Valassis Announces Results for the Third Quarter Ended Sept. 30, 2013

    Valassis Announces Results for the Third Quarter Ended Sept. 30, 2013

PR Newswire

LIVONIA, Mich., Oct. 24, 2013

LIVONIA, Mich., Oct. 24, 2013 /PRNewswire/ --Valassis (NYSE: VCI) today
announced financial results for the third quarter ended Sept. 30, 2013.
Third-quarter 2013 revenues were $489.4 million, a decrease of 6.6% from
$523.8 million in the prior year quarter. This decrease was due primarily to
an anticipated decline in revenues in the Neighborhood Targeted segment
resulting from the change in certain client contracts to a fee-based media
placement model, as well as the discontinuance of the sampling and solo direct
mail products. Without the effect of these changes, third-quarter 2013
adjusted revenues^* increased 4.3%.

Third-quarter 2013 net earnings were $27.7 million, which included $0.6
million of restructuring costs, net of tax, a decrease of 24.5% from $36.7
million in the prior year quarter, which included a favorable income tax
adjustment of $5.0 million resulting from the expiration of certain tax
reserves. Excluding these restructuring costs and favorable tax adjustment,
third-quarter 2013 adjusted net earnings^* were $28.3 million and
third-quarter 2012 adjusted net earnings^* were $31.7 million.

Third-quarter 2013 diluted earnings per share (EPS) was $0.70, which included
the negative impact of the aforementioned restructuring costs of $0.02, a
decrease of 22.2% from $0.90 in the prior year quarter, which included the
positive impact of the aforementioned income tax adjustment of $0.12.
Excluding these adjustments, third-quarter 2013 adjusted diluted EPS^* was
$0.72 and third-quarter 2012 adjusted diluted EPS^* was $0.78. Third quarter
adjusted EBITDA^* was $65.3 million, a decrease of 13.2% from $75.2 million in
the prior year quarter.

"Given our year-to-date results, I recognize a clear need for change. We are
executing our plan to strategically refocus, restructure and right-size our
company," said Rob Mason, Valassis President and Chief Executive Officer.  "We
project this plan will deliver approximately $28 million in annualized cost
savings, putting our company in a better position to jumpstart and accelerate
growth moving forward."

Some additional highlights include:

  oSelling, General and Administrative (SG&A) Costs: Third-quarter 2013 SG&A
    costs were $74.6 million (including $0.7 million in restructuring costs),
    compared to the prior year quarter SG&A costs of $73.4 million.
  oCapital Expenditures: Capital expenditures for third-quarter 2013 were
    $4.3 million.
  oReturn of Capital: During third-quarter 2013, we returned approximately
    $18.6 million to shareholders through a combination of stock repurchases
    and the payment of a cash dividend. Under our stock repurchase program, we
    repurchased $6.9 million or 242,712 shares of our common stock, at an
    average price of $28.49 per share. We paid a cash dividend of $0.31 per
    share of common stock, for a total of approximately $11.7 million.
  oLiquidity:

       oWe reduced total debt by $28.6 million during third-quarter 2013
         (including voluntary payments/repurchases of $21.1 million), and we
         ended the quarter with net debt (total debt less cash) of $461.4
         million.
       oAt Sept. 30, 2013, we had $75.0 million in cash.

Outlook
Based on our current performance and outlook, we are revising our full-year
2013 guidance as follows:

  odiluted earnings per share (EPS) of between $2.74 and $2.84 (previously
    between $3.05 and $3.20),
  oadjusted EBITDA^* of between $270.0 million and $275.0 million (previously
    between $290.0 million and $300.0 million), and
  ocapital expenditures of approximately $20 million (previously
    approximately $25 million).

2013 Planned Uses of Cash:

  oStock repurchase program: We assume the use of approximately 35-40% of
    free cash flow^* for stock repurchases during 2013. Our stock repurchase
    program does not obligate us to acquire any particular amount of shares of
    common stock, and may be modified or suspended at any time at our
    discretion.
  oQuarterly dividend: Pursuant to our cash dividend policy, we intend to pay
    a quarterly cash dividend to holders of our common stock. The dividend for
    the quarter ended Sept. 30, 2013 was $0.31 per share of common stock.

Business Segment Discussion

  oShared Mail: Revenues for the third quarter of 2013 were $342.5 million,
    an increase of 3.3% compared to the prior year quarter, driven by
    increases in packages, postage, the variable data postcard and
    distribution alliances. Segment profit for the quarter was $47.5 million,
    a decrease of 9.2% compared to the prior year quarter.The decline in
    segment profit was driven primarily by changes in volume mix and continued
    softness in wrap revenues, which offset gains from the variable data
    postcard and distribution alliances.

  oFree-standing Inserts (FSI): Revenues for the third quarter of 2013 were
    $75.5 million, an increase of 4.6% compared to the prior year quarter,
    primarily driven by an increase in page volume. Segment profit for the
    quarter was $7.7 million, an increase of 1.3% compared to the prior year
    quarter, primarily driven by an increase in volume, offset by client mix
    and price.

  oNeighborhood Targeted: Revenues for the third quarter of 2013 were $23.7
    million, a decrease of 68.7% compared to the prior year quarter, primarily
    due to the change in certain client contracts to a fee-based media
    placement model. Segment loss for the quarter was $2.1 million compared to
    segment loss in the prior year quarter of $1.1 million, due primarily to
    continued margin pressure.

  oInternational, Digital Media & Services (IDMS): Revenues for the third
    quarter of 2013 were $47.7 million, an increase of 7.4% compared to the
    prior year quarter, driven by increased coupon clearing volumes and growth
    in our in-store business. Segment loss for the quarter was $2.4 million,
    compared to segment profit of $0.1 million in the prior year quarter,
    primarily due to losses associated with our in-store and digital
    businesses.

Segment Results Summary

                                        Three Months Ended Sept. 30,
Segment Revenues ($ in millions)        2013           2012           % Change
   Shared Mail                         $342.5         $331.4         3.3%
   Free-standing Inserts                $75.5          $72.2          4.6%
   Neighborhood Targeted                $23.7          $75.8          -68.7%
   International, Digital Media &       $47.7          $44.4          7.4%
   Services^
Total Segment Revenues                  $489.4         $523.8         -6.6%
                                        Three Months Ended Sept. 30,
Segment Profit (Loss) ($ in millions)   2013           2012           % Change
   Shared Mail                         $47.5          $52.3          -9.2%
   Free-standing Inserts                $7.7           $7.6           1.3%
   Neighborhood Targeted                ($2.1)         ($1.1)         -90.9%
   International, Digital Media &       ($2.4)         $0.1           **
   Services
Total Segment Profit                    $50.7          $58.9          -13.9%

^**Not
Meaningful



Conference Call Information
We will hold an investor call today to discuss our third-quarter 2013 results
at 11 a.m. (EDT). The call-in number is 877-941-0844 (Conference ID: 4639008).
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, restructuring costs and other
non-recurring charges, depreciation, amortization, and stock-based
compensation expense. We define adjusted revenues as revenues adjusted to
(i)a net basis, for client contracts to which we were a principal and
recordedrevenues on a gross basis in 2012 that, in 2013, transitioned to a
fee-based media placement model and were recorded on a net basis, and
(ii)exclude revenues related to discontinued businesses. We define adjusted
net earnings and adjusted diluted EPS as net earnings and diluted EPS
excluding the effect, net of tax, of restructuring costs, asset impairments
and other non-recurring charges and the expiration of certain tax reserves. We
define free cash flow as net earnings before depreciation, amortization and
stock-based compensation expense, less capital expenditures. Adjusted EBITDA,
adjusted revenues, adjusted net earnings, adjusted diluted EPS and free cash
flow 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 and free cash flow do 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 revenues, adjusted net earnings, adjusted
    diluted EPS and free cash flow do not reflect the impact of earnings or
    charges resulting from matters we consider not to be indicative of our
    ongoing operations;
  ofree cash flow does not represent the residual cash flow available for
    discretionary expenditures because certain non-discretionary expenditures
    like mandatory debt service requirements are not deducted from the
    measure; 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 revenues, adjusted net
earnings, adjusted diluted EPS and free cash flow 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 Net Earnings and Adjusted Diluted EPS to Net
Earnings and Diluted EPS
($ in millions except for per share data)
                           Three Months Ended
                           Sept. 30,
                           2013                      2012
                           Net Earnings  Diluted EPS Net Earnings  Diluted EPS
As reported                $       $      $       $     
                           27.7          0.70     36.7           0.90
Exclude, net of tax:
Restructuring costs and
other non-recurring        0.6           0.02        -             -
charges
Tax benefit due to
expiration of certain tax  -             -           (5.0)         (0.12)
reserves
As adjusted                $        $      $       $     
                           28.3          0.72      31.7           0.78



Reconciliation of Adjusted Revenues to Revenues
($ in millions)
                                           Three Months Ended
                                           Sept. 30,
                                           2013              2012
Revenues, as reported                      $         $        
                                           489.4            523.8
Adjustment to a net basis of revenues
previously

contracted and recorded as principal on a  -                 (51.5)
gross

basis in 2012
Adjustment for discontinued businesses     -                 (2.9)
Adjusted Revenues                          $         $        
                                           489.4             469.4



Reconciliation of Full-year 2013 Adjusted EBITDA Guidance to Full-year 2013
Net Earnings Guidance^(1)
                                      Full-year 2013
                                      Guidance
                                      ($ in millions)
                                      Low End              High End
Net Earnings                          $            $        
                                      109.2               113.2
plus: Interest expense, net           29.4                 29.4
 Income taxes                  67.0                 68.0
 Depreciation and amortization 46.9                 46.9
 Other non-cash expenses       (0.9)                (0.9)
(income), net
EBITDA                                $            $        
                                      251.6               256.6
plus: Stock-based compensation        16.0                 16.0
expense
 Restructuring costs           2.4                  2.4
Adjusted EBITDA                       $            $        
                                      270.0                275.0



Reconciliation of Full-year 2013 Free Cash Flow to Full-year 2013 Net Earnings
Guidance^(1)
                                       Full-year 2013
                                       Guidance
                                       ($ in millions)
                                       Low End             High End
Net Earnings                           $           $        
                                       109.2              113.2
plus: Depreciation and amortization    46.9                46.9
 Stock-based compensation      16.0                16.0
expense
less: Capital expenditures             (20.0)              (20.0)
Free cash flow                         $           $        
                                       152.1               156.1



^(1)  Due to the forward-looking nature of adjusted EBITDA and free cash flow,
information to reconcile adjusted EBITDA and free cash flow to cash flows from
operating activities is not available without unreasonable effort. We believe
that the information necessary to reconcile these measures is not reasonably
estimable or predictable.

Reconciliation of Adjusted EBITDA to Net Earnings and Cash Flows from
Operating Activities
($ in millions)
Unaudited
                                        Three Months Ended
                                        Sept. 30,
                                        2013                 2012
Net Earnings - GAAP                     $           $        
                                           27.7              36.7
 plus: Income taxes                     16.5                 14.4
       Interest expense, net            7.3                  7.5
       Depreciation and amortization    11.1                 13.9
       Other non-cash (income) expense, (1.2)                0.5
       net
EBITDA                                  $           $        
                                           61.4              73.0
       Restructuring costs and other    1.0                  -
       non-recurring charges
       Stock-based compensation expense 2.9                  2.2
Adjusted EBITDA                         $           $        
                                           65.3              75.2
       Income taxes                     (16.5)               (14.4)
       Interest expense, net            (7.3)                (7.5)
       Changes in operating assets and  (19.1)               (11.9)
       liabilities
Cash Flows from Operating Activities    $           $        
                                           22.4              41.4



About Valassis
Valassis (NYSE: VCI) is a leader in intelligent media delivery, providing over
15,000 advertisers proven and innovative media solutions to influence
consumers wherever they plan, shop, buy and share. By integrating online and
offline data combined with powerful insights, Valassis precisely targets its
clients' most valuable shoppers, offering unparalleled reach and
scale.Valassis subsidiaries include Brand.net, a Valassis Digital Company,
and NCH Marketing Services, Inc. RedPlum^® is its consumer brand. Its
signature Have You Seen Me?^® program delivers hope to missing children and
their families. For insights on intelligent media delivery, visit
www.valassis.com and follow Valassis on Twitter at @ValassisVCI.

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; possible consolidation in our client
base, a significant decrease in the number of stores in our in-store retailer
network or 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; 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; governmental regulation
or litigation affecting aspects of our business, including laws and
regulations related to the internet, internet-related technologies and
activities, privacy and data security; potential security measure breaches or
attacks; 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; a reduction in, or discontinuance of, dividend payments
or stock repurchases; 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,
                                2013                    2012
Assets
Current assets:
 Cash and cash equivalents     $        74,985  $        94,711
 Accounts receivable, net      408,322                 426,899
 Inventories                   36,705                  43,253
 Prepaid expenses and other    49,006                  36,589
Total current assets            569,018                 601,452
Property, plant and equipment,  109,826                 125,832
net
Goodwill                        632,438                 632,438
Other intangible assets, net    203,984                 215,171
Other assets                    13,436                  14,142
Total assets                    $     1,528,702    $     1,589,035
Liabilities and Stockholders'
Equity
Current liabilities:
 Current portion long-term     $        33,750  $        22,500
debt
 Accounts payable              264,144                 281,320
 Progress billings             38,084                  39,595
 Accrued expenses              96,342                  107,467
Total current liabilities       432,320                 450,882
Long-term debt                  502,650                 565,061
Deferred income taxes           57,968                  57,258
Other non-current liabilities   38,002                  42,271
Total liabilities               1,030,940               1,115,472
Stockholders' equity:
 Common stock                  654                     654
 Additional paid-in capital    84,866                  102,373
 Retained earnings             1,169,075               1,128,540
 Accumulated other             3,796                   3,574
comprehensive income
 Treasury stock, at cost       (760,629)               (761,578)
Total stockholders' equity      497,762                 473,563
Total liabilities and           $     1,528,702    $     1,589,035
stockholders' equity
More tables to follow . . .



VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
                                 Three Months Ended
                                 Sept. 30,                             %
                                 2013               2012               Change
Revenues                         $            $            -6.6%
                                 489,383            523,822
Costs and expenses:
 Cost of sales                  361,337            388,284            -6.9%
 Selling, general and           74,577             73,358             1.7%
administrative
 Amortization expense           3,729              3,245              14.9%
Total costs and expenses         439,643            464,887            -5.4%
Operating income                 49,740             58,935             -15.6%
Other expenses and income:
 Interest expense               7,287              7,563              -3.6%
 Interest income                (30)               (46)               -34.8%
 Other (income) expense, net    (1,713)            249                -788.0%
Total other expenses, net        5,544              7,766              -28.6%
Earnings before income taxes     44,196             51,169             -13.6%
Income tax expense               16,483             14,429             14.2%
Net earnings                     $           $           -24.6%
                                 27,713             36,740
Net earnings per common share,   $          $          -22.2%
diluted                           0.70              0.90
Weighted average common shares,  38,684             40,832             -5.3%
diluted
Supplementary Data
 Amortization                   3,729              3,245
 Depreciation                   7,363              10,680
 Stock-based Compensation       2,906              2,220
 Capital Expenditures           4,338              4,013



VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
                            Nine Months Ended
                            Sept. 30,                                  %
                            2013                  2012                 Change
Revenues                    $     1,467,792  $                -7.3%
                                                  1,582,645
Costs and expenses:
 Cost of sales             1,086,648             1,180,905            -8.0%
 Selling, general and      228,632               234,498              -2.5%
administrative
 Amortization expense      11,187                9,557                17.1%
 Goodwill impairment       -                     7,585                -100.0%
Total costs and expenses    1,326,467             1,432,545            -7.4%
Operating income            141,325               150,100              -5.8%
Other expenses and income:
 Interest expense          22,464                21,372               5.1%
 Interest income           (138)                 (174)                -20.7%
 Other income, net         (2,636)               (525)                402.1%
Total other expenses, net   19,690                20,673               -4.8%
Earnings before income      121,635               129,427              -6.0%
taxes
Income tax expense          45,467                44,559               2.0%
Net earnings                $              $             -10.3%
                            76,168                84,868
Net earnings per common     $            $           -4.5%
share, diluted              1.91                  2.00
Weighted average common     39,147                42,532               -8.0%
shares, diluted
Supplementary Data
 Amortization              11,187                9,557
 Depreciation              24,610                33,465
 Stock-based Compensation  9,401                 7,021
 Capital Expenditures      14,746                15,783





SOURCE Valassis

Website: http://www.valassis.com
Contact: Mary Broaddus, Director, Investor Relations and Corporate
Communications, 734-591-7375, broaddusm@valassis.com; or April Masters,
Manager, Investor Relations, 734-432-2778, mastersa@valassis.com
 
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