On Plan to Reach 2009 Adjusted EBITDA Guidance LIVONIA, Mich.,
April 30, 2009 /PRNewswire-FirstCall/ -- Valassis (NYSE: VCI) today
announced financial results for the first quarter ended March 31,
2009. We reported quarterly revenue of $551.2 million, down 7.7%
from $597.1 million for the prior year quarter due primarily to the
negative effect the economic slowdown has had on our clients'
marketing budgets. First-quarter net earnings were $13.0 million,
including an after-tax gain of $4.5 million or $0.09 per share,
related to our repurchases at a discount of term loans under our
senior secured credit facility, an increase of 19.1% from the prior
year quarter(1). Earnings per share (EPS) for the quarter was
$0.27, up from $0.23(1) for the prior year quarter. For the first
quarter of 2009, adjusted EBITDA* was $53.9 million, down from
adjusted EBITDA* of $63.2 million for the prior year quarter. "This
quarter's revenue declines are a direct result of the ongoing
advertising recession, although we continue to outperform our media
peers," said Alan F. Schultz, Valassis Chairman, President and
Chief Executive Officer. "While client spending is more constricted
than we anticipated, we are on plan to reach our 2009 adjusted
EBITDA* guidance. We are particularly pleased with the growth in
our Neighborhood Targeted preprint business driven by our new
client wins and cross-selling strategy." Some additional financial
highlights include: -- 2009 Profit Maximization Plan Ahead of
Schedule: First-quarter 2009 selling, general and administrative
(SG&A) costs were $86.2 million, which includes $2.9 million in
legal costs related to the News America lawsuits and $0.8 million
in severance costs, compared to prior year quarter SG&A costs
of $97.2 million. This 11.3% reduction was due primarily to cuts in
discretionary spending and staffing. -- Capital Expenditures:
Capital expenditures for the first quarter of 2009 were $2.0
million and are on track to meet our annual target of $15 to $20
million in 2009. -- Liquidity: First-quarter 2009 cash flow from
operations was $39.7 million with a net decrease in debt of $86.2
million. As we previously disclosed on Jan. 26, 2009, we paid off
and cancelled our 6 5/8% Senior Secured Notes that matured on Jan.
15, 2009. No other material debt maturities are scheduled until
2014. Outlook It is difficult to predict with precision client
advertising budgets due to the prolonged economic downturn.
However, based on this quarter's performance and our current
outlook, we are on plan to meet our 2009 adjusted EBITDA* annual
guidance of approximately $215.0 million, allowing us to
comfortably exceed our debt covenant thresholds throughout 2009.
Based on today's environment, we will no longer provide 2009
revenue guidance. "We are off to a great start in the
implementation of our 2009 Profit Maximization Plan and savings are
coming at a faster pace than we anticipated," said Robert L.
Recchia, Valassis Executive Vice President and Chief Financial
Officer. "We expect to exceed our savings target of $57.5 million,
and we continue to look for opportunities to reduce costs."
(1)Effective Jan. 1, 2009, we adopted Financial Accounting
Standards Board's Staff Position No. APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)", (FSP APB 14-1)
which requires retrospective application. This adoption of FSP APB
14-1 had no effect on the current period. Previously reported net
earnings and EPS for the quarter ended March 31, 2008 have been
reduced by $1.4 million and $0.03, respectively, as the result of
recognizing incremental non-cash interest expense of $2.2 million
during that period. Business Segment Discussion -- Shared Mail:
Revenue for the first quarter of 2009 was $310.9 million, down
12.7% compared to the prior year quarter. The decline was due
primarily to reduced spending in the mass merchandising vertical,
lightweighting by grocery retailers and lower wrap revenue. Segment
profit for the quarter was $18.8 million compared to $30.9 million
for the prior year quarter. Margin loss related to the $45.4
million segment revenue decline was substantially mitigated by
business optimization efforts, newspaper alliances and effective
cost management. -- Neighborhood Targeted Products: Revenue for the
first quarter of 2009 was $112.6 million, up 12.4% compared to the
prior year quarter revenue of $100.2 million, due primarily to an
increase in spend in the financial services and specialty retail
verticals. Segment profit for the quarter was $10.6 million
compared to $11.1 million for the prior year quarter. Segment
profit declines for the quarter were due primarily to a shift in
client and product mix. -- Free-standing Inserts (FSI): Revenue for
the first quarter of 2009 was $93.6 million, down 5.1% compared to
the prior year quarter due primarily to the continued pricing
deterioration. Industry unit volume was up 1.2%, benefiting from
the increased popularity of value-oriented media. Segment profit
for the quarter was $1.0 million, down 50.0% compared to the prior
year quarter, primarily as a result of the pricing decline. --
International, Digital Media & Services: Revenue for the first
quarter was $34.1 million, down 18.8% compared to the prior year
quarter. Excluding revenue from previously announced divested and
discontinued operations and the impact of currency fluctuations,
revenue was up 9.6% compared to the prior year quarter. Segment
profit for the quarter was $4.0 million compared to a loss of $1.8
million for the prior year quarter primarily due to the
discontinuance of underperforming businesses and a strong
performance in U.S. coupon clearing volume. Segment Results Summary
Quarter Ended March 31, Segment Revenue (in millions) 2009 2008 %
Change Shared Mail $310.9 $356.3 -12.7% Neighborhood Targeted
$112.6 $100.2 12.4% Free-standing Inserts $93.6 $98.6 -5.1%
International, Digital Media & Services $34.1 $42.0 -18.8%
Total Segment Revenue $551.2 $597.1 -7.7% Quarter Ended March 31,
Segment Profit (in millions) 2009 2008 % Change Shared Mail $18.8
$30.9 -39.2% Neighborhood Targeted $10.6 $11.1 -4.5% Free-standing
Inserts $1.0 $2.0 -50.0% International, Digital Media &
Services $4.0 ($1.8) 322.2% Total Segment Profit $34.4 $42.2 -18.6%
Conference Call Information We will hold an investor call today to
discuss our first-quarter 2009 results at 11 a.m. (ET). The call-in
number is (800) 218-4007. The call will simulcast on our Web site
at http://www.valassis.com/ and telephonic replay of the call will
be available through May 13, 2009 at (800) 405-2236, pass code
11127109. This earnings release and the webcast will be archived on
our Web site under "Investor." Non-GAAP Financial Measures *We
define adjusted EBITDA as earnings before net interest and other
non-cash expenses (income), net, income taxes, depreciation,
amortization, stock-based compensation expense associated with SFAS
No. 123R and amortization of a client contract incentive. Adjusted
EBITDA is a non-GAAP financial measure commonly used by financial
analysts, investors, rating agencies and other interested parties
in evaluating companies, including marketing services companies.
Accordingly, management believes that adjusted EBITDA may be useful
in assessing our operating performance and our ability to meet our
debt service requirements. In addition, adjusted EBITDA is 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 a performance criteria for incentive compensation.
However, this non-GAAP financial measure has limitations as an
analytical tool and should not be considered in isolation from, or
as an alternative to, operating income, cash flow or other income
or cash flow data prepared in accordance with GAAP. Some of these
limitations are: -- adjusted EBITDA does not reflect our cash
expenditures for capital equipment or other contractual
commitments; -- although 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; -- adjusted
EBITDA does not reflect changes in, or cash requirements for, our
working capital needs; -- adjusted EBITDA does not reflect the
significant interest expense or the cash requirements necessary to
service interest or principal payments on our indebtedness; --
adjusted EBITDA does not reflect income tax expense or the cash
necessary to pay income taxes; -- adjusted EBITDA does not reflect
the impact of earnings or charges resulting from matters we
consider not to be indicative of our ongoing operations; -- other
companies, including companies in our industry, may calculate this
measure differently and as the number of differences in the way two
different companies calculate this measure increases, the degree of
its usefulness as a comparative measure correspondingly decreases.
Because of these limitations, adjusted EBITDA should not be
considered as a measure 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 this non-GAAP financial measure only
supplementally. Further important information regarding operating
results and reconciliations of this non-GAAP financial measure to
the most comparable GAAP measures can be found below.
Reconciliation of 2009 Adjusted EBITDA Guidance to 2009 Net
Earnings Guidance: Full-year 2009 Guidance ($in millions) Net
Earnings $36.2 Add back: Interest and other, net 82.0 Income taxes
23.1 Depreciation and amortization 65.0 EBITDA $206.3 Add back:
FAS123r expense 8.7 Adjusted EBITDA $215.0 Reconciliation of
Adjusted EBITDA to Net Earnings and Cash Flow from Operations
(dollars in thousands) Unaudited Three Months Ended March 31, 2009
2008 Net Earnings - GAAP $13,028 $10,942 plus: Income taxes 8,654
7,022 Interest expense, net 21,394 25,394 Depreciation and
amortization 17,660 17,638 less: Other non-cash income, net (8,695)
(1,119) EBITDA $52,041 $59,877 Stock-based compensation expense
(SFAS No. 123R) 1,049 1,456 Amortization of customer contract
incentive - 1,215 Restructuring costs/severance 783 637 Adjusted
EBITDA $53,873 $63,185 Interest expense, net (21,394) (25,394)
Income taxes (8,654) (7,022) Restructuring costs, cash (783) (637)
Changes in operating assets and liabilities 16,620 (26,731) Cash
Flow from Operations $39,662 $3,401 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 interactive offering -
redplum.com - consumers will find compelling national and local
deals online. 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(R) program. Valassis companies include Valassis Direct
Mail, Inc., Valassis Canada, Promotion Watch, Valassis Relationship
Marketing Systems, LLC and NCH Marketing Services, Inc. For more
information, visit http://www.valassis.com/ or
http://www.redplum.com/. Safe Harbor and Forward-Looking Statements
Certain statements found in this document constitute
"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 preference
for different promotional materials, strategies or coupon delivery
methods, including, without limitation, as a result of declines in
newspaper circulation; 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; our ability to comply with or obtain modifications
or waivers of the financial covenants contained in our debt
documents; certain covenants in our debt documents could adversely
restrict our financial and operating flexibility; recent
disruptions in the credit markets that make it difficult for
companies to secure financing; we do not currently comply with the
continued listing requirements of The New York Stock Exchange and
therefore our common stock may be delisted; 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; we may be required to recognize additional impairment
charges against goodwill and intangible assets in the future; the
outcome of ADVO's pending shareholder lawsuits; our current
litigation with News America Incorporated may be costly and divert
management's attention; possible governmental regulation or
litigation affecting aspects of our business; the credit and
liquidity crisis in the financial markets could continue to affect
our results of operations and financial condition; reductions of
our credit rating may have an adverse impact on our business;
counterparties to our secured credit facility and interest rate
swaps may not be able to fulfill their obligations due to
disruptions in the global credit markets; 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 Assets Mar. 31, Dec. 31, 2009 2008 Current
assets: Cash and cash equivalents $84,993 $126,556 Accounts
receivable 430,941 479,749 Inventories 46,089 48,173 Refundable
income taxes 10,445 15,509 Deferred income taxes 1,861 1,879 Other
19,985 31,235 Total current assets 594,314 703,101 Property, plant
and equipment, at cost 485,581 484,765 Less accumulated
depreciation (264,537) (250,828) Net property, plant and equipment
221,044 233,937 Intangible assets, net 889,366 892,422 Investments
2,091 2,555 Other assets 20,693 21,166 Total assets $1,727,508
$1,853,181 VALASSIS COMMUNICATIONS, INC. Consolidated Balance
Sheets, Continued (dollars in thousands) Unaudited Liabilities and
Stockholders' Equity Mar. 31, Dec. 31, 2009 2008 Current
liabilities: Current portion, long-term debt $6,254 $90,855
Accounts payable and accruals 381,380 440,214 Progress billings
49,207 44,539 Total current liabilities 436,841 575,608 Long-term
debt 1,110,163 1,111,712 Other liabilities 64,022 66,029 Deferred
income taxes 94,280 94,418 Stockholders' equity: Common stock 636
635 Additional paid-in capital 88,347 87,305 Retained earnings
468,991 455,963 Treasury stock (520,170) (520,170) Accumulated
other comprehensive loss (15,602) (18,319) Total stockholders'
equity 22,202 5,414 Total liabilities and stockholders' equity
$1,727,508 $1,853,181 VALASSIS COMMUNICATIONS, INC. Consolidated
Statements of Operations (in thousands, except per share data)
Unaudited Three Months Ended March 31, % 2009 2008 Change Revenue
$551,155 $597,081 - 7.7% Costs and expenses: Costs of products sold
427,490 455,357 - 6.1% Selling, general and administrative 86,228
97,179 - 11.3% Amortization 3,056 2,306 + 32.5% Total costs and
expenses 516,774 554,842 - 6.9% Operating income 34,381 42,239 -
18.6% Other expenses and (income): Interest expense 21,644 26,121 -
17.1% Interest income (250) (727) - 65.6% Other income (8,695)
(1,119) - 677.0% Total other expenses 12,699 24,275 - 47.7%
Earnings before income taxes 21,682 17,964 + 20.7% Income taxes
8,654 7,022 + 23.2% Net earnings $13,028 $10,942 + 19.1% Net
earnings per common share, + 17.4% diluted $0.27 $0.23 Weighted
average shares outstanding, diluted 47,948 47,933 - Supplementary
Data Amortization $3,056 $2,306 Depreciation 14,604 15,332 Capital
expenditures 2,036 9,022 DATASOURCE: Valassis CONTACT: Mary
Broaddus, Valassis, +1-734-591-7375, Web Site:
http://www.valassis.com/
Copyright