Livonia, Mich. - Valassis today announced financial results for the fourth quarter and full-year ended Dec. 31, 2010. We reported quarterly revenues of $631.2 million, an increase of 4.3% from $605.0 million for the prior year quarter. Fourth-quarter net earnings were $24.8 million, an increase of 3.3% from $24.0 million for the prior year quarter. Diluted earnings per share (EPS) for the quarter was $0.47, a decrease of 2.1% from $0.48 for the prior year quarter. For the fourth quarter of 2010, adjusted EBITDA* was $81.5 million, an increase of 2.0% from $79.9 million for the prior year quarter.

Results for the fourth quarter of 2010, including adjusted EBITDA,* were negatively impacted by the Chapter 11 bankruptcy case filed on Jan. 26, 2011 by Ultimate Acquisition Partners, L.P. (parent company of Ultimate Electronics). As a result of this development, we recorded an additional $4.5 million bad debt expense in the fourth quarter of 2010.

Full-year 2010 revenues were $2,333.5 million, an increase of 4.0% from full-year 2009 revenues of $2,244.2 million. Net earnings for full-year 2010 were $385.4 million, including debt repurchase costs of $14.7 million, net of tax, and News America litigation settlement proceeds, net of tax and related payments, of $301.4 million. Without these one-time items, net earnings would have been $98.7 million,* an increase of 47.8% from the prior full-year 2009 net earnings of $66.8 million. Diluted EPS for full-year 2010 was $7.42, which includes the effect of debt repurchase costs of $0.28 and litigation settlement proceeds and related payments of $5.80. Without these one-time items, diluted EPS would have been $1.90,* an increase of 39.7% from full-year 2009 diluted EPS of $1.36. Full-year 2010 adjusted EBITDA* was $318.6 million, including the $4.5 million bad debt expense described above, an increase of 21.3% from full-year 2009 adjusted EBITDA* of $262.7 million.

"In 2010, we successfully executed our recession-based strategy to grow volume across our portfolio," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "As the economic environment recovers, we expect to see price improvement which should drive mid-single-digit revenue and double-digit EPS growth in 2011 and beyond."

Some additional highlights include:

- Selling, General and Administrative (SG&A) Costs: Fourth quarter 2010 SG&A costs were $95.8 million, which included $9.8 million in non-cash stock-based compensation expense, of which $6.9 million related to grants awarded by our Board of Directors in December 2010 that would typically be granted in January 2011. This compares to the prior year quarter SG&A costs of $91.4 million, which included $2.0 million in legal costs related to the litigation settlement. SG&A costs for full-year 2010 were $371.3 million, an increase of 4.6% from $354.9 million for full-year 2009 due entirely to the increase in non-cash stock-based compensation expense.

- Capital Expenditures: Capital expenditures for the fourth-quarter and full-year 2010 were $10.2 million and $26.7 million, respectively.

- Liquidity:

   - Debt refinancing: On Jan. 28, 2011, we completed the private placement of $260 million aggregate principal amount of unsecured 6 5/8% senior notes due 2021. We used the net proceeds from the offering to fund the purchase of approximately $206.3 million of our outstanding unsecured 8 1/4% senior notes due 2015 (the "2015 Notes") pursuant to a tender offer at a weighted average price of $1,044.10 per $1,000.00 principal amount plus accrued and unpaid interest. On Jan. 28, 2011, we issued a notice to redeem the remaining outstanding $35.9 million aggregate principal amount of our 2015 Notes on March 1, 2011 at $1,041.25 per $1,000.00 principal amount plus accrued and unpaid interest. This refinancing of our 2015 Notes will save us approximately $2.3 million in interest expense in 2011 and approximately $2.8 million per year thereafter until our 2015 Notes would have otherwise matured;
   
   - We reduced total debt by $304.8 million during 2010, and we ended 2010 with net debt (total debt less cash) of $460.3 million, a decrease of 47.8% from year-end 2009.
   
   - We ended the fourth quarter of 2010 with $245.9 million in cash.
   
- Stock Repurchases: We made no share repurchases in the fourth quarter of 2010 as our 2010 stock repurchases were limited by our senior secured credit facility to an aggregate amount of $58.4 million. During the first three quarters of 2010, we repurchased $58.2 million of our common shares. 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 are 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 2010 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. Based on our full-year 2010 net earnings, our basket available for stock repurchases is $192.7 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.

Outlook

Based on our plan and outlook, we reiterate full-year 2011 guidance as follows:

- Full-year diluted earnings per share (EPS) of $2.76;
- A revenue increase from 2010 in the mid-single digits;
- Diluted cash EPS* of $3.71;
- Adjusted EBITDA* of approximately $355.0 million for 2011; and
- Capital expenditures of approximately $30 million.

Business Segment Discussion

- Shared Mail: Revenues for the fourth quarter of 2010 were $341.9 million, an increase of 2.0% compared to the prior year quarter due to an increase in insert volumes. Full-year 2010 revenues were $1,307.2 million, an increase of 2.2% compared to full-year 2009. Segment profit for the quarter was $45.3 million, an increase of 18.0% compared to the prior year quarter. Full-year 2010 segment profit was $156.8 million, an increase of 42.2% compared to full-year 2009. The increase in segment profit for the fourth-quarter and full-year 2010 was due to the increase in insert volumes, newspaper alliances and package optimization efforts.

- Neighborhood Targeted: Revenues for the fourth quarter of 2010 were $149.9 million, an increase of 6.2% compared to the prior year quarter. Full-year 2010 revenues were $479.9 million, an increase of 7.9% compared to full-year 2009. Segment profit for the quarter was $1.0 million, a decrease of 91.7% compared to the prior year quarter. Full-year 2010 segment profit was $20.6 million, a decrease of 43.3% compared to full-year 2009. Segment results for the fourth-quarter and full-year 2010 were negatively impacted by the aforementioned client bankruptcy, margin pressure associated with price and product mix and the impact of allocated non-cash stock-based compensation expense.

- Free-standing Inserts (FSI): Revenues for the fourth quarter of 2010 were $86.3 million, an increase of 3.7% compared to the prior year quarter due primarily to an additional regular FSI publication and an additional custom cooperative publication. Full-year 2010 revenues were $367.6 million, an increase of 1.7% compared to the prior year. Segment profit for the quarter was $0.3 million, a decrease of 91.7% compared to the prior year quarter due primarily to increased paper costs and lower average page counts associated with an additional FSI publication and the impact of non-cash stock-based compensation expense. Segment profit for the full-year 2010 was $24.9 million, an increase of 116.5% compared to the prior year due primarily to the increase in units and overall cost efficiencies.

- International, Digital Media & Services (IDMS): Revenues for the fourth quarter of 2010 were $53.1 million, an increase of 16.4% compared to the prior year quarter. Full-year 2010 revenues were $178.8 million, an increase of 12.5% compared to the prior year. Segment profit for the quarter was $9.6 million, an increase of 23.1% compared to the prior year. Segment results for the fourth quarter were due primarily to growth in our In-Store and Digital businesses. Segment profit for full-year 2010 was $22.7 million, a decrease of 9.2% compared to the prior year due to investments in our digital business.