VALASSIS COMMUNICATIONS, INC. 
By LIVONIA, Mich., April 25, 2013 /PRNewswire/ -- Valassis (NYSE: VCI) today announced financial results for the first quarter ended March 31, 2013. First-quarter 2013 revenues were $482.5 million, a decrease of 7.0% from $518.6 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. Increased revenues in our Free-standing Inserts (FSI) segment partially offset the decline.
First-quarter 2013 net earnings were $21.7 million, a decrease of 17.8% from $26.4 million in the prior year quarter. First-quarter 2013 diluted earnings per share (EPS) was $0.54, a decrease of 10.0% from $0.60 in the prior year quarter. First-quarter 2013 adjusted EBITDA* was $58.0 million, a decrease of 13.4% from $67.0 million in the prior year quarter.
"We are focused on improving execution, growing our share and achieving top and bottom-line growth," said Rob Mason, Valassis President and Chief Executive Officer. "I am confident that we are taking the necessary steps to expedite our progress and expect to see positive results from our efforts in the second half of the year."
Some additional highlights include:
-- Selling, General and Administrative (SG&A) Costs: First-quarter 2013
SG&A costs were $76.3 million, down 1.7% compared to the prior year
quarter SG&A costs.
-- Capital Expenditures: Capital expenditures for first-quarter 2013 were
$3.3 million.
-- Stock Repurchases: During first-quarter 2013, we repurchased $21.2
million, or 725,512 shares, of our common stock at an average price of
$29.18 per share under our stock repurchase program.
-- Liquidity:
-- We reduced total debt by $3.8 million during first-quarter 2013, and
we ended the quarter with net debt (total debt less cash) of $486.6
million.
-- At March 31, 2013, we had $97.2 million in cash.
Outlook
Based on our overall outlook, we are revising our full-year 2013 diluted earnings per share (EPS) and adjusted EBITDA(*) guidance as follows:
-- diluted earnings per share (EPS) of between $3.05 and $3.20 (previously
$3.50), and
-- adjusted EBITDA(*) of between $290.0 million and $300.0 million
(previously approximately $315.0 million).
We reiterate our guidance for capital expenditures of approximately $25 million.
2013 Planned Uses of Cash:
-- Stock repurchase plan: We assume the use of approximately 35-40% of free
cash flow(*) for continued 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.
-- Quarterly dividend: In December 2012, the Board approved a cash dividend
policy pursuant to which Valassis intends to pay a quarterly cash
dividend to holders of its common stock. The dividend for the quarter
ended March 31, 2013 was $0.31 per share of common stock. Valassis may
modify, suspend or discontinue the dividend policy at any time at its
discretion.
Business Segment Discussion
-- Shared Mail: Revenues for the first quarter of 2013 were $327.1
million, down 0.3% compared to the prior year quarter. Segment profit
for the quarter was $38.9 million, a decrease of 8.3% compared to the
prior year quarter. The decline in segment profit was driven primarily
by reduced wrap revenue and the shifting of product mix to lower margin
products.
-- Free-standing Inserts (FSI): Revenues for the first quarter of 2013
were $85.7 million, an increase of 12.3% compared to the prior year
quarter. Segment profit for the quarter was $11.1 million, an increase
of 105.6% compared to the prior year quarter. Segment results for the
quarter were positively impacted by an increase in page volume, improved
gross margin and market share gains.
-- Neighborhood Targeted: Revenues for the first quarter of 2013 were
$23.3 million, a decrease of 67.7% 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 $4.4 million
compared to segment loss in the prior year quarter of $1.6 million, due
primarily to continued margin pressure.
-- International, Digital Media & Services (IDMS): Revenues for the first
quarter of 2013 were $46.4 million, an increase of 10.5% compared to the
prior year quarter, driven by growth in our in-store and digital
businesses. Segment loss for the quarter was $3.9 million, compared to
segment profit of $2.7 million in the prior year quarter, primarily due
to continued investment in our in-store and digital businesses and a
decline in coupon redemption volumes at NCH.
Segment Results Summary
-----------------------
Quarter Ended March
31,
Segment Revenues ($ in millions) 2013 2012 % Change
---- ---- --------
Shared Mail $327.1 $328.1 -0.3%
------ ------ -----
Free-standing Inserts $85.7 $76.3 12.3%
----- ----- -----
Neighborhood Targeted $23.3 $72.2 -67.7%
----- ----- -----
International, Digital Media & Services $46.4 $42.0 10.5%
----- ----- -----
Total Segment Revenues $482.5 $518.6 -7.0%
------ ------ ----
Quarter Ended March
31,
Segment Profit (Loss) ($ in
millions) 2013 2012 % Change
---- ---- --------
Shared Mail $38.9 $42.4 -8.3%
----- ----- -----
Free-standing Inserts $11.1 $5.4 105.6%
----- ---- ----
Neighborhood Targeted ($4.4) ($1.6) -175.0%
------ ----- -----
International, Digital Media & Services ($3.9) $2.7 -244.4%
------ ---- ----
Total Segment Profit $41.7 $48.9 -14.7%
----- ----- -----
Conference Call Information
We will hold an investor call today to discuss our first-quarter 2013 results at 11 a.m. (EDT). The call-in number is 877-941-9205 (Conference ID: 4609849). 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, impairment charges and other non-recurring costs, depreciation, amortization, and stock-based compensation expense. We define free cash flow as net earnings before depreciation, amortization and stock-based compensation expense, less capital expenditures. Adjusted EBITDA 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:
-- 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 and free cash flow do 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 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;
-- free 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
-- other 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 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 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 $122.0 $128.2
plus: Interest
expense, net 29.6 29.6
Income taxes 74.8 78.6
Depreciation and
amortization 48.6 48.6
Other non-cash
expenses (income),
net - -
--- ---
EBITDA $275.0 $285.0
plus: Stock-based
compensation
expense 15.0 15.0
Adjusted EBITDA $290.0 $300.0
====== ======
Reconciliation of Full-year 2013 Free Cash Flow to Full-
year 2013 Net Earnings Guidance(1):
Full-year 2013
Guidance
($ in millions)
--------------
Low End High End
------- --------
Net Earnings $122.0 $128.2
plus:
Depreciation and
amortization 48.6 48.6
Stock-based
compensation
expense 15.0 15.0
less: Capital
expenditures (25.0) (25.0)
Free cash flow $160.6 $166.8
====== ======
(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
(dollars in millions)
Unaudited
Three Months Ended
March 31,
---------
2013 2012
---- ----
Net Earnings - GAAP $21.7 $26.4
===== =====
plus: Income taxes 12.7 16.2
Interest expense, net 7.6 7.0
Depreciation and amortization 13.3 14.7
Other non-cash expense (income),
net (0.3) 0.4
---- ---
EBITDA $55.0 $64.7
Stock-based compensation expense 3.0 2.3
Adjusted EBITDA $58.0 $67.0
----- -----
Income taxes (12.7) (16.2)
Interest expense, net (7.6) (7.0)
Changes in operating assets and
liabilities (14.2) (29.4)
----- -----
Cash Flows from Operating Activities $23.5 $14.4
===== =====
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. Valassis consumer brands include RedPlum(® )and save.com. Its signature Have You Seen Me?(®) program delivers hope to missing children and their families. To learn more, visit Valassis.com.
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, 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; 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
March 31, Dec. 31,
2013 2012
---- ----
Assets
Current assets:
Cash and cash
equivalents $97,204 $94,711
Accounts
receivable,
net 416,789 426,899
Inventories 39,075 43,253
Prepaid
expenses and
other 30,594 36,589
------ ------
Total current
assets 583,662 601,452
Property, plant
and equipment,
net 113,602 125,832
Goodwill 632,438 632,438
Other
intangible
assets, net 211,442 215,171
Other assets 13,414 14,142
------ ------
Total assets $1,554,558 $1,589,035
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion
long-term
debt $26,250 $22,500
Accounts
payable 276,565 281,320
Progress
billings 36,319 39,595
Accrued
expenses 79,161 107,467
------ -------
Total current
liabilities 418,295 450,882
Long-term debt 557,561 565,061
Deferred income
taxes 57,624 57,258
Other non-
current
liabilities 40,701 42,271
Total
liabilities 1,074,181 1,115,472
Stockholders' equity:
Common stock 654 654
Additional
paid-in
capital 94,738 102,373
Retained
earnings 1,138,185 1,128,540
Accumulated
other
comprehensive
income 3,080 3,574
Treasury stock,
at cost (756,280) (761,578)
-------- --------
Total
stockholders'
equity 480,377 473,563
------- -------
Total
liabilities
and
stockholders'
equity $1,554,558 $1,589,035
========== ==========
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
Quarter Ended
March 31, %
---------
2013 2012 Change
---- ---- ------
Revenues $482,522 $518,585 -7.0%
Costs and expenses:
Cost of sales 360,768 388,894 -7.2%
Selling, general
and
administrative 76,332 77,617 -1.7%
Amortization
expense 3,729 3,156 18.2%
----- -----
Total costs and
expenses 440,829 469,667 -6.1%
------- ------- ----
Operating income 41,693 48,918 -14.8%
------ ------ -----
Other expenses and income:
Interest expense 7,679 7,054 8.9%
Interest income (62) (58) 6.9%
Other expense
(income), net (302) (697) -56.7%
---- ---- -----
Total other
expenses, net 7,315 6,299 16.1%
----- ----- ----
Earnings before
income taxes 34,378 42,619 -19.3%
Income tax
expense 12,709 16,198 -21.5%
------ ------ -----
Net earnings $21,669 $26,421 -18.0%
======= ======= =====
Net earnings per
common share,
diluted $0.54 $0.60 -10.0%
Weighted average
common shares,
diluted 39,806 44,045 -9.6%
Supplementary Data
------------------
Amortization 3,729 3,156
Depreciation 9,558 11,554
Stock-based
Compensation 2,986 2,287
Capital
Expenditures 3,342 9,263
SOURCE Valassis
