Valassis announces strong earnings growth for 2009
Tuesday, February 23, 2010
Press release from the issuing company
Livonia, Mich. - Valassis today announced financial results for the fourth quarter and full-year ended Dec. 31, 2009. We reported quarterly revenue of $605.0 million, a decrease of 3.4% from $626.3 million for the prior year quarter. Fourth-quarter net earnings was $24.0 million compared to a loss of $222.0 million for the prior year quarter which included a $245.7 million non-cash impairment charge ($223.4 million, net of tax) related to goodwill and other intangible assets. Diluted earnings per share (EPS) for the quarter was $0.48 compared to a loss of $4.63 for the prior year quarter which included a loss of $4.66 in EPS (net of tax) due to the aforementioned impairment charge. Excluding this impairment charge, earnings for the fourth quarter 2008 would have been $1.4 million or $0.03 per share. For the fourth quarter of 2009, adjusted EBITDA* was $79.9 million, an increase of 27.6% compared to $62.6 million for the prior year quarter.
Full-year 2009 revenue was $2,244.2 million, a decrease of 5.8% from full-year 2008 revenue of $2,381.9 million. Excluding revenue of $23.7 million from divested and discontinued businesses from the prior year, the revenue decline for full-year 2009 would have been 4.8%. Net earnings for full-year 2009 was $66.8 million, or $1.36 per share, compared to a full-year 2008 net loss of $209.7 million,(1) or $4.37 per share,(1) which included the aforementioned impairment charge. Excluding this impairment charge, full-year 2008 earnings would have been $13.7 million or $0.29 per share. Full-year 2009 adjusted EBITDA* was $262.7 million, up 21.2% from full-year 2008 adjusted EBITDA* of $216.8 million.
"Our team did a tremendous job growing earnings in a challenging economic environment," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "I have never been more optimistic about the future of our business. As the combined forces of improved operating leverage and economic conditions come together, I believe we are in a strong position for future growth."
Some additional highlights include:
- Capital Expenditures: Capital expenditures for the fourth quarter and full-year 2009 were $5.6 million and $19.1 million, respectively.
- Interest Expense: Cash interest expense for the quarter was $19.3 million compared to $22.8 million for the prior year quarter, a decrease of 15.4%.
- Settlement Agreement with News America: On Feb. 4, 2010, we entered into a settlement agreement with News America Marketing dismissing all outstanding litigation and releasing all related existing and potential claims against each other as of the date of the agreement. As part of the settlement, on Feb. 4, 2010, we received a cash payment of $500 million, and we entered into a 10-year shared mail distribution agreement which provides for the sale by Valassis of shared mail services to News America on specified terms. In connection with the settlement, we are working with the Court, under the Honorable Judge Arthur J. Tarnow, on a set of procedures to handle future disputes among the parties with respect to conduct at issue in the litigation. The precise timing and format of the relief rests with the Court.
(1) Effective Jan. 1, 2009, we adopted the requirements of Financial Accounting Standards Board Accounting Standards Codification 470-20, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)", (ASC 470-20) which requires retrospective application. This adoption of ASC 470-20 had no effect on the current period. Previously reported net earnings and EPS for the year ended Dec. 31, 2008 have been reduced by $2.2 million and $0.05, respectively, as the result of recognizing incremental non-cash interest expense of $3.3 million during that period. In May 2008, we repurchased approximately 99.95% of our convertible debt.
Business Segment Discussion
- Neighborhood Targeted Products: Revenue for the fourth quarter of 2009 was $141.1 million, down 8.3% compared to the prior year quarter. Newspaper Inserts revenue remained strong and was up 25% for the quarter as a result of our cross-selling efforts. Run-of-Press revenue was down related to reduced client ad spend within the financial vertical. Segment profit for the quarter was $12.1 million, up 10.0% compared to the prior year quarter. Full-year 2009 segment revenue was $444.7 million, down 5.2% from full-year 2008. Full-year 2009 segment profit was $36.3 million, down 6.4% from full-year 2008 due primarily to the decline in revenue.
- Free-standing Inserts (FSI): Revenue for the fourth quarter of 2009 was $83.2 million, down 9.1% compared to the prior year quarter. This was due to continued pricing declines and one less custom co-op program during the quarter. Segment profit for the quarter was $3.6 million, up 80% compared to the prior year quarter primarily due to an increase of 3.2% in industry volume and reduced costs. Full-year 2009 segment revenue was $361.4 million, down 2.4% from full-year 2008. Full-year 2009 segment profit was $11.5 million, up 538.9% from full-year 2008. Industry units were up 3.9% for full-year 2009, as a result of marketers' continued response to consumer demand for value-oriented media.
- International, Digital Media & Services: Revenue for the fourth quarter was $45.6 million, up 3.9% compared to the prior year quarter. Excluding revenue from previously announced divested and discontinued operations of $2.1 million in the prior year quarter, revenue was up 9.1%. Segment profit for the quarter was $7.8 million, up 105.3% compared to the prior year quarter due primarily to record increases in U.S. coupon clearing volume. According to NCH Marketing Services, Inc. (our coupon-processing and analytics subsidiary), 2009 consumer packaged goods coupon distribution was up 11% and coupon redemption was up 23% compared to the prior year. Full-year 2009 segment revenue was $159.0 million, down 7.4% from full-year 2008. Excluding $23.7 million of 2008 revenue from discontinued businesses, full-year 2009 revenue was up 7.4% compared to full-year 2008. Segment profit for full-year 2009 was $25.0 million compared to $0.6 million in full-year 2008, which included restructuring charges of $2.5 million.
Non-GAAP Financial Measures
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 diluted cash EPS 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 does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; 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 diluted cash EPS 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.
Safe Harbor and Forward-Looking Statements
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