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Valassis Reports 8.3% Increase in EPS for Fourth Quarter 2001

Friday, February 22, 2002

Press release from the issuing company

LIVONIA, Mich., Feb. 21 - Valassis, the leading company in marketing services and Connective Media(TM), reported results for the fourth quarter and year ended December 31, 2001 in line with its published projections. Fourth quarter earnings-per-share before one-time events were up 8.3%, at 52 cents, on decreased revenues. Year-end earnings- per-share, before one-time events, were up 2.3%, at $2.27, with revenues for the year up 1.5%, at $849.5 million. Valassis chairman, president and CEO, Alan F. Schultz, said, "We improved 2001 sales and earnings, despite the advertising recession and overall weak economy. On the top line, we were less effected by the economic downturn than traditional media. We also have the added benefit of paper cost decreases during a weak economy. Coupled with quality products, strong cash flow and highly effective employees, we were able to post positive results.'' Mass-Distributed Products - Products which provide mass reach at low cost: Free-standing insert revenues were down for the fourth quarter and year. Year 2001 free-standing insert revenue was $579.2 million, down 3.9%, due primarily to lower page demand. Run-of-press sales were up 3% in the quarter and 24.1% for the year, to $31.9 million. This product line has experienced increased demand, which is expected to extend into 2002. Cluster-Targeted Products - Products targeted around geographic and demographic clusters: Cluster-targeted product revenues decreased 6.7% for the quarter, and ended the full year up 2.9%, to $197.1 million. This product group was negatively effected by the economy in the form of reduced demand and increased price competition for solo inserts, and fewer new product introductions resulting in fewer product-sampling events. One-to-One Products - Products and services that pinpoint individuals to build loyalty to a brand: Consolidated one-to-one revenues were down 8.6% for the quarter, but up 160.3% for the year, to $39.3 million. All three areas within this group, including PreVision, Promotion Watch and direct mail posted substantial gains in revenue, and profitable performance. Non-consolidated revenues include Valassis Relationship Marketing Services, which increased its revenues by 29.0% for the year, and is expected to break even in 2003. Costs and Expenses: FSI costs (on a CPM basis) were down 8.5% for the quarter, and 2.7% for the year, due primarily to decreases in paper costs. Interest expense was down for the quarter and year, at $17.7 million for the year, down 22.7%. This was as a result of decreased interest expense due to the company's retirement of its 9.55% bonds, due 2003, as well as overall lower interest rates. In addition, the company issued $150 million in convertible bonds, utilizing the proceeds to repay higher cost debt. SG&A expense was up 9.3% for the year, to $89.2 million, but down 9.5% for the quarter, due to cost containment initiatives put in place in the latter part of the year. Share Repurchase/Debt Position: During the fourth quarter, Valassis repurchased 510,600 shares of its stock, bringing the total number of shares repurchased in 2001 to 1,840,100. The company allocated over 51% of its net earnings to share repurchases for the year. In January, the company announced that it expects to finish its current share authorization during the first quarter of 2002, and that it had also authorized its next 5-million share repurchase. During the year, the company lowered its net debt by $70 million, ending 2001 with net debt of $244.4 million. Outlook: In its third quarter earnings release, the company provided full- year guidance for 2002, stating that it expects earnings-per-share increases of 2% - 12%. The company's third quarter release also referenced detailed assumptions for these projections for each of its divisions. Management is now providing the following 2002 quarterly projections: Q1: 58 cents - 64 cents EPS Q2: 56 cents - 62 cents EPS Q3: 57 cents - 63 cents EPS Q4: 59 cents - 65 cents EPS "The bottom line is that we expect to generate between $120 - $130 million in cash flow in 2002. This cash provides us with a number of options to enhance shareholder value,'' said Al Schultz.

 

 

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