Valassis today announced the following financial results for the third quarter ended Sept. 30, 2011:
- Revenues were $528.4 million, a decrease of 7.7% compared to $572.4 million for the prior year quarter due to the negative impact of the macroeconomic climate on client advertising budgets; the previously announced anticipated shortfall in Run-of-Press (ROP) revenue within the Neighborhood Targeted segment; and the negative impact of the increased costs of high coupon redemption on annual consumer promotion budgets. This has resulted in reduced consumer packaged goods (CPG) programs across our various business segments.
- Diluted earnings per share (EPS) was $0.58, an increase of 11.5% from $0.52 for the prior year quarter.
- Net earnings were $27.5 million, an increase of 1.9% from $27.0 million for the prior year quarter.
- Adjusted EBITDA* was $69.8 million, a decrease of 12.5% compared to $79.8 million for the prior year quarter driven primarily by the decline in revenue.
- Diluted cash EPS* was $0.79, a decrease of 3.7% compared to $0.82 for the prior year quarter.
"The combined effect of the economy and increasing coupon redemptions are prematurely exhausting annual consumer promotion budgets in the second half of 2011," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "We believe marketers will expand their consumer promotion budgets in 2012 to accommodate the increasing redemptions as they have in the past. We are also counseling clients to proactively manage redemption costs by controlling the variables we know influence redemptions such as coupon face values, coupon durations and multiple purchase requirements."
Some additional highlights include:
- Selling, General and Administrative (SG&A) Costs: Third-quarter 2011 SG&A costs were $80.5 million, which included $2.2 million in non-cash stock-based compensation expense. This represents a decrease of 12.3% compared to third quarter 2010 SG&A costs of $91.8 million, which included $8.6 million in non-cash stock-based compensation expense.
- Capital Expenditures: Capital expenditures were $6.5 million for the third quarter and $18.1 million year to date.
- Liquidity: Total cash was $91.0 million at Sept. 30, 2011, a decrease of $28.0 million from June 30, 2011 due to share repurchases of $50.0 million; offset, in part, by cash generated from operations of $32.2 million in the quarter.
- Stock Repurchases: During the quarter, we repurchased $50.0 million, or 2.1 million shares, of our common stock at an average price of $23.86 per share under the stock repurchase program. Year to date, we have repurchased $155.8 million, or 5.9 million shares of our common stock. We currently have 4.5 million shares authorized by our Board of Directors in our stock repurchase program. 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.
Global economic uncertainty has resulted in a combination of factors that have negatively affected our business including: a decline in client advertising budgets, the aforementioned high coupon redemption and subsequent reduction in programs as CPG manufacturers have prematurely exhausted annual consumer promotion budgets.
Based on our current outlook, we have revised our full-year 2011 guidance as follows:
- adjusted EBITDA* to be $315.1 million, compared to our previous adjusted EBITDA* guidance of approximately $355 million;
- diluted EPS to be $2.33, compared to our previous guidance of $2.76;
- adjusted diluted EPS* to be $2.56 (excludes the effect of loss on extinguishment of debt and related charges);
- diluted cash EPS* to be approximately $3.56 (calculated using estimated 2011 full-year weighted average diluted shares of 49.3 million based on shares outstanding at Sept. 30, 2011), compared to the previous guidance of $3.71 (calculated using the estimated weighted average diluted shares of 53.1 million based on shares outstanding at Dec. 15, 2010); and
- 2011 annual capital expenditures to be approximately $27 million, compared to our previous guidance of $30 million.
We expect to discuss 2012 annual guidance in December 2011.
Business Segment Discussion
- Shared Mail: Revenues for the third quarter of 2011 were $330.5 million, an increase of 1.3% compared to the prior year quarter. Segment profit for the quarter was $46.2 million, an increase of 17.6% compared to the prior year quarter. The improvement in segment profit was driven primarily by an increase in revenue per package attributed to our pricing initiative and ongoing cost containment efforts.
- Neighborhood Targeted: Revenues for the third quarter of 2011 were $76.9 million, a decrease of 32.5% compared to the prior year quarter. Revenue results for this segment were primarily due to a $25.0 million decrease in ROP revenue as well as the aforementioned reduction in CPG programs. Segment profit for the quarter was $0.4 million, a decrease of 94.4% compared to the prior year quarter. Segment profit was negatively impacted by margin pressure associated with a changing client mix and the aforementioned revenue shortfall.
- Free-standing Inserts (FSI): Revenues for the third quarter of 2011 were $73.5 million, a decrease of 17.6% compared to the prior year quarter due to the aforementioned reduction in CPG programs. Industry volume decreased by approximately 10%. Segment profit for the quarter was a loss of $0.8 million, a decrease of 116.3% compared to the prior year quarter.
- International, Digital Media & Services (IDMS): Revenues for the third quarter of 2011 were $47.5 million, an increase of 10.2% compared to the prior year quarter. Segment revenue results were driven by strong growth in our coupon clearing business despite lower than expected revenue in our new business initiatives. Segment profit for the quarter was $3.2 million, a decrease of 28.9% compared to the prior year quarter. Segment profit results were negatively impacted by the aforementioned reduction in CPG programs, but partially offset by a substantial increase in profitability in our coupon clearing and analytics business, NCH Marketing Services, Inc.