Vertis Communications Sees 80% Net Income Increase in Q4
Press release from the issuing company
BALTIMORE--April 2, 2007-- Vertis Communications announced today results for the three and twelve months ended December 31, 2006.
Revenue in the fourth quarter of 2006 amounted to $415.6 million versus $405.9 million in the fourth quarter of 2005, an increase of $9.7 million or 2.4%. The increase in revenue in the fourth quarter was the result of Direct Mail growth, including the impact of the acquisition of USA Direct in May 2006, which more than offset revenue declines in Advertising Inserts and Premedia.
For the full-year ended December 31, 2006, revenue was $1.47 billion, flat with $1.47 billion for year-end 2005.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
EBITDA in the fourth quarter of 2006 declined to $44.6 million versus $59.8 million for the same period in 2005. Adjusted EBITDA was $53.9 million in the fourth quarter of 2006, a decline of $8.0 million, or 13%, from Adjusted EBITDA of $61.9 million in 2005. For the full-year, EBITDA amounted to $142.0 million in 2006 versus $155.3 million in 2005. Adjusted EBITDA amounted to $169.4 million in 2006, a decline of $13.0 million, or 7.1%, from 2005 Adjusted EBITDA of $182.4 million.
The Company's previously announced sale of its fragrance business was completed in the fourth quarter of 2006 and a gain on the sale of $21.4 million was recorded. These operations have been classified as discontinued operations for all periods presented. Proceeds are expected to be $42 million, all but $1 million of which was received by December 31, 2006.
Net income in the fourth quarter of 2006 grew 80% to $18.5 million from $10.3 million in the fourth quarter of last year. This quarter's net income included a $20.4 million contribution from discontinued operations. 2005's fourth quarter included $1.5 million of income from discontinued operations. The Company had a loss from continuing operations before cumulative effect of accounting change in 2006's fourth quarter of $3.6 million versus income from continuing operations before cumulative effect of accounting change of $10.3 million in 2005's fourth quarter.
Net loss for the year ended December 31, 2006 was $26.2 million versus a net loss of $173.2 million in 2005. The 2006 full year results include income from discontinued operations of $21.6 million, while the 2005 full year results included $143.4 million in losses from discontinued operations and a $1.6 million cumulative effect of an accounting change. The loss from continuing operations before cumulative effect of accounting change through year-end 2006 was $47.8 million versus $28.2 million for the year ending December 31, 2005.
Additional information on the results are available in the Company's Form 10-K filed with the SEC on April 2, 2007.
The Company ended the year with $90.8 million available on its $220 million senior credit facility. EBITDA calculated for covenant purposes was $169.4 million or $9.4 million above the minimum requirement. Cash balances at year-end 2006 were $5.7 million.
On March 30, 2007, the Company amended its existing senior credit facility (the "Amendment"). The Amendment now provides for up to $250 million of availability through the December 2008 termination, of which $50 million is a fully funded term loan and $200 million is a revolving credit facility. In addition, the minimum EBITDA covenant has been reduced to $125 million from $160 million through the remaining term of the facility. Management has confidence that the new flexibility in the credit facility gives Vertis the ability to invest comfortably in the areas of the business that need it.
Mike DuBose, Chairman and Chief Executive Officer, commented, "I remain very impressed with my fellow Vertis employees as well as the broad range of capabilities embedded within the Company and the potential for our future.
"However, our 2006 performance fell far short of the Company's potential. We missed customer expectations and executed poorly, which drove disappointing financial performance. Based on our comprehensive assessment completed during my first 90 days, we understand the root causes of these problems and have already begun to implement corrective actions which are now a priority of this management team."
He continued, "Our plan for 2007 is to begin the transformation of Vertis into a well-managed world class business. We are investing in people, processes and our customers while launching several key initiatives aimed at dramatically improving Vertis' performance over the long term. We will accomplish this by further strengthening our foundation of printing and value added service capabilities and focusing our efforts on understanding and exceeding our customers' expectations. As we progress in this transformation, we expect to reverse the negative performance trends this company has experienced in the past years, and drive greater growth and profitability over the long term."
DuBose concluded, "2007 is a transitional year for the Company, and our financials will be significantly impacted by the residual problems of 2006 as well as from the investments and key initiatives necessary to transform the Company. These initiatives include investments in process improvements through lean and continuous improvements, additional maintenance and training, additional sales resources, additional customer support personnel and tools, and additional operational support. For these reasons, we expect Adjusted EBITDA to decline to approximately $135 million in 2007 on revenue of $1.5 billion. We expect to see the results of this transformation by the end of 2007, and enter 2008 with a much improved platform for growth and profitability."
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