<PAGE>
 
 
                                   ADVO, Inc.
 
                                   Form 10-K
 
                               September 26, 1998
 
 
<PAGE>
 
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                                   FORM 10-K
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
(Mark One)
 
 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
 
For the fiscal year ended September 26, 1998
                          ------------------              

                                      OR
 
 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
 
For the transition period from _________ to _________
 
Commission file number 1-11720
 
                                  ADVO, INC.
            ------------------------------------------------------   
            (Exact name of registrant as specified in its charter)
 
              Delaware                                 06-0885252
-------------------------------------     --------------------------------------
   (State or other jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)
 
   One Univac Lane, P.O. Box 755,                      
             Windsor, CT                                06095-0755
-------------------------------------     --------------------------------------
   (Address of principal executive                      (Zip Code)
              offices)
 
      Registrant's telephone number, including area code: (860) 285-6100
                                                          ----------------   

Securities registered pursuant to Section 12(b) of the Act:
 
               Common Stock and Rights, par value $.01 per share
               -------------------------------------------------
                               (Title of Class)
 
Securities registered pursuant to Section 12(g) of the Act:
 
                                     NONE
                                     ----

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
 
The aggregate market value of voting stock held by non-affiliates of the
registrant at November 27, 1998 was $506,416,219. On that date, there were
22,133,572 outstanding shares of the registrant's common stock.
 
Documents Incorporated by Reference:
 
Portions of the 1998 Annual Report to Stockholders are incorporated by
reference into Parts II and IV of this Report.
 
Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Report.
 
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<PAGE>
 
                                   ADVO, INC.
                          INDEX TO REPORT ON FORM 10-K
                     FOR THE YEAR ENDED SEPTEMBER 26, 1998
 
                                     PART I
 
<TABLE>
<CAPTION>
ITEM                                                                        PAGE
----                                                                        ----
<S>                                                                         <C>
 1. Business................................................................  1
 2. Properties..............................................................  5
 3. Legal Proceedings.......................................................  5
 4. Submission of Matters to a Vote of Security Holders.....................  5
                                                                             
                                    PART II                                  
                                                                             
 5. Market for Registrant's Common Equity and Related Stockholder Matters...  6
 6. Selected Financial Data.................................................  7
 7. Management's Discussion and Analysis of Financial Condition and Results  
    of Operations...........................................................  7
7a. Quantitative and Qualitative Disclosure about Market Risk...............  7
 8. Financial Statements and Supplementary Data.............................  7
 9. Changes in and Disagreements with Accountants on Accounting and Finan-   
    cial Disclosure.........................................................  7
                                                                             
                                    PART III                                 
                                                                             
10. Directors and Executive Officers of the Registrant......................  8
11. Executive Compensation..................................................  8
12. Security Ownership of Certain Beneficial Owners and Management..........  8
13. Certain Relationships and Related Transactions..........................  8
                                                                             
                                    PART IV                                  
                                                                             
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........  8
</TABLE>
<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
  ADVO, Inc. ("ADVO" or the "Company") is a direct mail marketing firm
primarily engaged in soliciting and processing printed advertising from
retailers, manufacturers and service companies for targeted distribution by
both shared and solo mail to consumer households in the United States on a
national, regional and local basis. Founded in 1929 as a hand delivery
company, the Company entered the direct mail industry as a solo mailer in 1946
and began its shared mail program in 1980. The Company currently is the
largest commercial user of third-class mail in the United States.
 
  ADVO competes primarily with newspapers, direct mail companies, broadcast
media, periodicals and other local distribution entities for retail
advertising expenditures. The Company believes that direct mail, which enables
advertisers to target advertisements to specific customers or geographic
areas, is the most efficient vehicle for delivering printed advertising on a
saturation or full market coverage basis, as well as an effective means of
targeted coverage.
 
  ADVO's principal executive offices are located at One Univac Lane, Windsor,
Connecticut 06095.
 
PRODUCTS AND SERVICES
 
  ADVO's direct mail marketing products and services include shared mail and
solo mail. ADVO also provides ancillary services in conjunction with its
direct mail marketing programs. In addition, during fiscal 1998, the Company
acquired a franchise-based coupon envelope mail company.
 
SHARED MAIL
 
  In the Company's shared mail programs (Marriage Mail(R) and Mailbox
Values(R)), the advertisements of several advertisers are combined into a
single mail package.
 
  Shared mail packages are assembled by the Company for distribution by ZIP
Code and, in most instances, each household within the ZIP Code will receive a
mail package. Individual customers can choose a portion of the designated
mailing area for their distributions, ranging from part of a ZIP Code to all
ZIP Codes covered by the program. This flexibility enables major customers,
such as retail store chains, to select areas serviced by their retail stores
and, at the same time, distribute different versions of their advertisements
to accommodate the needs of their individual stores. It also allows a smaller
retailer to target only those ZIP Codes or portions of ZIP Codes needed to
accommodate its customer base, thereby reducing overall advertising costs.
 
  During fiscal 1998, the Company began offering the nationwide availability
of ADVO Targeting Zones ("ATZs") which enables advertisers to target their ads
to consumer clusters of about 3,500 households. ATZs are neighboring postal
carrier delivery routes within a ZIP Code that are clustered together based on
shared demographic characteristics and proximity to key retail shopping areas.
 
  The Company's shared mail programs offer the features of penetration and
target marketing at a significant cost reduction when compared to mailing on
an individual or solo mail basis. This cost advantage is available because the
Company pays the total postage expense, and advertisers are generally charged
a selling price based upon, among other factors, the incremental weight of
their promotional pieces.
 
  As a part of its shared mail programs, the Company provides the addresses of
the households receiving the mail packages, sorts, processes and transports
the advertising material for ultimate delivery through the United States
Postal Service ("USPS"). Generally, larger businesses, such as food chains and
mass merchandisers, will provide the Company with preprinted advertising
materials in predetermined quantities. In the case of manufacturers and small
retail customers, the Company may perform graphics services and act as a
broker for the required printing. The Company also offers shared mail
customers numerous standard turnkey advertising products in a variety of sizes
and colors.
 
                                       1
<PAGE>
 
  The Company believes its shared mail programs are the largest programs of
their kind.
 
  Marriage Mail(R) is a weekly mail program with coverage, on average, of 60
million households in approximately 120 markets. This program is used by local
and national retailers. The ZIP Code configuration selected for each market is
normally determined by population density and by proximity to retail outlets.
Retailers with multiple locations and weekly frequency have a great influence
on the ZIP Codes chosen by the Company for its weekly mailings. The Company
derives most of its revenues from the Marriage Mail(R) program.
 
  In fiscal 1997, the Company formed a new network, known as ADVO National
Network Extension ("A.N.N.E."), of regional shared mail companies to provide
its clients with extended coverage outside the markets already served by the
Company. Approximately an additional 21.5 million households can be reached on
a shared mail basis through A.N.N.E. The Company handles the clients' orders
directly and manages distribution of their advertising through A.N.N.E.'s
partners. Conversely, A.N.N.E. enables participating partners (shared mail
companies) to offer their clients extended marketplace reach using the
Company's services.
 
SOLO MAIL
 
  Solo mail services include addressing and processing brochures and circulars
for an individual customer for distribution through the USPS. Each customer
bears the full cost of postage and handling for each mailing. Customers
choosing this form of direct mail are generally those who wish to maintain an
exclusive image and complete control over the timing and the target of their
mailings.
 
  The Company processes solo mail using its own mailing list or lists supplied
by the customer. The Company charges a processing fee based on the solo mail
services rendered.
 
OTHER PRODUCTS AND SERVICES
 
  Through a specialized firm hired by the Company to manage it, the Company
rents portions of its mailing list to organizations interested in distributing
their own mailings. The Company may or may not perform the associated
distribution services for the customer.
 
  ADVO Creative Services, Inc., based in Texas, is a wholly-owned subsidiary
of the Company which specializes in the coordination and production of custom
promotional magazines and circulars which, in most cases, are then distributed
by the Company.
 
  On February 27, 1998, the Company acquired The Mailhouse, Inc., a franchise-
based cooperative coupon envelope mail company headquartered in Avon, MA. The
company was renamed MailCoups, Inc. ("MailCoups") and operates as a subsidiary
of ADVO. The new subsidiary, operating under the trade name of SuperCoups, is
a leader in creating and distributing attractive, cost-effective targeted
coupons in a distinctive envelope format for local neighborhood merchants via
an extended network of franchise owners. At the end of fiscal 1998, MailCoups
had approximately 300 franchise units in 26 states and directly employed 145
people.
 
MAILING LIST
 
  ADVO's management believes its computerized mailing list is the largest
residential/household mailing list in the country. It contains over 116
million delivery points (constituting nearly all of the households in the
United States) and was used by the U.S. Census Bureau as a base for developing
the mailing list for its 1980 and 1990 census questionnaire mailings. The
Company's management believes that the list is particularly valuable and that
replication in its entirety by competitors would be extremely difficult and
costly. The list enables the Company to target mailings to best serve its
customers.
 
                                       2
<PAGE>
 
  ADVO's list is updated on a regular basis with information supplied by the
USPS. Bimonthly, ADVO submits each address on its mailing list to the USPS.
The USPS then provides to ADVO any changes to the addresses within the ZIP
Code. Such changes would cover whether the address is still occupied, whether
the address still exists at all (i.e., demolished buildings) and any new
addresses included in the ZIP Code (i.e., new construction). The USPS also
indicates to ADVO changes in the walk sequence order of addresses, which
allows ADVO to qualify for the lowest possible postage rates. The USPS
provides these updates to any user for a fee, provided that the user's list is
at least 90% complete on a ZIP Code basis. ADVO believes its list is nearly
100% accurate.
 
CUSTOMER BASE
 
  Typically, the Company's customers are those businesses whose products and
services are used by the general population. These businesses (supermarkets,
fast food, drug stores, discount and department stores and consumer products
manufacturers) require continuous advertising to a mass audience. No one
customer accounted for more than 4% of the Company's sales in fiscal 1998,
1997, or 1996.
 
OPERATIONS
 
  Customers' advertising circulars are processed by approximately 2,400
production employees who work at 19 mail processing facilities which are
strategically located throughout the nation. State-of-the-art inserting
machines (which combine the individual advertising pieces into the mailing
packages), addressing and labeling, and quarter-folding equipment are the
principal pieces of equipment used to process the Company's products and
services. At several of the Company's production facilities, a new
computerized mail sorter is being utilized and developed. In all 19 of ADVO's
mail processing facilities, the USPS accepts and verifies the Company's mail
to help ensure rapid package acceptance and distribution, which benefits both
the USPS and the Company. In most instances, the mail is then shipped by the
Company to the destination office of the USPS for final delivery.
 
  MailCoups operates a cooperative direct mail coupon envelope advertising
business by performing printing and distribution services for the franchisees
at their one production facility.
 
  During fiscal 1996, the Company entered into a ten year agreement with
Integrated Systems Solution Corporation, now known as IBM Global Services, to
provide systems development and technical support to the Company. As a result
of this outsourcing, ADVO's computer center moved from Hartford to IBM Global
Services' computer center located in Southbury, Connecticut. The Company's
branches are on-line to this computer center which enables the day-to-day
processing functions to be performed and provides corporate headquarters with
management information. The systems include: order processing and production
control, transportation/distribution, address list maintenance, market
analysis, label printing and distribution, billing and financial systems, and
carrier routing of addresses received from customer files and demographic
analyses.
 
COMPETITION
 
  In general, the printed advertising market is highly competitive with
companies competing primarily on the basis of price, speed of delivery and
ability to target selected potential customers on a cost-effective basis.
ADVO's competitors for the delivery of retail and other printed advertising
are numerous, and include newspapers, regional and local mailers, direct
marketing firms, "shoppers" and "pennysavers."
 
  Newspapers represent the Company's most significant and direct competition.
Through the distribution of preprinted circulars, classified advertising and
run of press advertising ("ROP"), newspapers have been the traditional and
dominant medium for advertising by retailers for many years. Insertion rates
are highly competitive and many newspapers' financial resources are
substantial.
 
                                       3
<PAGE>
 
  ADVO's principal direct marketing competitors are other companies with
residential lists or similar cooperative mailing programs. These companies
have a significant presence in many of the Company's markets and represent
serious competition to the Company's Marriage Mail(R) programs in those
markets.
 
  There are local mailers in practically every market of the country. In
addition to local mailers, there are many local private delivery services such
as "shoppers" and "pennysavers" which compete by selling ROP advertisements
and classified advertisements. ADVO believes that it competes effectively in
its various markets.
 
SEASONALITY
 
  ADVO's business generally follows the trends of retail advertising spending.
The Company has historically experienced higher revenues in the second half of
the calendar year.
 
RESEARCH AND DEVELOPMENT
 
  Expenditures of the Company in research and development during the last
three years have not been material.
 
ENVIRONMENTAL MATTERS
 
  The Company believes that it is substantially in compliance with all
regulations concerning the discharge of materials into the environment, and
such regulations have not had a material effect on the capital expenditures or
operations of the Company.
 
RAW MATERIALS
 
  The Company manages approximately 45,000 tons of paper per year through its
printing network on behalf of its print vendors. ADVO has agreements with
various paper suppliers and print vendors to assure the supply of proper paper
grades at competitive prices.
 
EMPLOYEES
 
  As of September 26, 1998, the Company had a total of approximately 4,600
full and part-time employees. ADVO also uses outside temporary employees,
particularly during busy seasons.
 
  ADVO has one union contract, covering production employees in the Hartford,
Connecticut branch. The Company believes that its relations with its employees
are satisfactory.
 
FORWARD LOOKING STATEMENTS
 
  Except for the historical information stated herein, the matters discussed
in this Report on Form 10-K contain forward looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward looking statements are subject to cautionary factors which could
cause the Company's actual results to differ materially from those in the
forward looking statements. Such factors include but are not limited to:
changes in customer demand; the possibility of consolidation throughout the
retail sector; postal and paper prices; the realization of benefits associated
with the Company's reengineering initiative; possible governmental regulation
or legislation affecting aspects of the Company's business; the efficiencies
achieved with technology upgrades; the amount of shares the Company will
purchase in the future under its buyback program; the successful completion
and estimated costs of the Year 2000 program; fluctuations in interest rates
related to the outstanding debt; and other general economic factors.
 
                                       4
<PAGE>
 
ITEM 2. PROPERTIES
 
  ADVO does not own any real estate except for its corporate headquarters. The
corporate headquarters, located in Windsor, Connecticut, consist of two
buildings totaling approximately 136,000 square feet. The Company leases 20
production facilities, including the MailCoups facility, and approximately 65
sales offices (which excludes the sales offices that are located in the mail
processing facilities) throughout the United States. The Company believes its
facilities are suitable and adequate for the purposes for which they are used
and are adequately maintained.
 
ITEM 3. LEGAL PROCEEDINGS
 
  ADVO is party to various lawsuits and regulatory proceedings which are
incidental to its business and which the Company believes will not have a
material adverse effect on its consolidated financial condition, liquidity or
results of operations.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  Not applicable.
 
                     EXECUTIVE OFFICERS OF THE REGISTRANT
 
<TABLE>
<CAPTION>
          NAME           AGE                       POSITION WITH COMPANY
          ----           ---                       ---------------------
<S>                      <C> <C>
Robert Kamerschen.......  62 Chairman and Chief Executive Officer
Gary M. Mulloy..........  53 President and Chief Operating Officer
Myron L. Lubin..........  58 Executive Vice President--Marketing and Sales
Donald E. McCombs.......  42 Senior Vice President and Chief Financial Officer
Henry S. Evans..........  45 Senior Vice President--Operations
Vince Giuliano..........  51 Senior Vice President--Government Relations
Rick Kurz...............  58 Senior Vice President--Chief Strategic Growth Officer
Mardelle Pena...........  46 Senior Vice President--Chief Human Resources Officer
A. Brian Sanders........  37 Senior Vice President--Chief Marketing Officer
David Stigler...........  55 Senior Vice President--Chief Legal and Public Affairs Officer and
                              General Counsel
Frank Talz..............  54 Senior Vice President--Network Development
B. Kabe Woods...........  43 Senior Vice President--Chief Information Officer
Julie A. Abraham........  40 Vice President and Controller
C. David Taugher........  43 Vice President--Change Management
</TABLE>
 
  Mr. Kamerschen has been the Chairman of the Board since January 1989. From
November 1988 to February 1989, he was President of the Company and he has
been Chief Executive Officer and a Director since November 1988. Mr.
Kamerschen is also a Director of Micrografx, Inc., R.H. Donnelley Corporation,
and IMS Health. Mr. Kamerschen is retiring as Chief Executive Officer as of
January 1, 1999.
 
  Mr. Mulloy has been President and Chief Operating Officer since November 4,
1996 and was elected to the Board of Directors on December 3, 1996. From 1990
to October 1996, he was President and Chief Executive Officer of Pilkington
Barnes-Hind, Inc., a division of Pilkington Vision Care. Mr. Mulloy has been
elected to succeed Mr. Kamerschen in the position of Chief Executive Officer
as of January 1, 1999.
 
  Mr. Lubin became Executive Vice President--Marketing and Sales on October
29, 1998. From December 1995 to October 1998, he was Senior Vice President--
Chief Sales Officer. Prior to that, he was Senior Vice President--President
Western Division from January 1990 to November 1995.
 
  Mr. McCombs became Senior Vice President and Chief Financial Officer on
November 7, 1997. Prior to that, from 1989 to October 1997, he was Vice
President--Financial Planning and Measurement.
 
                                       5
<PAGE>
 
  Mr. Evans became Senior Vice President--Operations in August 1997. From 1992
to 1997 he was Senior Vice President of Operations with Anchor Glass Container
Corporation.
 
  Mr. Giuliano has been Senior Vice President--Government Relations since
October 28, 1996. From April 1983 to October 1996 he was Vice President--
Government Relations.
 
  Mr. Kurz became Senior Vice President--Chief Strategic Growth Officer on
April 15, 1997. From April 1993 to March 1997, he held the position of Senior
Vice President--Chief Marketing Officer. Prior to that, he was a Managing
Partner of Marketing Corporation of America, a marketing consulting firm.
 
  Ms. Pena has been Senior Vice President--Chief Human Resources Officer since
August 1997. From May 1994 to August 1997, she was Vice President--Human
Resources. Prior to that she held various management positions at the Company
since August 1992.
 
  Mr. Sanders became Senior Vice President--Chief Marketing Officer on May 19,
1997. For the five years prior to that he held several executive positions at
Pilkington Barnes-Hind, Inc., a division of Pilkington Vision Care.
 
  Mr. Stigler has been Senior Vice President--Chief Legal and Public Affairs
Officer and General Counsel since January 1990. He has also served as the
Company's Secretary since August 1986.
 
  Mr. Talz became Senior Vice President--Network Development on October 29,
1998. From April 1997 to October 1998 he was Senior Vice President--Chief
Client Services Officer. Prior to that, he was Senior Vice President of
Organizational Development from January 1996 to April 1997 and Senior Vice
President--President Central Division from September 1986 to January 1996.
 
  Mr. Woods became Senior Vice President--Chief Information Officer on August
25, 1997. From November 1995 to August 1997, he was Director--End User
Services of Lucent Technologies and from November 1993 to November 1995 he was
Chief Information Officer of AT&T Advanced Technology Systems. In addition,
for a short time in 1995 he held the concurrent position of Chief Information
Officer of AT&T Multimedia Ventures and Technologies.
 
  Ms. Abraham became Vice President and Controller on October 8, 1998. From
November 1997 to October 1998, she was Vice President--Financial Planning and
Investor Relations. From August 1995 to November 1997, she was Vice
President--Shared Financial Services. Prior to that, she held several other
financial management positions at the Company since April 1992.
 
  Mr. Taugher has been Vice President--Change Management since April 15, 1997.
From 1995 to 1997, he was Vice President of Organizational Development. Prior
to that, he was an independent consultant working with various senior
management client teams conducting team building, strategic planning, and
organizational development interventions.
 
  The Company is not aware of any family relationships between any of the
foregoing officers and any of the Company's directors. Each of the foregoing
officers holds such office until his successor shall have been duly chosen and
shall have been qualified, or until his earlier resignation or removal.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
  ADVO's 1998 Annual Report to Stockholders includes on page 39 under the
caption "Quarterly Financial Data (Unaudited)" the reported high and low
market prices of ADVO's common stock for the past two fiscal years, and such
information is incorporated herein by reference and made a part hereof (see
Exhibit 13).
 
                                       6
<PAGE>
 
  For the fiscal years ended September 26, 1998 and September 27, 1997, the
Company declared no cash dividends. During fiscal 1996, the Company paid a
regular first quarter dividend of $.025 per share of ADVO common stock,
payable to shareholders of record on December 27, 1995. On January 17, 1996
the Company announced the declaration of a special one time dividend (the
"Special Dividend") of $10 per share of ADVO common stock to stockholders of
record on February 20, 1996. The announcement was a result of the Company's
initiative to explore strategic alternatives aimed at increasing stockholder
value, which began at the end of fiscal 1995. In addition, the Board of
Directors suspended the Company's regular quarterly dividend of $.025 per
share of ADVO common stock after the declaration of the Special Dividend. The
Company is currently subject to ratio restrictions regarding future cash
dividends exceeding $.025 per share as stipulated in its renegotiated credit
agreement dated September 29, 1997, with Chase Manhattan Bank.
 
  The closing price as of November 27, 1998 of the Company's common stock,
under the symbol AD, on the New York Stock Exchange as reported in The Wall
Street Journal was $25 11/16 per share. The approximate number of holders of
record of the common stock on November 27, 1998 was 831.
 
  During fiscal 1998, the Company engaged in no sales of its securities that
were not registered under the Securities Act of 1933.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
  The information required by this item is included in ADVO's 1998 Annual
Report to Stockholders on page 22 under the caption "Selected Financial Data"
and is incorporated herein by reference and made a part hereof (see Exhibit
13).
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

  The information required by this item is included in ADVO's 1998 Annual
Report to Stockholders on pages 23 through 27 under the caption "Financial
Report" and is incorporated herein by reference and made a part hereof (see
Exhibit 13).
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
  The information required by this item is included in ADVO's 1998 Annual
Report to Stockholders on page 26 under the caption "Market Risk" and is
incorporated herein by reference and made a part hereof (see Exhibit 13).
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
  ADVO's consolidated financial statements, together with the Report of
Independent Auditors thereon dated October 20, 1998, appearing on pages 28
through 40 of ADVO's 1998 Annual Report to Stockholders, are incorporated
herein by reference and made a part hereof (see Exhibit 13).
 
  The selected quarterly information required by this item is included under
the caption "Quarterly Financial Data (Unaudited)" on page 39 of ADVO's 1998
Annual Report to Stockholders and is incorporated herein by reference and made
a part hereof (see Exhibit 13).
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
  None.
 
                                       7
<PAGE>
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  The information required by this item, to the extent not included under the
caption "Executive Officers of the Registrant" in Part I of this Annual Report
on Form 10-K, appears on pages 3 through 5 of the Company's definitive proxy
statement dated December 17, 1998 for the annual meeting of stockholders to be
held on January 21, 1999 (the "Proxy Statement"), under the caption "Election
of Directors," and on page 6 of the Proxy Statement under the subcaption
"Section 16 (a) Beneficial Ownership Reporting Compliance", and is
incorporated herein by reference and made a part hereof.
 
ITEM 11. EXECUTIVE COMPENSATION
 
  The information required by this item is included under the caption
"Executive Compensation" on pages 7 through 18 (except for those portions
appearing under the subcaptions "Report of the Compensation Committee" and
"Company Financial Performance"), and "Governance of the Company" on pages 2
and 3, of ADVO's Proxy Statement and is incorporated herein by reference and
made a part hereof.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  The information required by this item is included under the captions
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" on page 2 and on pages 5 and 6, respectively, of ADVO's Proxy
Statement and is incorporated herein by reference and made a part hereof.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  The information required by this item is included under the caption "Related
Party Transactions" on page 18 of ADVO's Proxy Statement and in footnote 9
under the caption "Security Ownership of Management" on pages 5 and 6 of
ADVO's Proxy Statement and is incorporated herein by reference and made a part
hereof.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
  (a)(1) Financial Statements. See the Index to Financial Statements and
         Financial Statement Schedules on page F-1.
 
     (2) Financial Statement Schedules. See the Index to Financial Statements
         and Financial Statement Schedules on page F-1.
 
     (3) Exhibits. The following is a list of the exhibits to this Report:
 
<TABLE>
<CAPTION>
EXHIBIT
NO.                     EXHIBIT                            WHERE LOCATED
-------                 -------                            -------------
<S>      <C>                                   <C>
 3(a)    Restated Certificate of Incorporation Incorporated by reference to Exhibit
          of ADVO.                              3(a) to the Company's Form 10 filed
                                                on September 15, 1986 (No. 1-11720.)

 3(b)    Restated By-laws of ADVO.             Incorporated by reference to Exhibit
                                                3(b) to the Company's Annual Report
                                                on Form 10-K for the fiscal year
                                                ended September 30, 1989.

 4(a)    Stockholder Protection Rights         Incorporated by reference to Exhibit
          Agreement, dated as of February 5,    4.1 of the Company's Form 8-K dated
          1993, between the Company and Mellon  February 5, 1993.
          Securities Trust Company, as Rights
          Agent, including Exhibit A and
          Exhibit B.
</TABLE>
 
                                       8
<PAGE>
 
<TABLE>
<CAPTION>
EXHIBIT NO.                 EXHIBIT                            WHERE LOCATED
-----------                 -------                            -------------
<S>          <C>                                   <C>
10(a)        1986 Stock Option Plan of ADVO. *     Incorporated by reference to Exhibit
                                                    4.1 to the Company's Form S-8 filed
                                                    on July 16, 1987 (No. 33-15856.)

10(b)        1986 Employee Restricted Stock Plan   Incorporated by reference to Exhibit A
              of ADVO, as amended. *                to the Company's definitive Proxy
                                                    Statement for the annual meeting held
                                                    on January 22, 1998.

10(c)        1988 Non-Qualified Stock Option Plan  Incorporated by reference to Exhibit B
              and 1993 Stock Option Subplan of      to the Company's definitive Proxy
              ADVO, as amended. *                   Statement for the annual meeting held
                                                    on January 22, 1998.

10(d)        The ADVO Savings Continuation Plan,   Incorporated by reference to Exhibit
              effective January 1, 1988. *          10(n) to the Company's Annual Report
                                                    on Form 10-K for the fiscal year
                                                    ended September 24, 1988.

10(e)        Executive Severance Agreement, dated  Incorporated by reference to Exhibit
              October 17, 1995 between ADVO and     10(k) to the Company's Annual Report
              Robert Kamerschen. *                  on Form 10-K for the fiscal year
                                                    ended September 30, 1995.

10(f)        Executive Severance Agreements, dated Incorporated by reference to Exhibit
              October 17, 1995 between ADVO and     10(m) to the Company's Annual Report
              the executive officers named          on Form 10-K for the fiscal year
              therein. *                            ended September 30, 1995.

10(g)        Employment Agreement, dated May 29,   Incorporated by reference to Exhibit
              1996 between ADVO and Robert          10(k) to the Company's Annual Report
              Kamerschen. *                         on Form 10-K for the fiscal year
                                                    ended September 28, 1996.

10(h)        Information Technology Agreement      Incorporated by reference to Exhibit
              dated as of July 16, 1996 between     10(o) to the Company's Annual Report
              ADVO and Integrated Systems           on Form 10-K for the fiscal year
              Solutions Corporation.                ended September 28, 1996.

10(i)        Executive Severance Agreement, dated  Incorporated by reference to Exhibit
              November 4, 1996 between ADVO and     10(m) to the Company's Annual Report
              Gary M. Mulloy. *                     on Form 10-K for the fiscal year
                                                    ended September 28, 1996.

10(j)        Executive Severance Agreement dated   Incorporated by reference to Exhibit
              May 19, 1997 between ADVO and A.      10(k) to the Company's Annual Report
              Brian Sanders. *                      on Form 10-K for the fiscal year
                                                    ended September 27, 1997.

10(k)        Amended and Restated Credit Agreement Incorporated by reference to Exhibit
              dated September 29, 1997 between      99(b) of the Company's Form 8-K dated
              ADVO and a syndicate of lenders led   September 29, 1997.
              by Chase Manhattan Bank as
              Administrative Agent.

10(l)        Executive Severance Agreement dated   Incorporated by reference to Exhibit
              November 7, 1997 between ADVO and     10(m) to the Company's Annual Report
              Donald E. McCombs. *                  on Form 10-K for the fiscal year
                                                    ended September 27, 1997.
</TABLE>
 
                                       9
<PAGE>
 
<TABLE>
<CAPTION>
EXHIBIT NO.                 EXHIBIT                            WHERE LOCATED
-----------                 -------                            -------------
<S>          <C>                                   <C>
10(m)        Employment Agreement dated July 31,   Filed herewith.
              1998 between ADVO and Gary M.
              Mulloy. *

10(n)        Executive Severance Agreements dated  Filed herewith.
              October 17, 1995 between ADVO and
              the executive officers named
              therein. *

10(o)        Executive Severance Agreement dated   Filed herewith.
              October 17, 1995 between ADVO and
              David Stigler.*

10(p)        Executive Severance Agreement dated   Filed herewith.
              July 1, 1997 between ADVO and
              Mardelle Pena. *

10(q)        Executive Severance Agreement dated   Filed herewith.
              July 30, 1997 between ADVO and Henry
              S. Evans. *

10(r)        Executive Severance Agreement dated   Filed herewith.
              August 6, 1997 between ADVO and B.
              Kabe Woods. *

10(s)        Consulting Agreement dated December   Filed herewith.
              1, 1998 between ADVO and Robert
              Kamerschen. *

13           1998 Annual Report to Stockholders.   Furnished herewith; however, such
                                                    report, except for those portions
                                                    thereof which are expressly
                                                    incorporated by reference into this
                                                    Annual Report on Form 10-K, is for
                                                    the information of the Commission and
                                                    is not deemed "filed."

21           Subsidiaries of the Registrant.       Filed herewith.

22           Power of Attorney.                    See signature page.

23           Consent of Independent Auditors.      Filed herewith.

27           Financial Data Schedule.              Filed herewith.
</TABLE>
--------
*  Management contract or compensatory plan required to be filed as an exhibit
   pursuant to item 14(c) of this report.
 
  (b) Reports on Form 8-K.
 
  A report on Form 8-K dated September 8, 1998 was filed by the Company during
the quarter ended September 26, 1998. The Form 8-K reported under item 5
thereof the Company's announcement of a new stock repurchase program for up to
1 million shares through September 25, 1999. This new program includes the
approximate 442,000 shares remaining from its previous buyback program.
 
                                      10
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
          December 17, 1998
Date: _______________________________     ADVO, Inc.
 
                                                         Julie A. Abraham  /s/
                                          By: _________________________________
                                                         JULIE A. ABRAHAM
                                                         VICE PRESIDENT AND
                                                         CONTROLLER
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE
SIGNATURE APPEARS BELOW HEREBY CONSTITUTES DAVID M. STIGLER AND JULIE A.
ABRAHAM, AND EACH OF THEM SINGLY, SUCH PERSON'S TRUE AND LAWFUL ATTORNEYS,
WITH FULL POWER TO THEM AND EACH OF THEM, TO SIGN FOR SUCH PERSON AND IN SUCH
PERSON'S NAME AND CAPACITY AS INDICATED BELOW, ANY AND ALL AMENDMENTS TO THIS
REPORT, HEREBY RATIFYING AND CONFIRMING SUCH PERSON'S SIGNATURE AS IT MAY BE
SIGNED BY SAID ATTORNEYS TO ANY AND ALL AMENDMENTS.
 
        DATE                   SIGNATURE                       TITLE
 
  December 17, 1998   Robert Kamerschen /s/          Chairman, Chief Executive
                      ----------------------------    Officer and Director
                      ROBERT KAMERSCHEN               (Principal Executive
                                                      Officer)
 
  December 17, 1998   Gary M. Mulloy /s/             President, Chief
                      ----------------------------    Operating Officer and
                      GARY M. MULLOY                  Director
 
  December 17, 1998   Donald E. McCombs /s/          Senior Vice President and
                      ----------------------------    Chief Financial Officer
                      DONALD E. MCCOMBS               (Principal Financial
                                                      Officer)
 
  December 17, 1998   Julie A. Abraham  /s/          Vice President and
                      ----------------------------    Controller (Principal
                      JULIE A. ABRAHAM                Accounting Officer)
 
  December 17, 1998   Bruce Crawford /s/             Director
                      ----------------------------
                      BRUCE CRAWFORD
 
  December 17, 1998   David F. Dyer /s/              Director
                      ----------------------------
                      DAVID F. DYER
 
  December 17, 1998   Jack W. Fritz /s/              Director
                      ----------------------------
                      JACK W. FRITZ
 
  December 17, 1998   Howard H. Newman /s/           Director
                      ----------------------------
                      HOWARD H. NEWMAN
 
  December 17, 1998   John R. Rockwell /s/           Director
                      ----------------------------
                      JOHN R. ROCKWELL
 
  December 17, 1998   John L. Vogelstein /s/         Director
                      ----------------------------
                      JOHN L. VOGELSTEIN
 
                                      11
<PAGE>
 
                                  ADVO, INC.
 
                         INDEX TO FINANCIAL STATEMENTS
                       AND FINANCIAL STATEMENT SCHEDULES
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
Report of independent auditors...........................................    *
Consolidated statements of operations for the years ended September 26,
 1998, September 27, 1997 and September 28, 1996.........................    *
Consolidated balance sheets at September 26, 1998 and September 27, 1997.    *
Consolidated statements of cash flows for the years ended September 26,
 1998, September 27, 1997 and September 28, 1996.........................    *
Consolidated statements of changes in stockholders' equity (deficiency)
 for the years ended September 26, 1998, September 27, 1997 and September
 28, 1996................................................................    *
Notes to consolidated financial statements...............................    *
Consolidated Schedules
  II-Valuation and Qualifying Accounts...................................  F-2
</TABLE>
 
  All other schedules have been omitted since the required information is not
present.
--------
*  Incorporated herein by reference from pages 28 to 40 of the ADVO, Inc. 1998
   Annual Report to Stockholders.
 
                                      F-1
<PAGE>
 
                                   ADVO, INC.
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
        COLUMN A            COLUMN B         COLUMN C           COLUMN D     COLUMN E
        --------          ------------ ---------------------   ----------   ----------
                                             ADDITIONS
                                       ---------------------
                           BALANCE AT  CHARGED TO CHARGED TO   DEDUCTIONS   BALANCE AT
                          BEGINNING OF COSTS AND    OTHER         FROM        END OF
      DESCRIPTION            PERIOD     EXPENSES   ACCOUNTS     RESERVES      PERIOD
      -----------         ------------ ---------- ----------   ----------   ----------
<S>                       <C>          <C>        <C>          <C>          <C>
Year ended September 28,
 1996:
Allowances for sales
 adjustments............    $ 2,126      $  --     $10,007(b)   $ 9,297      $ 2,836
Allowances for doubtful
 accounts...............      1,292       3,701        --         3,603(a)     1,390
Restructuring reserve...      9,879         --         --         7,820        2,059
Accumulated amortization
 Goodwill...............      1,032         390        --           --         1,422
Accumulated amortization
 Intangibles............      4,398         892        --           --         5,290
                            -------      ------    -------      -------      -------
                            $18,727      $4,983    $10,007      $20,720      $12,997
                            =======      ======    =======      =======      =======
Year ended September 27,
 1997:
Allowances for sales
 adjustments............    $ 2,836      $  --     $ 4,889(b)   $ 5,143      $ 2,582
Allowances for doubtful
 accounts...............      1,390       5,374        --         4,186(a)     2,578
Restructuring reserve...      2,059         --         --         1,711          348
Accumulated amortization
 Goodwill...............      1,422         392        --           --         1,814
Accumulated amortization
 Intangibles............      5,290         729        --           --         6,019
                            -------      ------    -------      -------      -------
                            $12,997      $6,495    $ 4,889      $11,040      $13,341
                            =======      ======    =======      =======      =======
Year ended September 26,
 1998:
Allowances for sales
 adjustments............    $ 2,582      $  --     $ 2,787(b)   $ 3,373      $ 1,996
Allowances for doubtful
 accounts...............      2,578       4,459        --         4,409(a)     2,628
Restructuring reserve...        348         --         --            61          287
Accumulated amortization
 Goodwill...............      1,814         564        --           --         2,378
Accumulated amortization
 Intangibles............      6,019         710        --           --         6,729
                            -------      ------    -------      -------      -------
                            $13,341      $5,733    $ 2,787      $ 7,843      $14,018
                            =======      ======    =======      =======      =======
</TABLE>
--------
(a)  Write off of uncollectible accounts, net of recoveries on accounts
     previously written off.
(b)  Reduction of revenues.
 
                                      F-2