Valassis Announces Results for the Third Quarter Ended Sept. 30, 2012

    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.

       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
       oAt Sept. 30, 2012, we had $90.3 million in cash.

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%
  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%
                                     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 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)
                                              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)
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

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

^(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 and, 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 For more
information, visit, and To
learn about advertising opportunities with RedPlum, please call

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.

Consolidated Balance Sheets
(dollars in thousands)
                                Sept. 30,               Dec. 31,
                                2012                    2011
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
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'
Current liabilities:
 Current portion long-term     $        18,750  $        15,000
 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

Consolidated Statements of Operations
(in thousands, except per share data)
                                 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%
 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%
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

Consolidated Statements of Operations
(in thousands, except per share data)
                             Nine Months Ended
                             Sept. 30,                                  %
                             2012                  2011                 Change
Revenues                     $     1,582,645  $                -3.5%
Costs and expenses:
 Cost of sales              1,180,905             1,222,345            -3.4%
 Selling, general and       234,498               239,778              -2.2%
 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
 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

Contact: Mary Broaddus. +1-734-591-7375,
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