VALASSIS COMMUNICATIONS, INC. 
By LIVONIA, Mich., Feb. 21, 2013 /PRNewswire/ -- Valassis (NYSE: VCI) today announced financial results for the fourth quarter and full year ended Dec. 31, 2012. Fourth-quarter 2012 revenues were $579.4 million, a decrease of 2.7% from $595.3 million in the prior year quarter. Full-year 2012 revenues were $2,162.1 million, a decrease of 3.3% from $2,236.0 million in full-year 2011. The decrease in revenues was primarily due to a shortfall in shared mail volume, a decline in the Neighborhood Targeted segment and consumer packaged goods (CPG) clients' spend patterns, which negatively influenced multiple business segments.
Fourth-quarter 2012 net earnings were $34.1 million, flat from $34.3 million in the prior year quarter. Fourth-quarter 2012 diluted earnings per share (EPS) was $0.85, an increase of 11.8% from $0.76 in the prior year quarter due to a lower share base as a result of share repurchases. Fourth-quarter 2011 net earnings and diluted EPS were negatively impacted by charges in an aggregate amount of $14.0 million ($8.5 million, net of tax) and $0.19, respectively, primarily related to the restructuring of certain non-core businesses and the associated costs including write-offs of impaired assets, as well as the early termination of leases and severance costs.
Full-year 2012 net earnings were $119.0 million, an increase of 4.9% from $113.4 million for full-year 2011. Full-year 2012 adjusted net earnings(*) were $124.7 million, which excludes $10.7 million of restructuring charges and asset impairments resulting from the exit of the newspaper polybag advertising and sampling and solo direct mail businesses and other non-recurring costs, net of tax, and a tax benefit of $5.0 million related to the reversal of certain tax reserves. Full-year 2011 adjusted net earnings(*) were $133.5 million, which excludes debt refinancing costs of $11.6 million, net of tax, and the restructuring and related charges described above of $8.5 million, net of tax. Full-year 2012 adjusted net earnings(*) decreased 6.6% from full-year 2011.
Full-year 2012 diluted EPS was $2.84 and full-year 2011 diluted EPS was $2.33. Full-year 2012 adjusted diluted EPS(*), which excludes a $0.13 net effect from the items described above, was $2.97. Full-year 2012 adjusted diluted EPS(*) increased 8.4% from full-year 2011 adjusted diluted EPS(*) of $2.74 due to a lower share base as a result of share repurchases.
Fourth-quarter 2012 adjusted EBITDA(*) was $86.4 million, a decrease of 5.4% from $91.3 million in the prior year quarter. Full-year 2012 adjusted EBITDA(*) was $305.4 million, a decrease of 3.5% from $316.6 million in full-year 2011.
"While clearly disappointed in our fourth-quarter and full-year results, I am pleased with our growth in earnings per share and the results of our efforts to return value to our shareholders," said Rob Mason, Valassis President and Chief Executive Officer. "We established a solid foundation for growth in 2012 and I fully expect that 2013 will see growth in both our top and bottom lines."
Some additional highlights include:
-- Selling, General and Administrative (SG&A) Costs: Fourth-quarter 2012
SG&A costs were $82.8 million, a decrease of 7.3% compared to the prior
year quarter SG&A costs of $89.3 million. Full-year 2012 SG&A costs were
$317.3 million, a decrease of 3.6% compared to full-year 2011 SG&A costs
of $329.1 million. Cost savings efforts in the back half of 2012
favorably impacted SG&A for the full year.
-- Capital Expenditures: Capital expenditures for the fourth-quarter and
full-year 2012 were $5.4 million and $21.2 million, respectively.
-- Stock Repurchases: During 2012, we spent $112.0 million to repurchase
5.1 million shares, or approximately 13% of our common stock, at an
average price of $21.89 per share under our stock repurchase program.
-- Liquidity:
-- We reduced total debt by $15.0 million during 2012, and we ended
2012 with net debt (total debt less cash) of $492.9 million.
-- At Dec. 31, 2012, we had $94.7 million in cash.
Outlook
Based on our plan, current outlook and the assumptions specified in our Dec. 14, 2012 earnings guidance press release, we reiterate full-year 2013 guidance as follows:
-- Diluted earnings per share (EPS) of $3.50;
-- Adjusted EBITDA(*) of approximately $315.0 million; and
-- 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 first such dividend for the
quarter ended Dec. 31, 2012 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 fourth quarter of 2012 were $357.3
million, a decrease of 0.9% compared to the prior year quarter.
Full-year 2012 revenues were $1,365.6 million, an increase of 1.1%
compared to full-year 2011 driven by postage and an increase in printed
programs. Segment profit for the quarter was $54.4 million, a decrease
of 2.7% compared to the prior year quarter. The declines in segment
results for the quarter were driven primarily by a decrease in insert
volume due to softness in the specialty and discount retail categories.
Full-year 2012 segment profit was $201.4 million, an increase of 5.0%
compared to full-year 2011 driven primarily by a decrease in SG&A costs.
-- Neighborhood Targeted: Revenues for the fourth quarter of 2012 were
$100.9 million, a decrease of 15.1% compared to the prior year quarter.
Full-year 2012 revenues were $326.4 million, a decrease of 12.9%
compared to full-year 2011. Segment profit for the quarter was $4.0
million, a decrease of 13.0% compared to the prior year quarter.
Full-year 2012 segment loss was $1.0 million, compared to full-year 2011
segment profit of $7.7 million. Segment results for the quarter and
full year were negatively impacted by continued margin pressure, a
decline in newspaper insert volume and the change in certain client
contracts to a fee-based media placement model.
-- Free-standing Inserts (FSI): Revenues for the fourth quarter of 2012
were $64.9 million, an increase of 1.2% compared to the prior year
quarter, due to increased page volume. Full-year 2012 revenues were
$283.9 million, a decrease of 10.2% compared to the prior year,
primarily due to the absence of the custom co-op business. Segment
profit for the quarter was $1.6 million compared to the prior year
quarter segment loss of $0.8 million. Segment profit for the full-year
2012 was $21.9 million, an increase of 55.3% compared to the prior year.
Segment results for the quarter and full year were positively impacted
by an increase in page volume in our core FSI product and improved gross
profit margin.
-- International, Digital Media & Services (IDMS): Revenues for the fourth
quarter of 2012 were $56.3 million, an increase of 8.5% compared to the
prior year quarter, driven by growth in our digital business, partially
offset by lower coupon redemption volumes at NCH and the exit from the
solo direct mail business. Full-year 2012 revenues were $186.2 million,
a decrease of 4.3% compared to the prior year despite digital revenue
growth of over 100%. Segment profit for the quarter was $3.2 million, a
decrease of 65.6% compared to the prior year quarter which can primarily
be attributed to the acquisition of Brand.net. Full-year 2012 segment
profit was $8.3 million, a decrease of 65.8% compared to the prior year,
primarily due to the continued investment in our in-store and digital
businesses and reduced volumes at NCH.
Segment Results Summary
Quarter Ended Dec. 31,
Segment Revenues ($ in
millions) 2012 2011 % Change
---- ---- --------
Shared Mail $357.3 $360.4 -0.9%
------ ------ -----
Neighborhood Targeted $100.9 $118.9 -15.1%
------ ------ ------
Free-standing Inserts $64.9 $64.1 1.2%
----- ----- ----
International, Digital Media & Services $56.3 $51.9 8.5%
----- ----- ----
Total Segment Revenues $579.4 $595.3 -2.7%
------ ------ ----
Quarter Ended Dec. 31,
Segment Profit ($ in
millions) 2012 2011 % Change
---- ---- --------
Shared Mail $54.4 $55.9 -2.7%
----- ----- -----
Neighborhood Targeted $4.0 $4.6 -13.0%
---- ---- ----
Free-standing Inserts $1.6 ($0.8) *
---- ---- ---
International, Digital Media & Services $3.2 $9.3 -65.6%
---- ---- ----
Total Segment Profit $63.2 $69.0 -8.4%
----- ----- ----
*Not Meaningful
Year Ended Dec. 31,
Segment Revenues ($ in
millions) 2012 2011 % Change
---- ---- --------
Shared Mail $1,365.6 $1,350.8 1.1%
-------- -------- ----
Neighborhood Targeted $326.4 $374.7 -12.9%
------ ------ ------
Free-standing Inserts $283.9 $316.0 -10.2%
------ ------ ------
International, Digital Media & Services $186.2 $194.5 -4.3%
------ ------ -----
Total Segment Revenues $2,162.1 $2,236.0 -3.3%
-------- -------- ----
Year Ended Dec. 31,
Segment Profit ($ in
millions) 2012 2011 % Change
---- ---- --------
Shared Mail $201.4 $191.9 5.0%
------ ------ ----
Neighborhood Targeted ($1.0) $7.7 -113.0%
------ ---- ----
Free-standing Inserts $21.9 $14.1 55.3%
----- ----- -----
International, Digital Media & Services $8.3 $24.3 -65.8%
---- ---- -----
Total Segment Profit $230.6 $238.0 -3.1%
------ ------ ----
Conference Call Information
We will hold an investor call today to discuss our fourth-quarter and full-year 2012 results at 11 a.m. (ET). The call-in number is 800-762-8779 (Conference ID: 4591892). 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 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, impairment charges and other non-recurring costs 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 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:
-- 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, 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;
-- 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, 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):
Quarter ended Dec. 31, 2012 Quarter ended Dec. 31, 2011
--------------------------- ---------------------------
Net Earnings Diluted EPS Net Earnings Diluted EPS
------------ ----------- ------------ -----------
As reported $34.1 $0.85 $34.3 $0.76
Exclude, net of tax:
Impairment charges and other non-recurring costs - - 8.5 0.19
--- --- --- ----
As adjusted $34.1 $0.85 $42.8 $0.95
===== ===== ===== =====
Year ended Dec. 31, 2012 Year ended Dec. 31, 2011
------------------------ ------------------------
Net Earnings Diluted EPS Net Earnings Diluted EPS
------------ ----------- ------------ -----------
As reported $119.0 $2.84 $113.4 $2.33
Exclude, net of tax:
Loss on extinguishment of debt and related charges - - 11.6 0.24
Impairment charges and other non-recurring costs 10.7 0.25 8.5 0.17
Tax benefit due to expiration of certain tax reserves (5.0) (0.12) - -
---- ----- --- ---
As adjusted $124.7 $2.97 $133.5 $2.74
====== ===== ====== =====
Reconciliation of Full-year 2013 Adjusted EBITDA Guidance to Full-year 2013 Net Earnings Guidance(1):
Full-year 2013
Guidance
($ in millions)
--------------
Net Earnings $138.9
plus: Interest expense, net 29.2
Income taxes 85.8
Depreciation and amortization 46.8
Other non-cash expenses (income),
net -
---
EBITDA $300.7
plus: Stock-based compensation
expense 14.3
----
Adjusted EBITDA $315.0
======
Reconciliation of Full-year 2013 Free Cash Flow to Full-year 2013 Net Earnings Guidance(1):
Full-year 2013
Guidance
($ in millions)
--------------
Net Earnings $138.9
plus: Depreciation and
amortization 46.8
Stock-based compensation expense 14.3
less: Capital expenditures (25.0)
-----
Free cash flow $175.0
======
((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
December 31,
------------
2012 2011
---- ----
Net Earnings - GAAP $34.1 $34.3
===== =====
plus: Income taxes 21.3 15.9
Interest expense, net 7.3 6.0
Depreciation and amortization 14.9 15.2
Other non-cash expense (income), net 1.9 (0.4)
--- ----
EBITDA $79.5 $71.0
Stock-based compensation expense 6.9 6.3
Impairment charges and other non-recurring costs - 14.0
Adjusted EBITDA $86.4 $91.3
----- -----
Income taxes (21.3) (15.9)
Interest expense, net (7.3) (6.0)
Changes in operating assets and liabilities (23.0) 7.6
----- ---
Cash Flows from Operating Activities $34.8 $77.0
===== =====
Year Ended
December 31,
------------
2012 2011
---- ----
Net Earnings - GAAP $119.0 $113.4
====== ======
plus: Income taxes 65.9 66.3
Interest expense, net 28.5 35.3
Loss on extinguishment of debt - 16.3
Depreciation and amortization 58.0 60.7
Other non-cash expense (income), net 2.9 (2.3)
--- ----
EBITDA $274.3 $289.7
Stock-based compensation expense 13.9 12.9
Impairment charges and other non-recurring costs 17.2 14.0
Adjusted EBITDA $305.4 $316.6
------ ------
Income taxes (65.9) (66.3)
Interest expense, net (28.5) (35.3)
Changes in operating assets and liabilities (65.0) (14.8)
----- -----
Cash Flows from Operating Activities $146.0 $200.2
====== ======
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; 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
Dec. 31, Dec. 31,
2012 2011
---- ----
Assets
Current assets:
Cash and cash
equivalents $94,711 $101,971
Accounts
receivable, net 426,899 448,320
Inventories 43,253 41,120
Prepaid expenses
and other 36,589 37,655
------ ------
Total current
assets 601,452 629,066
Property, plant
and equipment,
net 125,832 148,905
Goodwill 632,438 636,471
Other intangible
assets, net 215,171 213,613
Other assets 14,142 16,392
------ ------
Total assets $1,589,035 $1,644,447
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion
long-term debt $22,500 $15,000
Accounts payable 281,320 334,378
Progress
billings 39,595 39,975
Accrued expenses 107,467 98,409
------- ------
Total current
liabilities 450,882 487,762
Long-term debt 565,061 587,560
Deferred income
taxes 57,258 67,404
Other non-
current
liabilities 42,271 52,187
------ ------
Total
liabilities 1,115,472 1,194,913
Stockholders' equity:
Common stock 654 654
Additional paid-
in capital 90,362 123,881
Retained
earnings 1,140,551 1,021,566
Accumulated
other
comprehensive
income 3,574 2,775
Treasury stock,
at cost (761,578) (699,342)
-------- --------
Total
stockholders'
equity 473,563 449,534
------- -------
Total
liabilities and
stockholders'
equity $1,589,035 $1,644,447
========== ==========
More tables to follow . . .
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
Quarter Ended
Dec. 31, %
--------
2012 2011 Change
---- ---- ------
Revenues $579,439 $595,337 -2.7%
Costs and expenses:
Cost of sales 429,234 447,926 -4.2%
Selling,
general and
administrative 82,759 89,282 -7.3%
Amortization
expense 4,249 3,157 34.6%
----- -----
Total costs and
expenses 516,242 540,365 -4.5%
------- ------- ----
Operating
income 63,197 54,972 15.0%
------ ------ ----
Other expenses and income:
Interest
expense 7,294 6,047 20.6%
Interest income (31) (57) -45.6%
Other expense
(income), net 495 (1,214) -140.8%
--- ------ ------
Total other
expenses, net 7,758 4,776 62.4%
----- ----- ----
Earnings before
income taxes 55,439 50,196 10.4%
Income tax
expense 21,322 15,923 33.9%
------ ------ ----
Net earnings $34,117 $34,273 -0.5%
======= ======= ====
Net earnings
per common
share, diluted $0.85 $0.76 11.8%
Weighted
average common
shares,
diluted 40,191 44,842 -10.4%
Supplementary Data
------------------
Amortization 4,249 3,157
Depreciation 10,684 12,064
Stock-based
Compensation 6,887 6,344
Capital
Expenditures 5,411 3,593
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
Year Ended
Dec. 31, %
--------
2012 2011 Change
---- ---- ------
Revenues $2,162,084 $2,235,959 -3.3%
Costs and expenses:
Cost of
sales 1,610,139 1,670,271 -3.6%
Selling,
general and
administrative 317,257 329,060 -3.6%
Amortization
expense 13,806 12,624 9.4%
Impairment
charge 7,585 -
----- ---
Total costs
and
expenses 1,948,787 2,011,955 -3.1%
--------- --------- ----
Operating
income 213,297 224,004 -4.8%
------- ------- ----
Other expenses and income:
Interest
expense 28,666 35,696 -19.7%
Interest
income (205) (372) -44.9%
Loss on
extinguishment
of debt - 16,318
Other
income, net (30) (7,382) -99.6%
--- ------ -----
Total other
expenses,
net 28,431 44,260 -35.8%
------ ------ -----
Earnings
before
income
taxes 184,866 179,744 2.8%
Income tax
expense 65,881 66,314 -0.7%
------ ------ ----
Net earnings $118,985 $113,430 4.9%
======== ======== ===
Net earnings
per common
share,
diluted $2.84 $2.33 21.9%
Weighted
average
common
shares,
diluted 41,947 48,777 -14.0%
Supplementary Data
------------------
Amortization 13,806 12,624
Depreciation 44,149 48,084
Stock-based
Compensation 13,908 12,908
Capital
Expenditures 21,194 21,720
SOURCE Valassis
