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Valassis announces 2011 financial guidance; Expects annual mid-single-digit revenue growth

Press release from the issuing company

Livonia, Mich. - Valassis today provided financial guidance for 2011, expecting full-year diluted earnings per share (EPS) of $2.76 and a revenue increase in the mid-single digits from 2010. We expect diluted cash EPS* of $3.71 and adjusted EBITDA* of approximately $355.0 million for 2011. We believe diluted EPS and diluted cash EPS* are the most relevant performance measures for our business, and we are calculating these based on an estimated 53.1 million in fully diluted shares outstanding as of Dec. 31, 2010. Our full-year 2011 guidance excludes the effect of any potential stock repurchases during 2011. We expect 2011 capital expenditures of approximately $30 million to be used primarily for technology and new business initiatives.

"Our 2011 guidance is consistent with our long-term plan to deliver annual mid-single-digit revenue growth and double-digit EPS growth," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "We believe consumer demand for value, along with marketers' demand for measurable media results, creates an environment for the sustainable, profitable growth of our products."

Our 2011 guidance takes into consideration the following assumptions:

- We expect mid-single-digit growth in U.S. advertising spend for 2011.

- Pre-Easter is historically a strong promotional period. In 2010, Easter fell on the first Sunday of April where the majority of pre-promotion revenue was recognized in the first quarter. In 2011, Easter will fall on the fourth Sunday in April pushing the majority of pre-promotion revenue to the second quarter.

- In 2011, we expect an increase in Shared Mail pieces per package and a flat-to-slight decrease in year-over-year packages compared to 2010.

- The current environment suggests the likelihood of an inflationary increase in postal rates in May 2011. We expect to pass any potential increase on to clients per our Shared Mail contracts. Since postage is on average approximately 50% of Shared Mail revenue, for every potential 1% increase in postage, our clients will receive a 0.5% increase.

- We expect the contracted distribution of News America's SmartSource Cooperative Free-standing Insert (FSI) to begin running in our RedPlum Shared Mail package in January 2011.

- Incremental revenue gains from our In-Store and Digital businesses are expected to be approximately $40 million compared to 2010. We expect the incremental revenue for In-Store to be skewed toward the back half of 2011.

- Although our full-year 2011 guidance does not give effect to any stock repurchases, we intend to spend the majority of our 2011 basket for stock repurchases under our Stock Repurchase Program reinstated in May 2010. Our 2011 stock repurchases will be limited by the agreements governing our indebtedness. As a result of these limitations, we currently do not intend on effecting any stock repurchases until after we file our Annual Report on Form 10-K. In addition, our credit agreement stock repurchase basket is calculated in part at 50% of 2010's net earnings. Assuming the estimated full-year 2010 net earnings in our 2010 adjusted EBITDA reconciliation, our 2011 basket could be approximately $193 million. The 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.

- We expect a mid-to-high-single-digit increase in paper prices for 2011.

- A low-single-digit increase in Selling, General and Administrative costs is expected in 2011 compared to 2010, excluding non-cash stock-based compensation expense in 2010 and 2011. In addition, 2011 non-cash stock-based compensation expense is expected to be approximately $17 million based on our current stock price and fair value assumptions and anticipated 2011 equity compensation grants.

2010 Guidance:

Based on our current results and outlook, we reiterate our full-year 2010 guidance as follows: we plan to meet or exceed our guidance for adjusted EBITDA* of $320 million. We expect 2010 diluted cash EPS* to be approximately $3.20 and full-year 2010 capital expenditures to be approximately $25 million.

Diluted EPS and diluted cash EPS* for 2010 are based on an estimated 52.1 million in weighted average fully diluted shares outstanding.


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