LIVONIA, MI - Valassis today announced financial results for the second quarter ended June 30, 2013.  Second-quarter 2013 revenues were $495.9 million, a decrease of 8.2% from $540.2 million in the prior year quarter. This decrease was due primarily to an anticipated decline in revenues in the Neighborhood Targeted segment resulting from the change in certain client contracts to a fee-based media placement model, as well as the discontinuance of the sampling and solo direct mail products.  Without the effect of these changes, second-quarter 2013 adjusted revenues^* increased 1.2%.

Second-quarter 2013 net earnings were $26.8 million, which included $0.9 million net of tax, of restructuring costs, an increase of 23.5% from $21.7 million in the prior year quarter, which included $10.7 million net of tax, of restructuring costs and asset impairments resulting from the exit of the newspaper polybag advertising and sampling and solo direct mail businesses and other non-recurring charges. Excluding these restructuring costs, asset impairments and other non-recurring charges, second-quarter 2013 adjusted net earnings^* were $27.7 million  and second-quarter 2012 adjusted net earnings^* were $32.4 million.

Second-quarter 2013 diluted earnings per share (EPS) was $0.68, which included the negative impact of the aforementioned restructuring costs of $0.02, an increase of 33.3% from $0.51 in the prior year quarter, which included the negative impact of the aforementioned restructuring costs, asset impairments and other non-recurring charges of $0.25. Excluding these charges, second-quarter 2013 adjusted diluted EPS^* was $0.70and second-quarter 2012 adjusted diluted EPS^* was $0.76. Second-quarter 2013 adjusted EBITDA^* was$66.2 million, a decrease of 13.8% from $76.8 million in the prior year quarter. 

"Despite a challenging first half, we remain committed and focused on improving our execution," said Rob Mason, Valassis President and Chief Executive Officer.  "Based on our back-half plan and current forecast, I believe we are on the right path to achieve our full-year 2013 guidance."

 Some additional highlights include:

• Selling, General and Administrative (SG&A) Costs: Second-quarter 2013 SG&A costs were $77.7 million (which included $0.9 million in restructuring costs), compared to the prior year quarter SG&A costs of $83.5 million (which included $6.0 million in restructuring and other non-recurring costs). 
• Capital Expenditures: Capital expenditures for second-quarter 2013 were $7.1 million.
• Return of Capital: During second-quarter 2013, we returned approximately $44.2 million to shareholders through a combination of stock repurchases and the payment of a cash dividend. Under our stock repurchase program, we repurchased $32.2 million or 1.3 million shares of our common stock, at an average price of $25.53 per share. We paid a cash dividend of $0.31 per share of common stock, for a total of approximately $12.0 million.
• Liquidity:
  • We reduced total debt by $18.8 million during second-quarter 2013 (including a voluntary payment of $15.0 million), and we ended the quarter with net debt (total debt less cash) of$476.4 million.
  • At June 30, 2013, we had $88.6 million in cash.

Outlook

Based on our plan and current outlook, we reiterate full-year 2013 guidance as follows:

• diluted earnings per share (EPS) of between $3.05 and $3.20,
• adjusted EBITDA^* of between $290.0 million and $300.0 million, and
• capital expenditures of approximately $25 million.

2013 Planned Uses of Cash:

• Stock repurchase program: We assume the use of approximately 35-40% of free cash flow^* for 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 dividend for the quarter ended June 30, 2013 was $0.31 per share of common stock.

Business Segment Discussion

• Shared Mail:  Revenues for the second quarter of 2013 were $335.9 million, a decrease of 3.7% compared to the prior year quarter. Segment profit for the quarter was $43.9 million, a decrease of 16.1% compared to the prior year quarter. The declines in segment results were driven primarily by volume decreases.
• Free-standing Inserts (FSI):  Revenues for the second quarter of 2013 were $80.2 million, an increase of 13.8% compared to the prior year quarter. Segment profit for the quarter was $9.4 million, an increase of 28.8% compared to the prior year quarter. Segment results for the quarter were positively impacted by an increase in page volume and cost efficiencies.
• Neighborhood Targeted:  Revenues for the second quarter of 2013 were $28.9 million, a decrease of 62.7% compared to the prior year quarter, primarily due to the change in certain client contracts to a fee-based  media placement model. Segment loss for the quarter was $1.5 million compared to segment loss in the prior year quarter of $2.4 million, due primarily to an improved cost structure and the exit of the sampling business in the prior year quarter.
• International, Digital Media & Services (IDMS):  Revenues for the second quarter of 2013 were $50.9 million, an increase of 17.3% compared to the prior year quarter, driven by growth in our in-store and digital businesses. Segment loss for the quarter was $0.5 million, compared to segment profit of $2.3 million in the prior year quarter, primarily due to continued investment in our in-store and digital businesses.

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