LIVONIA, Mich. -- Valassis today announced financial results for the fourth quarter and full year ended Dec. 31, 2012. Fourth-quarter 2012 revenues were $579.4 million, a decrease of 2.7% from $595.3 million in the prior year quarter. Full-year 2012 revenues were $2,162.1 million, a decrease of 3.3% from $2,236.0 million in full-year 2011. The decrease in revenues was primarily due to a shortfall in shared mail volume, a decline in the  Neighborhood Targeted segment and consumer packaged goods (CPG) clients' spend patterns, which negatively influenced multiple business segments.

Fourth-quarter 2012 net earnings were $34.1 million, flat from $34.3 million in the prior year quarter. Fourth-quarter 2012 diluted earnings per share (EPS) was $0.85, an increase of 11.8% from $0.76 in the prior year quarter due to a lower share base as a result of share repurchases. Fourth-quarter 2011 net earnings and diluted EPS were negatively impacted by charges in an aggregate amount of $14.0 million ($8.5 million, net of tax) and $0.19, respectively, primarily related to the restructuring of certain non-core businesses and the associated costs including write-offs of impaired assets, as well as the early termination of leases and severance costs. 

Full-year 2012 net earnings were $119.0 million, an increase of 4.9% from $113.4 million for full-year 2011. Full-year 2012 adjusted net earnings^* were $124.7 million, which excludes $10.7 million of restructuring charges and asset impairments resulting from the exit of the newspaper polybag advertising and sampling and solo direct mail businesses and other non-recurring costs, net of tax, and a tax benefit of $5.0 million related to the reversal of certain tax reserves. Full-year 2011 adjusted net earnings^* were $133.5 million, which excludes debt refinancing costs of $11.6 million, net of tax, and the restructuring and related charges described above of $8.5 million, net of tax. Full-year 2012 adjusted net earnings^* decreased 6.6% from full-year 2011.

Full-year 2012 diluted EPS was $2.84 and full-year 2011 diluted EPS was $2.33. Full-year 2012 adjusted diluted EPS^*, which excludes a $0.13 net effect from the items described above, was $2.97. Full-year 2012 adjusted diluted EPS^* increased 8.4% from full-year 2011 adjusted diluted EPS^* of $2.74 due to a lower share base as a result of share repurchases. 

Fourth-quarter 2012 adjusted EBITDA^* was $86.4 million, a decrease of 5.4% from $91.3 million in the prior year quarter. Full-year 2012 adjusted EBITDA^* was $305.4 million, a decrease of 3.5% from $316.6 million in full-year 2011. 

"While clearly disappointed in our fourth-quarter and full-year results, I am pleased with our growth in earnings per share and the results of our efforts to return value to our shareholders," said Rob Mason, Valassis President and Chief Executive Officer. "We established a solid foundation for growth in 2012 and I fully expect that 2013 will see growth in both our top and bottom lines."

Some additional highlights include:

• Selling, General and Administrative (SG&A) Costs: Fourth-quarter 2012 SG&A costs were $82.8 million, a decrease of 7.3% compared to the prior year quarter SG&A costs of $89.3 million. Full-year 2012 SG&A costs were $317.3 million, a decrease of 3.6% compared to full-year 2011 SG&A costs of $329.1 million. Cost savings efforts in the back half of 2012 favorably impacted SG&A for the full year.
• Capital Expenditures: Capital expenditures for the fourth-quarter and full-year 2012 were $5.4 million and$21.2 million, respectively.
• Stock Repurchases: During 2012, we spent $112.0 million to repurchase 5.1 million shares, or approximately 13% of our common stock, at an average price of $21.89 per share under our stock repurchase program.
• Liquidity:
  • We reduced total debt by $15.0 million during 2012, and we ended 2012 with net debt (total debt less cash) of $492.9 million.
  • At Dec. 31, 2012, we had $94.7 million in cash.

Outlook 
Based on our plan, current outlook and the assumptions specified in our Dec. 14, 2012 earnings guidance press release, we reiterate full-year 2013 guidance as follows:

• Diluted earnings per share (EPS) of $3.50;
• Adjusted EBITDA^* of approximately $315.0 million; and
• Capital expenditures of approximately $25 million.

2013 Planned Uses of Cash

• Stock repurchase plan: We assume the use of approximately 35-40% of free cash flow for continued stock repurchases during 2013. Our stock repurchase program does not obligate us to acquire any particular amount of shares of common stock, and may be modified or suspended at any time at our discretion.
• Quarterly dividend: In December 2012, the Board approved a cash dividend policy pursuant to whichValassis intends to pay a quarterly cash dividend to holders of its common stock. The first such dividend for the quarter ended Dec. 31, 2012 was $0.31 per share of common stock. Valassis may modify, suspend or discontinue the dividend policy at any time at its discretion.

Business Segment Discussion

• Shared Mail:  Revenues for the fourth quarter of 2012 were $357.3 million, a decrease of 0.9% compared to the prior year quarter. Full-year 2012 revenues were $1,365.6 million, an increase of 1.1% compared to full-year 2011 driven by postage and an increase in printed programs. Segment profit for the quarter was $54.4 million, a decrease of 2.7% compared to the prior year quarter. The declines in segment results for the quarter were driven primarily by a decrease in insert volume due to softness in the specialty and discount retail categories. Full-year 2012 segment profit was $201.4 million, an increase of 5.0% compared to full-year 2011 driven primarily by a decrease in SG&A costs.
  
  
• Neighborhood Targeted:  Revenues for the fourth quarter of 2012 were $100.9 million, a decrease of 15.1% compared to the prior year quarter. Full-year 2012 revenues were $326.4 million, a decrease of 12.9% compared to full-year 2011. Segment profit for the quarter was $4.0 million, a decrease of 13.0% compared to the prior year quarter. Full-year 2012 segment loss was $1.0 million, compared to full-year 2011 segment profit of $7.7 million.  Segment results for the quarter and full year were negatively impacted by continued margin pressure, a decline in newspaper insert volume and the change in certain client contracts to a fee-based media placement model.
  
  
• Free-standing Inserts (FSI):  Revenues for the fourth quarter of 2012 were $64.9 million, an increase of 1.2% compared to the prior year quarter, due to increased page volume. Full-year 2012 revenues were$283.9 million, a decrease of 10.2% compared to the prior year, primarily due to the absence of the custom co-op business. Segment profit for the quarter was $1.6 million compared to the prior year quarter segment loss of $0.8 million. Segment profit for the full-year 2012 was $21.9 million, an increase of 55.3% compared to the prior year. Segment results for the quarter and full year were positively impacted by an increase in page volume in our core FSI product and improved gross profit margin.
  
  
• International, Digital Media & Services (IDMS):  Revenues for the fourth quarter of 2012 were $56.3 million, an increase of 8.5% compared to the prior year quarter, driven by growth in our digital business, partially offset by lower coupon redemption volumes at NCH and the exit from the solo direct mail business. Full-year 2012 revenues were $186.2 million, a decrease of 4.3% compared to the prior year despite digital revenue growth of over 100%. Segment profit for the quarter was $3.2 million, a decrease of 65.6% compared to the prior year quarter which can primarily be attributed to the acquisition of Brand.net. Full-year 2012 segment profit was $8.3 million, a decrease of 65.8% compared to the prior year, primarily due to the continued investment in our in-store and digital businesses and reduced volumes at NCH.

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