LIVONIA, Mich. - Valassis today provided financial guidance for full-year 2010, expecting adjusted EBITDA* of approximately $280 million. In 2010, we expect capital expenditures to be $25 million, resulting in expected diluted cash earnings per share (EPS)* of $2.48. Management believes that adjusted EBITDA and diluted cash EPS are the most relevant performance measurement criteria for our business.
"Consumer demand for our products remains strong," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "Our full-year 2010 guidance is based on the continuing success of our products, strategy and team."
Non-GAAP Financial Measures
*We define adjusted EBITDA as earnings before net interest expense, other non-cash expenses (income), net, income taxes, depreciation, amortization, stock-based compensation expense and non-recurring restructuring and severance costs. We define diluted cash EPS as net earnings plus depreciation, amortization and stock-based compensation expense, less capital expenditures, divided by weighted shares outstanding. Adjusted EBITDA and diluted cash EPS are non-GAAP financial measures commonly used by financial analysts, investors, rating agencies and other interested parties in evaluating companies, including marketing services companies. Accordingly, management believes that adjusted EBITDA and diluted cash EPS may be useful in assessing our operating performance and our ability to meet our debt service requirements. In addition, adjusted EBITDA is used by management to measure and analyze our operating performance and, along with other data, as our internal measure for setting annual operating budgets, assessing financial performance of business segments and as a performance criteria for incentive compensation. Management also believes that diluted cash EPS is useful to investors because it provides a measure of our profitability on a more comparable basis to historical periods and provides a more meaningful basis for forecasting future performance, by replacing non-cash amortization and depreciation expenses, which are currently running significantly higher than our annual capital needs, with actual and forecasted capital expenditures. Additionally, because of management's focus on generating shareholder value, of which profitability is a primary driver, management believes diluted cash EPS, as defined above, provides an important measure of our results of operations.
However, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, operating income, cash flow, EPS or other income or cash flow data prepared in accordance with GAAP. Some of these limitations are:
-adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments;
-although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements;
-adjusted EBITDA and diluted cash EPS do not reflect changes in, or cash requirements for, our working capital needs;
-adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
-adjusted EBITDA does not reflect income tax expense or the cash necessary to pay income taxes;
-adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and
-other companies, including companies in our industry, may calculate these measures differently and as the number of differences in the way two different companies calculate these measures increases, the degree of their usefulness as comparative measures correspondingly decreases.
Because of these limitations, adjusted EBITDA and diluted cash EPS should not be considered as measures of discretionary cash available to us to invest in the growth of our business or reduce indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures only supplementally. Further important information regarding reconciliations of these non-GAAP financial measures to their respective most comparable GAAP measures can be found below.