LIVONIA, Mich., Oct. 4 -- Valassis, the leading company in marketing services and Connective Media (TM), announced that it is revising its previous EPS growth projections, which were published in September 2000. The company successfully reached its original targets for the first half of 2001. Management expects that the worsening advertising recession, and the media pull-back associated with the September 11th terrorist attacks, will cause the company to fall short of these previous goals for the second half. Valassis is now expected to deliver earnings per share between 50-54 cents (before one-time charges) in both the third and fourth quarters, representing a near 10% increase versus the second half 2000. "We've been working hard to meet expectations in a difficult environment,'' said Alan F. Schultz, Chairman, President and CEO. "We have experienced the repercussions of several recent negative events, which have now made our original goals unreachable for the second half. However, I'm very proud that we still expect to deliver earnings-per-share growth near 10% for the second half. And, we expect to achieve these results in the midst of an ad spending recession, and formidable political and economic unrest. This is clear evidence that our Connective Media products do weather the storm better than traditional media, and that our team consistently performs well -- even during tough times.'' Mass-Distributed Products: Free-standing insert revenue is projected to be up for the third quarter, unaffected by the events of September 11th. Fourth quarter FSI revenue is expected to be down, however, due to one less publishing date than in the year ago quarter, as stated previously, and anticipated continued cuts in marketing spending. Management said, however, that additional downturn in consumer confidence could likely have a positive impact on promotional responsiveness and coupon use, which it has yet to see in the current economic environment. Additionally, the mass reach of the FSI could attract new categories currently in need of broad-scale messaging, as well as attracting the budget-conscious advertisers looking for proven methodswith measurable returns. Cluster-Targeted Products: Solo Inserts, which operate on increasingly short lead times, have experienced recent cancellations of business as a result of the aftermath of the terrorist attacks. This will cause a shortfall for the third quarter, and uncertainty about fourth quarter projections. Management noted, however, that solo inserts' short lead times could also be a positive capability for booking additional last minute business. This product line is continuing to experience pressure due to increased competition from commercial printers, and less-than-expected growth in newer categories, such as telecommunications and computer hardware. As reported, Polybag advertising and sampling experienced strong growth in the first half; however, the recent slow down in new product introductions has negatively effected the second half, and revenues are expected to be down for the six months versus last year's same period. One-to-One Products: PreVision Marketing/CRM Direct Mail remains on track to meet second half goals. The recent closure of Save.com, the company's internet coupon investment, has dramatically decreased its exposure to this currently volatile area, and to further internet-related cash flow drain. Valassis will take a charge of $5 - $7 million in the third quarter as a result of this previously announced closure. The company has redirected these efforts and resources into its grocery-based CRM effort, Valassis Relationship Marketing Systems. Costs and Expenses: The company expects that its paper cost will be even less than projected, down over 15% in the fourth quarter versus the year ago. Interest expense is also expected to be down in the second half. Valassis has taken action to reduce SG&A expenses in light of the current environment, and SG&A is expected to be down in the second half versus the first half of 2001. "We continue to generate strong free cash flow, and are utilizing it for continued share repurchase, and the retirement of our outstanding 9.55% bonds,'' said Robert L. Recchia, Chief Financial Officer. The retirement of the 9.55% bonds will result in a third quarter charge of approximately $1.3 million, after tax. Valassis will announce its third quarter results on October 25, 2001.