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Valassis announces revenue growth over 5% for Q3

Friday, October 29, 2010

Press release from the issuing company

Livonia, Mich. - Valassis today announced financial results for the third quarter ended Sept. 30, 2010. Quarterly revenues were $572.4 million, an increase of 5.2% compared to $544.1 million for the prior year quarter. Third-quarter net earnings were $27.0 million, an increase of 95.7% compared to $13.8 million in the prior year quarter. Diluted earnings per share (EPS) for the quarter was $0.52, an increase of 85.7% compared to $0.28 in the prior year quarter. For the third quarter of 2010, adjusted EBITDA was $79.8 million, an increase of 24.9% compared to $63.9 million for the prior year quarter.

"Our strong results this quarter are consistent with our long-term plan to deliver annual mid-single-digit revenue growth and double-digit EPS growth," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer.

Some additional highlights include:
- Selling, General and Administrative (SG&A) Costs: Third quarter 2010 SG&A costs were $91.8 million, which included $8.6 million in non-cash stock-based compensation expense ($6.5 million of which is related to accelerated expense attributable to recipients of equity awards who meet certain age and service criteria under the company's recently implemented post-termination policy). This compares to the prior year quarter SG&A costs of $90.7 million, which included $2.8 million in non-cash stock-based compensation expense and $2.5 million in legal costs related to litigation settled in February of 2010. Management is planning to recommend to its Board of Directors that certain equity award grants that would typically be granted in January of 2011 be granted in December of 2010. If approved, we anticipate approximately $10 million in non-cash stock-based compensation expense in the fourth quarter of 2010. We expect 2011 non-cash stock-based compensation expense to be approximately $16 million to $18 million based on current stock price and fair value assumptions and anticipated 2011 grants.

- Capital Expenditures: Capital expenditures were $8.0 million during the third quarter.

- Liquidity:
    - We ended the third quarter of 2010 with $208.5 million in cash and net debt (total debt less cash) of $499.5 million.
    - Total tax payments during the third quarter of 2010 were $61.8 million primarily as a result of our first quarter 2010 receipt of net proceeds from the aforementioned litigation settlement. During the fourth quarter of 2010, we expect total tax payments of approximately $56.0 million.

- Stock Repurchases: During the quarter, we repurchased $3.6 million, or 114,072 shares, of our common stock at an average price of $31.57 per share under the stock repurchase program reinstated in May 2010. As of Sept. 30, 2010, we repurchased $58.2 million, or 1,733,672 shares, of our common stock at an average price of $33.58 per share. Our 2010 stock repurchases are limited by our senior secured credit facility to an aggregate amount of $58.4 million.

Outlook
We believe our RedPlum(TM) blended media solutions and products are a mainstay for both value-conscious consumers and the marketers who seek to reach them. Based on our current results and outlook, full-year 2010 guidance is as follows: we plan to meet or exceed our guidance for adjusted EBITDA of $320 million and are increasing diluted cash EPS from $3.14 to $3.20. We also reiterate our previously announced full-year 2010 guidance of $25 million in capital expenditures.

Business Segment Discussion
- Shared Mail: Revenues for the third quarter of 2010 were $326.1 million, an increase of 2.1% compared to the prior year quarter due primarily to an increase in insert volumes. Segment profit for the quarter was $39.3 million, an increase of 32.8% compared to the prior year quarter. The growth in segment profit is due to the increase in revenues, newspaper alliances and package optimization efforts.

- Neighborhood Targeted: Revenues for the third quarter of 2010 were $114.0 million, an increase of 23.9% compared to the prior year quarter due to an increase in client spend in the energy, telecom and specialty retail verticals. Segment profit for the quarter was $7.2 million, an increase of 84.6% compared to the prior year quarter due to increased volume.

- Free-standing Inserts (FSI): Revenues for the third quarter of 2010 were $89.2 million, a decrease of 3.7% compared to the prior year quarter. The revenue decline is due to two less FSI publications compared to the prior year quarter. Segment profit for the quarter was $4.9 million, an increase of 113.0% compared to $2.3 million in the prior year quarter. Segment profit improvement was due primarily to an increase in average pages per book and related cost efficiencies.

- International, Digital Media & Services (IDMS): Revenues for the third quarter of 2010 were $43.1 million, an increase of 7.8% compared to the prior year quarter. Coupon clearing volume continues to be the primary driver of revenues for this segment. The increase in revenues for the third quarter was due primarily to growth in our In-Store and Digital businesses. Segment profit for the quarter was $4.5 million, a decrease of 34.8% compared to the prior year quarter due primarily to reduced volume in our European business and the continued investment in the Digital business.

 

 

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