Valassis first quarter profit rises 10 percent
Friday, May 02, 2008
Press release from the issuing companyLIVONIA, Mich., May 1 -- Valassis today announced financial results for the first quarter ended March 31, 2008. We reported quarterly revenues of $597.1 million, up 65.3% compared to $361.3 million for the first quarter of 2007 (which excludes revenue for ADVO, Inc. for the period of Jan. 1, 2007 through March 1, 2007). Revenue increased 2.1% compared to pro forma revenue for the first quarter of 2007 of $584.8 million. This increase is due primarily to revenue growth in the Shared Mail segment. First quarter net earnings were $12.4 million, up 10.2% from $11.2 million in the first quarter of 2007. First quarter earnings per share (EPS) was $0.26, up from $0.23 in the first quarter of 2007. For the first quarter of 2008, adjusted EBITDA* was $63.2 million, up 47.0% from pro forma adjusted EBITDA* of $43.0 million for the first quarter of 2007.
"We are pleased with our performance, the third consecutive quarter of exceptional results in light of the difficult market conditions. This positive momentum is evidence of the strong strategic rationale behind our shared mail acquisition, our integration game plan and our outstanding execution of this plan. By focusing early on cost synergies and optimization of the shared mail business, we have significantly improved its cost structure and operating leverage. Our efforts in sales training and the launch of our new targeting system have set the stage for cross-selling and long- term profitable revenue growth starting in the second half of this year," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer.
Some additional highlights include:
Continued Momentum in Cost Management
-- Business Optimization: We continue to make substantial improvements in
the management of the shared mail business. Our optimization
initiative, designed to reduce over-supply and deliver more profitable
packages, has increased the profitability of the shared mail business
and contributed significantly to our performance in the last three
consecutive quarters. This initiative resulted in the elimination of 46
million packages in the first quarter of 2008 versus the first quarter
of the prior year. The revenue associated with this reduction in
packages, combined with the revenue loss from the discontinuation of
the detached address label in May 2007, represents a 3.9% revenue drag
in the first quarter of 2008.
-- Cost Synergies: Cost synergies are on track to meet our 2008 target of
-- Integration: Integration is near completion in all major functions of
the company except IT systems, accounting and finance.
Driving Profitable Revenue Growth
-- Cross-selling: We are pleased with our ability to offer optimized
solutions that blend shared mail and newspaper distribution. In
addition, we have secured planned incremental newspaper placement
contracts from shared mail clients. We expect to realize most of this
revenue beginning in the second half of 2008.
-- New Clients: We are on track to meet our 2008 objective of 4,000 new
-- Targeting System Launch: On April 1, 2008, we successfully launched and
are actively field testing our proprietary targeting system, Integrated
Media Optimization (IMO). IMO is designed to facilitate the cross-
selling of all our products.
-- Delayed Draw Term Loan: In April 2008, we successfully closed on the
delayed draw term loan portion of our Senior Secured Credit Facility in
an aggregate principal amount of $160 million. Pricing on the delayed
draw term loan will be in line with the term loan B portion of our
Senior Secured Credit Facility at LIBOR plus 1.75%. As previously
disclosed, the proceeds of the delayed draw term loan will primarily be
used in connection with the anticipated exercise of put rights by the
holders of Valassis' Senior Secured Convertible Notes due 2033 on May
-- 2009 Secured Notes: We expect to repay the 6 5/8% 2009 Secured Notes
which mature in January 2009 through a combination of cash, any excess
proceeds from the delayed draw term loan and borrowings on the
revolving portion of our Senior Secured Credit Facility which is
currently priced at LIBOR plus 2.25%. Based on certain ratio covenants
contained in our Senior Secured Credit Facility, we expect pricing to
ratchet down to LIBOR plus 2.00% in the next six to 12 months.
"Once the 2009 Notes are repaid, we will have no scheduled liquidity events until 2014, and we will strive to achieve investment grade status far before that time. We are comfortable with our current strong liquidity position including $93.5 million in cash and cash equivalents at quarter end, a $120 million revolver and expected adjusted cash flow* of approximately $103 million to $116 million in 2008," said Robert L. Recchia, Executive Vice President and Chief Financial Officer.
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