Livonia, Mich. - Valassis today announced financial results for the first quarter ended March 31, 2011. We reported quarterly revenues of $547.0 million compared to $550.0 million for the prior year quarter. First-quarter 2011 net earnings were $21.4 million, including loss on debt extinguishment, net of tax, of $8.2 million. Net earnings for first-quarter 2010 were $322.5 million, including News America litigation settlement proceeds, net of tax and related payments, of $301.4 million. First-quarter 2011 adjusted net earnings* were $29.6 million, an increase of 40.3% from $21.1 million for the prior year quarter. First-quarter 2011 diluted earnings per share (EPS) was $0.41, including loss on debt extinguishment, net of tax, of $0.16. Diluted EPS for first-quarter 2010 was $6.26, including litigation settlement proceeds, net of tax and related payments, of $5.85. First-quarter 2011 adjusted diluted EPS* was $0.57, an increase of 39.0% from $0.41 for the prior year quarter. First-quarter 2011 adjusted EBITDA* was $74.5 million compared to $73.9 million for the prior year quarter. First-quarter 2011 diluted cash EPS* was $0.81, an increase of 8.0% from $0.75 for the prior year quarter.

"Our Shared Mail business delivered strong segment profit results this quarter, up over 33% compared to the same quarter last year," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer."And we see a number of factors in the Shared Mail business that we expect will positively impact segment revenues and profit, as well as improve overall company performance in the second half of the year."

Some additional highlights include:

- Selling, General and Administrative (SG&A) Costs: First-quarter 2011 SG&A costs were $78.4 million, which included $1.9 million in non-cash stock-based compensation expense, compared to first quarter 2010 SG&A costs of $91.0 million, which included $5.9 million in non-cash stock-based compensation expense.

- Capital Expenditures: Capital expenditures for the first quarter of 2011 were $5.0 million.

- Liquidity: We ended the first quarter of 2011 with $230.2 million in cash.

- Stock Repurchases: During the quarter, we repurchased $45.5 million, or 1,622,785 shares, of our common stock at an average price of $28.04 per share plus commission under our stock repurchase program. Our stock repurchases are limited bythe agreements governing our indebtedness, and our senior secured creditfacility basket for 2011 is $192.7 million. We currently intend to spend the majority of our 2011 basket for stock repurchases under our stock repurchase program reinstated in May 2010. 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

We anticipate a revenue shortfall primarily in the Neighborhood Targeted segment in which we have projected a decline in 2011 Run-of-Press (ROP) revenue of at least $60 million. This anticipated decline makes it difficult for us to achieve our mid-single digit revenue guidance for 2011. Based on our overall outlook, which includes strong revenue growth in the second half of 2011 for Shared Mail and its corresponding operating leverage, as well as the debt refinancing completed during the first quarter of 2011, our full-year 2011 guidance is as follows:

- Diluted earnings per share (EPS) of $2.76;
- 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 first quarter of 2011 were $322.6 million, an increase of 3.1% compared to the prior year quarter. Segment profit for the quarter was $42.1 million, an increase of 33.2% compared to the prior year quarter. The improvement in segment results for the first quarter of 2011 was driven by pieces per package growth of 5.3% to 10.0 pieces compared to the prior year quarter and an all-time low in unused postage of 14.9%.

- Neighborhood Targeted: Revenues for the first quarter of 2011 were $90.1 million, a decrease of 9.7% compared to the prior year quarter due to a decrease in client spend in the ROP business of approximately $20 million. Segment profit for the quarter was $1.9 million, a decrease of 73.2% compared to the prior year quarter. Segment profit was negatively impacted by margin pressure associated with a changing client mix and our new client on-boarding process, as well as the aforementioned shortfall in revenue.

- Free-standing Inserts (FSI): Revenues for the first quarter of 2011 were $89.2 million, a decrease of 8.5% compared to the prior year quarter. Segment profit for the quarter was $7.4 million, a decrease of 10.8% compared to the prior year quarter. Segment results were negatively impacted by the shift of Easter-related business into the second quarter and increased paper and transportation costs.

- International, Digital Media & Services (IDMS): Revenues for the first quarter of 2011 were $45.1 million, an increase of 13.3% compared to the prior year quarter due primarily to growth in our In-Store and Digital businesses. Segment profit for the quarter was $5.4 million, a slight decrease compared to the prior year quarter due to a slowdown in our International business and investments in our Digital business.