties in the Company's operations and business environment. Such risks and uncertainties include, but are not limited to, changes in customer demand and pricing, the possibility of consolidation throughout the retail sector, postal and paper prices, the efficiencies achieved with technology upgrades, and other general economic factors.

                              ADVO, Inc.
                   Results of Operations (Unaudited)
                    Quarter Ended December 30, 2000
                 (In thousands, except per share data)

                                        Quarter Ended
                             -------------------------------------
                              Dec. 30, 2000    Dec. 25, 1999
                             -------------   ---------------------

Revenues                        $297,541             $274,203
Cost of sales                    213,000              195,021
Selling, general &
 administrative                   56,063               56,242
                             ------------    -----------------

Operating Income                  28,478               22,940

Interest expense                   4,638                3,999
Other expense, net                   119                   63
                             ------------    ------------------

Income before income taxes        23,721               18,878
Provision for income taxes         8,777                6,985
                             ------------    -----------------

Net Income                       $14,944              $11,893
                             ============    =================

Basic earnings per share           $0.75                $0.58
                             ============    =================


Diluted earnings per share         $0.73                $0.57
                             ============    =================

Weighted average
 common shares                    20,027               20,625
Weighted average
 diluted shares                   20,588               20,774