Valassis Announces Results for the Third Quarter Ended Sept. 30, 2012 PR Newswire LIVONIA, Mich., Oct. 25, 2012 LIVONIA, Mich., Oct. 25, 2012 /PRNewswire/ --Valassis (NYSE: VCI) today announced financial results for the third quarter ended Sept. 30, 2012. Third-quarter 2012 revenues were $523.8 million compared to $528.4 million in the prior year quarter. Third-quarter 2012 net earnings were $36.7 million, an increase of 33.5% from $27.5 million in the prior year quarter. This increase was primarily the result of the previously announced cost reductions and a favorable income tax adjustment resulting from the expiration of certain tax reserves. Third-quarter 2012 diluted earnings per share (EPS) was $0.90, an increase of 55.2% from $0.58 in the prior year quarter due to improved earnings coupled with a lower share base as a result of share repurchases. Third-quarter 2012 adjusted EBITDA^* was $75.2 million, an increase of 7.7% from $69.8 million in the prior year quarter. "This quarter, we delivered strong growth in EPS and adjusted EBITDA^*," said Rob Mason, President and Chief Executive Officer. "Notable gains in our Free-standing Insert business, ongoing operational improvements within Shared Mail, and continued cost containment efforts were key drivers that contributed to our results." Some additional highlights include: oSelling, General and Administrative (SG&A) Costs: Third-quarter 2012 SG&A costs were $73.4 million compared to prior year quarter costs of $80.5 million. This 8.8% decrease was primarily due to restructuring and other cost reduction measures that took place at the end of the second quarter. oCapital Expenditures: Capital expenditures were $4.0 million for the third quarter of 2012 and $15.8 million year to date. oStock Repurchases: During third quarter 2012, we repurchased $21.2 million, or 0.8 million shares, of our common stock at an average price of $25.34 per share. Year to date, we have repurchased $87.1 million, or 4.1 million shares of our common stock at an average price of $21.08 per share under our stock repurchase program. oLiquidity: oWe reduced total debt by $3.8 million during third-quarter 2012, and we ended the quarter with net debt (total debt less cash) of $501.0 million. oAt Sept. 30, 2012, we had $90.3 million in cash. Outlook Based on our plan and current outlook, we are updating our full-year 2012 guidance as follows: odiluted EPS of $2.98 (previously $2.86) which reflects a favorable income tax adjustment of $0.12; oexcluding one-time charges, adjusted diluted EPS^* of $3.23 (previously $3.11) which reflects a favorable income tax adjustment of $0.12; and ocapital expenditures to be between $20 million and $22 million (previously approximately $26 million). The company has decided to no longer use diluted cash EPS as a financial performance measure. Business Segment Discussion oShared Mail: Revenues for the third quarter of 2012 were $331.4 million, an increase of 0.3% compared to the prior year quarter. Segment profit for the quarter was $52.3 million, an increase of 13.2% compared to the prior year quarter. The improvement in segment profit was due to an increase in pieces per package and effective cost management, including package optimization efforts and SG&A reductions. oNeighborhood Targeted: Revenues for the third quarter of 2012 were $75.8 million, a decrease of 1.4% compared to the prior year quarter. Segment loss for the quarter was $1.1 million compared to segment profit in the prior year quarter of $0.4 million due to continued margin pressure. oFree-standing Inserts (FSI): Revenues for the third quarter of 2012 were $72.2 million, a decrease of 1.8% compared to the prior year quarter. Segment profit for the quarter was $7.6 million, compared to a segment loss of $0.8 million in the prior year quarter. Segment results for the quarter were positively impacted primarily by an increase in average pages per book, which offset the absence of approximately $14 million in custom co-op revenue. oInternational, Digital Media & Services (IDMS): Revenues for the third quarter of 2012 were $44.4 million, a decrease of 6.5% compared to the prior year quarter. Segment revenues were negatively impacted primarily by the reduced consumer packaged goods spend affecting in-store as well as a decrease in coupon redemption volume impacting NCH, our coupon clearing business. The revenue decreases in these businesses offset the growth in our digital business. Segment profit for the quarter was $0.1 million compared to $3.2 million in the prior year quarter, primarily due to the continued investment in our digital business. Segment Results Summary Quarter Ended Sept. 30, Segment Revenues ($ in millions) 2012 2011 % Change Shared Mail $ $ 330.5 0.3% 331.4 Neighborhood Targeted $ $ -1.4% 75.8 76.9 Free-standing Inserts $ $ -1.8% 72.2 73.5 International, Digital Media & $ $ -6.5% Services^ 44.4 47.5 Total Segment Revenues $ $ 528.4 -0.9% 523.8 Quarter Ended Sept. 30, Segment Profit ($ in millions) 2012 2011 % Change Shared Mail $ $ 13.2% 52.3 46.2 Neighborhood Targeted $ $ -375.0% (1.1) 0.4 Free-standing Inserts $ $ * 7.6 (0.8) International, Digital Media & $ $ -96.9% Services 0.1 3.2 Total Segment Profit $ $ 20.2% 58.9 49.0 *Not meaningful Conference Call Information We will hold an investor call today to discuss our third-quarter 2012 results at 11 a.m. (ET). The call-in number is 1-877-941-0844 (Conference ID: 4561501). The call will be simulcast on our website at www.valassis.com. This earnings release, webcast and a transcript of the conference call will be archived on our website under "Investors." Non-GAAP Financial Measures *We define adjusted EBITDA as net earnings before interest expense, net, other non-cash expenses (income), net, income taxes, gain or loss on extinguishment of debt, restructuring and other non-recurring costs, depreciation, amortization, and stock-based compensation expense. We define adjusted net earnings and adjusted diluted EPS as net earnings and diluted EPS excluding the effect, net of tax, of loss on extinguishment of debt and related charges, and restructuring and other non-recurring costs. Adjusted EBITDA, adjusted net earnings and adjusted diluted EPS are non-GAAP financial measures commonly used by financial analysts, investors, rating agencies and other interested parties in evaluating companies, including marketing services companies. Accordingly, management believes that these non-GAAP measures may be useful in assessing our operating performance and our ability to meet our debt service requirements. In addition, these non-GAAP measures are used by management to measure and analyze our operating performance and, along with other data, as our internal measure for setting annual operating budgets, assessing financial performance of business segments and as performance criteria for incentive compensation. Additionally, because of management's focus on generating shareholder value, of which profitability is a primary driver, management believes these non-GAAP measures, as defined above, provide an important measure of our results of operations. However, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, operating income, cash flow, EPS or other income or cash flow data prepared in accordance with GAAP. Some of these limitations are: oadjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments; oalthough depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements; oadjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; oadjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; oadjusted EBITDA does not reflect income tax expense or the cash necessary to pay income taxes; oadjusted EBITDA, adjusted net earnings and adjusted diluted EPS do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and oother companies, including companies in our industry, may calculate these measures differently and as the number of differences in the way two different companies calculate these measures increases, the degree of their usefulness as comparative measures correspondingly decreases. Because of these limitations, adjusted EBITDA, adjusted net earnings and adjusted diluted EPS should not be considered as measures of discretionary cash available to us to invest in the growth of our business or reduce indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures only supplementally. Further important information regarding reconciliations of these non-GAAP financial measures to their respective most comparable GAAP measures can be found below. Reconciliation of Adjusted EBITDA to Net Earnings and Cash Flows from Operating Activities (dollars in millions) Unaudited Three Months Ended Sept. 30, 2012 2011 Net Earnings - GAAP $ 36.7 $ 27.5 plus: Income taxes 14.5 17.3 Interest expense, net 7.5 8.1 Depreciation and amortization 13.9 14.4 Other non-cash expenses, net 0.4 0.3 EBITDA $ 73.0 $ 67.6 plus: Stock-based compensation expense 2.2 2.2 Adjusted EBITDA $ 75.2 $ 69.8 Income taxes (14.5) (17.3) Interest expense, net (7.5) (8.1) Changes in operating assets and (11.8) (12.2) liabilities Cash Flows from Operating Activities $ 41.4 $ 32.2 Reconciliation of Full-year 2012 Adjusted Diluted EPS to Full-year 2012 Diluted EPS Guidance: Full-Year 2012 Guidance Net earnings (in millions) $ 125.2 Diluted EPS $ 2.98 Restructuring and other non-recurring costs $ 0.25 Adjusted diluted EPS $ 3.23 Weighted Average Diluted Shares Outstanding (in 42,034 thousands)^(1) ^(1)Represents estimated weighted average diluted shares outstanding for the year ended Dec. 31, 2012 and assumes the use of 50% of annual free cash flow for stock repurchases. As of Sept. 30, 2012, $87.1 million had been used for share repurchases year to date. About Valassis Valassis is one of the nation's leading media and marketing services companies, offering unparalleled reach and scale to more than 15,000 advertisers. Its RedPlum® media portfolio delivers value on a weekly basis to over 100 million shoppers across a multi-media platform – in-home, in-store and in-motion. Through its digital offerings, including redplum.com and save.com, consumers can find compelling national and local deals. Headquartered in Livonia, Michigan with approximately 7,000 associates in 28 states and eight countries, Valassis is widely recognized for its associate and corporate citizenship programs, including its America's Looking for Its Missing Children® program. Valassis companies include Valassis Direct Mail, Inc., Valassis Canada, Promotion Watch, Valassis Relationship Marketing Systems, LLC, NCH Marketing Services, Inc. and Brand.net. For more information, visit www.valassis.com, www.redplum.com and www.save.com. To learn about advertising opportunities with RedPlum, please call 1-800-437-0479. Cautionary Statements Regarding Forward-looking Statements This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements Such factors include, among others, the following: price competition from our existing competitors; new competitors in any of our businesses; a shift in client preferences for different promotional materials, strategies or coupon delivery methods, including, without limitation, as a result of declines in newspaper circulation and/or increased competition from new media formats including digital; an unforeseen increase in paper or postal costs; changes which affect the businesses of our clients and lead to reduced sales promotion spending, including, without limitation, a decrease of marketing budgets which are generally discretionary in nature and easier to reduce in the short-term than other expenses; our substantial indebtedness, and ability to refinance such indebtedness, if necessary, and our ability to incur additional indebtedness, may affect our financial health; the financial condition, including bankruptcies, of our clients, suppliers, senior secured credit facility lenders or other counterparties; certain covenants in our debt documents could adversely restrict our financial and operating flexibility; fluctuations in the amount, timing, pages, weight and kinds of advertising pieces from period to period, due to a change in our clients' promotional needs, inventories and other factors, including, without limitation, high levels of coupon redemption rates; our failure to attract and retain qualified personnel may affect our business and results of operations; a rise in interest rates could increase our borrowing costs; possible governmental regulation or litigation affecting aspects of our business; clients experiencing financial difficulties, or otherwise being unable to meet their obligations as they become due, could affect our results of operations and financial condition; uncertainty in the application and interpretation of applicable state sales tax laws may expose us to additional sales tax liability; and general economic conditions, whether nationally, internationally, or in the market areas in which we conduct our business, including the adverse impact of the ongoing economic downturn on the marketing expenditures and activities of our clients and prospective clients as well as our vendors, with whom we rely on to provide us with quality materials at the right prices and in a timely manner. These and other risks and uncertainties related to our business are described in greater detail in our filings with the United States Securities and Exchange Commission, including our reports on Forms 10-K and 10-Q and the foregoing information should be read in conjunction with these filings. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. VALASSIS COMMUNICATIONS, INC. Consolidated Balance Sheets (dollars in thousands) Unaudited Sept. 30, Dec. 31, 2012 2011 Assets Current assets: Cash and cash equivalents $ 90,344 $ 101,971 Accounts receivable, net 399,341 448,320 Inventories 31,860 41,120 Prepaid expenses and other 55,080 37,655 Total current assets 576,625 629,066 Property, plant and equipment, 131,566 148,905 net Goodwill 628,886 636,471 Other intangible assets, net 221,403 213,613 Other assets 16,085 16,392 Total assets $ 1,574,565 $ 1,644,447 Liabilities and Stockholders' Equity Current liabilities: Current portion long-term $ 18,750 $ 15,000 debt Accounts payable 284,473 334,378 Progress billings 40,552 39,975 Accrued expenses 82,008 98,409 Total current liabilities 425,783 487,762 Long-term debt 572,561 587,560 Deferred income taxes 66,672 67,404 Other non-current liabilities 44,450 52,187 Total liabilities 1,109,466 1,194,913 Stockholders' equity: Common stock 654 654 Additional paid-in capital 111,600 123,881 Retained earnings 1,106,434 1,021,566 Accumulated other 2,340 2,775 comprehensive income Treasury stock, at cost (755,929) (699,342) Total stockholders' equity 465,099 449,534 Total liabilities and $ 1,574,565 $ 1,644,447 stockholders' equity VALASSIS COMMUNICATIONS, INC. Consolidated Statements of Operations (in thousands, except per share data) Unaudited Quarter Ended Sept. 30, % 2012 2011 Change Revenues $ $ -0.9% 523,822 528,391 Costs and expenses: Cost of sales 388,284 395,728 -1.9% Selling, general and 73,358 80,520 -8.9% administrative Amortization expense 3,245 3,156 2.8% Total costs and expenses 464,887 479,404 -3.0% Operating income 58,935 48,987 20.3% Other expenses and income: Interest expense 7,563 8,148 -7.2% Interest income (46) (54) -14.8% Other expenses (income), net 249 (3,856) -106.5% Total other expenses, net 7,766 4,238 83.2% Earnings before income taxes 51,169 44,749 14.3% Income tax expense 14,429 17,255 -16.4% Net earnings $ $ 33.6% 36,740 27,494 Net earnings per common share, $ $ 55.2% diluted 0.90 0.58 Weighted average common shares, 40,832 47,766 -14.5% diluted Supplementary Data Amortization 3,245 3,156 Depreciation 10,680 11,210 Stock-based Compensation 2,220 2,197 Capital Expenditures 4,013 6,501 VALASSIS COMMUNICATIONS, INC. Consolidated Statements of Operations (in thousands, except per share data) Unaudited Nine Months Ended Sept. 30, % 2012 2011 Change Revenues $ 1,582,645 $ -3.5% 1,640,622 Costs and expenses: Cost of sales 1,180,905 1,222,345 -3.4% Selling, general and 234,498 239,778 -2.2% administrative Amortization expense 9,557 9,467 1.0% Impairment charge 7,585 - Total costs and expenses 1,432,545 1,471,590 -2.7% Operating income 150,100 169,032 -11.2% Other expenses and income: Interest expense 21,372 29,649 -27.9% Interest income (174) (315) -44.8% Loss on extinguishment of - 16,318 debt Other income, net (525) (6,168) -91.5% Total other expenses, net 20,673 39,484 -47.6% Earnings before income taxes 129,427 129,548 -0.1% Income tax expense 44,559 50,391 -11.6% Net earnings $ $ 7.2% 84,868 79,157 Net earnings per common $ $ 26.6% share, diluted 2.00 1.58 Weighted average common 42,532 50,089 -15.1% shares, diluted Supplementary Data Amortization 9,557 9,467 Depreciation 33,465 36,020 Stock-based Compensation 7,021 6,564 Capital Expenditures 15,783 18,127 SOURCE Valassis Website: http://www.valassis.com Contact: Mary Broaddus. +1-734-591-7375, firstname.lastname@example.org
Valassis Announces Results for the Third Quarter Ended Sept. 30, 2012
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