Vertis Announces 2003 Loss: Signs of market stabilization
Press release from the issuing company
Baltimore, MD (February 18, 2004) -- Vertis, the premier provider of targeted advertising, media and marketing services, today announced results for the three and 12 months ended December 31, 2003. For the three months ended December 31, 2003, net sales were $446.4 million, or 1.9 percent below the fourth quarter of 2002. For the year ended December 31, 2003, net sales amounted to $1,585.9 million, a 5.3 percent decrease from the year ended December 31, 2002. The decline in net sales reflects the difficult overall economic conditions experienced throughout 2003 and competitive pricing pressures.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) amounted to $58.9 million in the three months ended December 31, 2003, an increase of $0.4 million, or 0.6 percent versus the fourth quarter of 2002. For the year ended December 31, 2003, EBITDA amounted to $172.7 million, an increase of $71.7 million, or 71.0percent versus 2002. Included in the fourth quarter and full-year 2003 results are approximately $8.5 million and $15.2 million of restructuring costs compared to $13.3 million and $19.1 million in the comparable 2002 periods. In addition, the full-year 2002 results include an after-tax charge of $108.4 million due to adopting Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”) as it relates to goodwill and other intangibles. Excluding the effects of SFAS No. 142 in 2002, EBITDA for the year ended December 31, 2003 would have been less than 2002 by $36.7 million or 17.5 percent. The decline in EBITDA, excluding the effects of SFAS No. 142, was the result of the difficult market conditions which offset lower costs and a $10.1 million recovery from a settlement to a legal proceeding recorded in the first quarter of 2003. The recovery is included in “Other, net” on the Company’s Consolidated Statement of Operations.
Vertis’ Chairman, President, and Chief Executive Officer Donald Roland stated, “We ended the year by posting the best quarter-over-quarter net sales and EBITDA performance in the fourth quarter. During this quarter several of our business units posted year-over-year growth and we completed the reorganization of our North American platform, forming Vertis North America. The year-over-year growth reflects the solid underpinnings of our business while the reorganization will allow us to drive top-line growth and better serve our customers with our targeted, integrated solutions. In addition, we completed a rigorous marketing study, including extensive customer interviews that verified our strategic direction. We believe this will provide new growth opportunities for Vertis."
Vertis reported net income of $5.9 million in the fourth quarter of 2003 and a net loss of $95.9 million for the year ended December 31, 2003 versus net income of $5.5 million and a net loss of $120.1 million in the fourth quarter and full-year 2002, respectively. The net loss in the year ended December 31, 2003 includes a $67.4 million increase in the Company’s valuation allowance against deferred tax benefits arising from net operating loss carryforwards. The valuation allowance was recorded due to the continuation of the poor economic climate and the projected increase in annual interest expense resulting from the high-yield bond offering completed in June 2003. The 2002 net loss reflects the $108.4 million after-tax cumulative effect of adopting SFAS No. 142 as it relates to goodwill and other intangibles.
Dean D. Durbin, chief financial officer for Vertis commented, “The advertising market conditions were extremely challenging in 2003. Our fourth quarter comparables, however, showed some signs of stabilization as evidenced by the growth in EBITDA and nearly flat sales when compared to the fourth quarter of 2002. In fact, excluding the consulting costs associated with the marketing study mentioned earlier and the negative impact of the grocery strike in California, our fourth quarter EBITDA would have exceeded the 2002 fourth quarter results by 6.1 percent.” Mr. Durbin added, ”Even in these difficult conditions we reduced total debt by $41 million and finished the year safely within our debt covenant requirements.”
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