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Valassis Q3 Profit Increases

Friday, October 26, 2012

Press release from the issuing company

LIVONIA, Mich., - Valassis today announced financial results for the third quarter ended Sept. 30, 2012. Third-quarter 2012 revenues were $523.8 million compared to $528.4 million in the prior year quarter. Third-quarter 2012 net earnings were $36.7 million, an increase of 33.5% from $27.5 million in the prior year quarter. This increase was primarily the result of the previously announced cost reductions and a favorable income tax adjustment resulting from the expiration of certain tax reserves. Third-quarter 2012 diluted earnings per share (EPS) was $0.90, an increase of 55.2% from $0.58 in the prior year quarter due to improved earnings coupled with a lower share base as a result of share repurchases. Third-quarter 2012 adjusted EBITDA* was $75.2 million, an increase of 7.7% from $69.8 million in the prior year quarter.

"This quarter, we delivered strong growth in EPS and adjusted EBITDA*," said Rob Mason, President and Chief Executive Officer. "Notable gains in our Free-standing Insert business, ongoing operational improvements within Shared Mail, and continued cost containment efforts were key drivers that contributed to our results."

 Some additional highlights include:

  • Selling, General and Administrative (SG&A) Costs: Third-quarter 2012 SG&A costs were $73.4 million compared to prior year quarter costs of $80.5 million. This 8.8% decrease was primarily due to restructuring and other cost reduction measures that took place at the end of the second quarter.
  • Capital Expenditures: Capital expenditures were $4.0 million for the third quarter of 2012 and $15.8 million year to date.
  • Stock Repurchases: During third quarter 2012, we repurchased $21.2 million, or 0.8 million shares, of our common stock at an average price of $25.34 per share. Year to date, we have repurchased $87.1 million, or 4.1 million shares of our common stock at an average price of $21.08 per share under our stock repurchase program.

Liquidity:

  • We reduced total debt by $3.8 million during third-quarter 2012, and we ended the quarter with net debt (total debt less cash) of $501.0 million.
  • At Sept. 30, 2012, we had $90.3 million in cash.

Outlook
Based on our plan and current outlook, we are updating our full-year 2012 guidance as follows:

  • diluted EPS of $2.98 (previously $2.86) which reflects a favorable income tax adjustment of $0.12;
  • excluding one-time charges, adjusted diluted EPS* of $3.23 (previously $3.11) which reflects a favorable income tax adjustment of $0.12; and
  • capital expenditures to be between $20 million and $22 million (previously approximately $26 million).

The company has decided to no longer use diluted cash EPS as a financial performance measure.

Business Segment Discussion

  • Shared Mail: Revenues for the third quarter of 2012 were $331.4 million, an increase of 0.3% compared to the prior year quarter. Segment profit for the quarter was $52.3 million, an increase of 13.2% compared to the prior year quarter. The improvement in segment profit was due to an increase in pieces per package and effective cost management, including package optimization efforts and SG&A reductions.
  • Neighborhood Targeted: Revenues for the third quarter of 2012 were $75.8 million, a decrease of 1.4% compared to the prior year quarter. Segment loss for the quarter was $1.1 million compared to segment profit in the prior year quarter of $0.4 million due to continued margin pressure.
  • Free-standing Inserts (FSI):  Revenues for the third quarter of 2012 were $72.2 million, a decrease of 1.8% compared to the prior year quarter. Segment profit for the quarter was $7.6 million, compared to a segment loss of $0.8 million in the prior year quarter. Segment results for the quarter were positively impacted primarily by an increase in average pages per book, which offset the absence of approximately $14 million in custom co-op revenue.
  • International, Digital Media & Services (IDMS):  Revenues for the third quarter of 2012 were $44.4 million, a decrease of 6.5% compared to the prior year quarter. Segment revenues were negatively impacted primarily by the reduced consumer packaged goods spend affecting in-store as well as a decrease in coupon redemption volume impacting NCH, our coupon clearing business. The revenue decreases in these businesses offset the growth in our digital business. Segment profit for the quarter was $0.1 million compared to $3.2 million in the prior year quarter, primarily due to the continued investment in our digital business.

 

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