Exhibit 99.1
FOR IMMEDIATE RELEASE
Valassis Announces Results for the First Quarter Ended March 31, 2013
LIVONIA, Mich., April 25, 2013: Valassis (NYSE: VCI)today announced financial results for the first quarter ended March 31, 2013. First-quarter 2013 revenues were $482.5 million, a decrease of 7.0% from $518.6 million in the prior year quarter. This decrease was due primarily to an anticipated decline in revenues in the Neighborhood Targeted segment resulting from the change in certain client contracts to a fee-based media placement model. Increased revenues in our Free-standing Inserts (FSI) segment partially offset the decline.
First-quarter 2013 net earnings were $21.7 million, a decrease of 17.8% from $26.4 million in the prior year quarter. First-quarter 2013 diluted earnings per share (EPS) was $0.54, a decrease of 10.0% from $0.60 in the prior year quarter. First-quarter 2013 adjusted EBITDA* was $58.0 million, a decrease of 13.4% from $67.0 million in the prior year quarter.
“We are focused on improving execution, growing our share and achieving top and bottom-line growth,”said Rob Mason, Valassis President and Chief Executive Officer.“I am confident that we are taking the necessary steps to expedite our progress and expect to see positive results from our efforts in the second half of the year.”
Some additional highlights include:
| • | Selling, General and Administrative (SG&A) Costs:First-quarter 2013 SG&A costs were $76.3 million, down 1.7% compared to the prior year quarter SG&A costs. |
| • | Capital Expenditures: Capital expenditures for first-quarter 2013 were $3.3 million. |
| • | Stock Repurchases:During first-quarter 2013, we repurchased $21.2 million, or 725,512 shares, of our common stock at an average price of $29.18 per share under our stock repurchase program. |
| • | Liquidity: |
| • | We reduced total debt by $3.8 million during first-quarter 2013, and we ended the quarter with net debt (total debt less cash) of $486.6 million. |
| • | At March 31, 2013, we had $97.2 million in cash. |
Outlook
Based on our overall outlook, we are revising our full-year 2013 diluted earnings per share (EPS) and adjusted EBITDA* guidance as follows:
| • | diluted earnings per share (EPS) of between $3.05 and $3.20 (previously $3.50), and |
| • | adjusted EBITDA* of between $290.0 million and $300.0 million (previously approximately $315.0 million). |
We reiterate our guidance for capital expenditures of approximately $25 million.
2013 Planned Uses of Cash:
| • | Stock repurchase plan:We assume the use of approximately 35-40% of free cash flow* for continued stock repurchases during 2013. Our 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. |
| • | Quarterly dividend: In December 2012, the Board approved a cash dividend policy pursuant to which Valassis intends to pay a quarterly cash dividend to holders of its common stock. The dividend for the quarter ended March 31, 2013 was $0.31 per share of common stock. Valassis may modify, suspend or discontinue the dividend policy at any time at its discretion. |
Business Segment Discussion
| • | Shared Mail: Revenues for the first quarter of 2013 were $327.1 million, down 0.3% compared to the prior year quarter. Segment profit for the quarter was $38.9 million, a decrease of 8.3% compared to the prior year quarter. The decline in segment profit was driven primarily by reduced wrap revenue and the shifting of product mix to lower margin products. |
| • | Free-standing Inserts (FSI): Revenues for the first quarter of 2013 were $85.7 million, an increase of 12.3% compared to the prior year quarter. Segment profit for the quarter was $11.1 million, an increase of 105.6% compared to the prior year quarter. Segment results for the quarter were positively impacted by an increase in page volume, improved gross margin and market share gains. |
| • | Neighborhood Targeted: Revenues for the first quarter of 2013 were $23.3 million, a decrease of 67.7% compared to the prior year quarter, primarily due to the change in certain client contracts to a fee-based media placement model. Segment loss for the quarter was $4.4 million compared to segment loss in the prior year quarter of $1.6 million, due primarily to continued margin pressure. |
| • | International, Digital Media & Services (IDMS): Revenues for the first quarter of 2013 were $46.4 million, an increase of 10.5% compared to the prior year quarter, driven by growth in our in-store and digital businesses. Segment loss for the quarter was $3.9 million, compared to segment profit of $2.7 million in the prior year quarter, primarily due to continued investment in our in-store and digital businesses and a decline in coupon redemption volumes at NCH. |
Segment Results Summary
| Quarter Ended March 31, | ||||||||||||
| 2013 | 2012 | % Change | ||||||||||
Segment Revenues ($ in millions) | ||||||||||||
Shared Mail | $ | 327.1 | $ | 328.1 | -0.3 | % | ||||||
Free-standing Inserts | $ | 85.7 | $ | 76.3 | 12.3 | % | ||||||
Neighborhood Targeted | $ | 23.3 | $ | 72.2 | -67.7 | % | ||||||
International, Digital Media & Services | $ | 46.4 | $ | 42.0 | 10.5 | % | ||||||
Total Segment Revenues | $ | 482.5 | $ | 518.6 | -7.0 | % | ||||||
| Quarter Ended March 31, | ||||||||||||
| 2013 | 2012 | % Change | ||||||||||
Segment Profit (Loss) ($ in millions) | ||||||||||||
Shared Mail | $ | 38.9 | $ | 42.4 | -8.3 | % | ||||||
Free-standing Inserts | $ | 11.1 | $ | 5.4 | 105.6 | % | ||||||
Neighborhood Targeted | ($ | 4.4 | ) | ($ | 1.6 | ) | -175.0 | % | ||||
International, Digital Media & Services | ($ | 3.9 | ) | $ | 2.7 | -244.4 | % | |||||
Total Segment Profit | $ | 41.7 | $ | 48.9 | -14.7 | % | ||||||
Conference Call Information
We will hold an investor call today to discuss our first-quarter 2013 results at 11 a.m. (EDT). The call-in number is 877-941-9205 (Conference ID: 4609849). The call will be simulcast on our website atwww.valassis.com. This earnings release, webcast and a transcript of the conference call will be archived on our website under “Investors.”
*Non-GAAP Financial Measures
We define adjusted EBITDA as net earnings before interest expense, net, other non-cash expenses (income), net, income taxes, gain or loss on extinguishment of debt, impairment charges and other non-recurring costs, depreciation, amortization, and stock-based compensation expense. We define free cash flow as net earnings before depreciation, amortization and stock-based compensation expense, less capital expenditures. Adjusted EBITDA and free cash flow are non-GAAP financial measures commonly used by financial analysts, investors, rating agencies and other interested parties in evaluating companies, including marketing services companies. Accordingly, management believes that these non-GAAP measures may be useful in assessing our operating performance and our ability to meet our debt service requirements. In addition, these non-GAAP measures are used by management to measure and analyze our operating performance and, along with other data, as our internal measure for setting annual operating budgets, assessing financial performance of business segments and as performance criteria for incentive compensation. Additionally, because of management’s focus on generating shareholder value, of which profitability is a primary driver, management believes these non-GAAP measures, as defined above, provide an important measure of our results of operations.
However, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, operating income, cash flow, EPS or other income or cash flow data prepared in accordance with GAAP. Some of these limitations are:
| • | adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments; |
| • | although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements; |
| • | adjusted EBITDA and free cash flow do not reflect changes in, or cash requirements for, our working capital needs; |
| • | adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; |
| • | adjusted EBITDA does not reflect income tax expense or the cash necessary to pay income taxes; |
| • | adjusted EBITDA and free cash flow do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; |
| • | free cash flow does not represent the residual cash flow available for discretionary expenditures because certain non-discretionary expenditures like mandatory debt service requirements are not deducted from the measure; and |
| • | other companies, including companies in our industry, may calculate these measures differently and as the number of differences in the way two different companies calculate these measures increases, the degree of their usefulness as comparative measures correspondingly decreases. |
Because of these limitations, adjusted EBITDA and free cash flow should not be considered as measures of discretionary cash available to us to invest in the growth of our business or reduce indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures only supplementally. Further important information regarding reconciliations of these non-GAAP financial measures to their respective most comparable GAAP measures can be found below.
Reconciliation of Full-year 2013 Adjusted EBITDA Guidance to Full-year 2013 Net Earnings Guidance(1):
| Full-year 2013 Guidance ($ in millions) | ||||||||
| Low End | High End | |||||||
Net Earnings | $ | 122.0 | $ | 128.2 | ||||
plus: Interest expense, net | 29.6 | 29.6 | ||||||
Income taxes | 74.8 | 78.6 | ||||||
Depreciation and amortization | 48.6 | 48.6 | ||||||
Other non-cash expenses (income), net | — | — | ||||||
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EBITDA | $ | 275.0 | $ | 285.0 | ||||
plus: Stock-based compensation expense | 15.0 | 15.0 | ||||||
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Adjusted EBITDA | $ | 290.0 | $ | 300.0 | ||||
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Reconciliation of Full-year 2013 Free Cash Flow to Full-year 2013 Net Earnings Guidance(1):
| Full-year 2013 Guidance ($ in millions) | ||||||||
| Low End | High End | |||||||
Net Earnings | $ | 122.0 | $ | 128.2 | ||||
plus: Depreciation and amortization | 48.6 | 48.6 | ||||||
Stock-based compensation expense | 15.0 | 15.0 | ||||||
less: Capital expenditures | (25.0 | ) | (25.0 | ) | ||||
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Free cash flow | $ | 160.6 | $ | 166.8 | ||||
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| (1) | Due to the forward-looking nature of adjusted EBITDA and free cash flow, information to reconcile adjusted EBITDA and free cash flow to cash flows from operating activities is not available without unreasonable effort. We believe that the information necessary to reconcile these measures is not reasonably estimable or predictable. |
Reconciliation of Adjusted EBITDA to Net Earnings and Cash Flows from Operating Activities
(dollars in millions)
Unaudited
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2013 | 2012 | |||||||
Net Earnings - GAAP | $ | 21.7 | $ | 26.4 | ||||
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plus: Income taxes | 12.7 | 16.2 | ||||||
Interest expense, net | 7.6 | 7.0 | ||||||
Depreciation and amortization | 13.3 | 14.7 | ||||||
Other non-cash expense (income), net | (0.3 | ) | 0.4 | |||||
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EBITDA | $ | 55.0 | $ | 64.7 | ||||
| Stock-based compensation expense | 3.0 | 2.3 | ||||||
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Adjusted EBITDA | $ | 58.0 | $ | 67.0 | ||||
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| Income taxes | (12.7 | ) | (16.2 | ) | ||||
| Interest expense, net | (7.6 | ) | (7.0 | ) | ||||
| Changes in operating assets and liabilities | (14.2 | ) | (29.4 | ) | ||||
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Cash Flows from Operating Activities | $ | 23.5 | $ | 14.4 | ||||
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About Valassis
Valassis (NYSE: VCI) is a leader in intelligent media delivery, providing over 15,000 advertisers proven and innovative media solutions to influence consumers wherever they plan, shop, buy and share. By integrating online and offline data combined with powerful insights, Valassis precisely targets its clients’ most valuable shoppers, offering unparalleled reach and scale. Valassis subsidiaries includeBrand.net, a Valassis Digital Company, andNCH Marketing Services, Inc. Valassis consumer brands include RedPlum® andsave.com. Its signature Have You Seen Me?® program delivers hope to missing children and their families. To learn more, visitValassis.com.
Cautionary Statements Regarding Forward-looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: price competition from our existing competitors; new competitors in any of our businesses; possible consolidation in our client base, a significant decrease in the number of stores in our in-store retailer network or a shift in client preferences for different promotional materials, strategies or coupon delivery methods, including, without limitation, as a result of declines in newspaper circulation and/or increased competition from new media formats including digital; an unforeseen increase in paper or postal costs; changes which affect the businesses of our clients and lead to reduced sales promotion spending, including, without limitation, a decrease of marketing budgets which are generally discretionary in nature and easier to reduce in the short-term than other expenses; our substantial indebtedness, and ability to refinance such indebtedness, if necessary, and our ability to incur additional indebtedness, may affect our financial health; the financial condition, including bankruptcies, of our clients, suppliers, senior secured credit facility lenders or other counterparties; certain covenants in our debt documents could adversely restrict our financial and operating flexibility; fluctuations in the amount, timing, pages, weight and kinds of advertising pieces from period to period, due to a change in our clients’ promotional needs, inventories and other factors, including, without limitation, high levels of coupon redemption rates; our failure to attract and retain qualified personnel may affect our business and results of operations; a rise in interest rates could increase our borrowing costs; governmental regulation or litigation affecting aspects of our business,including laws and regulations related to the internet, internet-related technologies and activities, privacy and data security; potential security measure breaches or attacks; clients experiencing financial difficulties, or otherwise being unable to meet their obligations as they become due, could affect our results of operations and financial condition; uncertainty in the application and interpretation of applicable state sales tax laws may expose us to additional sales tax liability; a reduction in, or discontinuance of, dividend payments or stock repurchases; and general economic conditions, whether nationally, internationally, or in the market areas in which we conduct our business, including the adverse impact of the ongoing economic downturn on the marketing expenditures and activities of our clients and prospective clients as well as our vendors, with whom we rely on to provide us with quality materials at the right prices and in a timely manner. These and other risks and uncertainties related to our business are described in greater detail in our filings with the United States Securities and Exchange Commission, including our reports on Forms 10-K and 10-Q and the foregoing information should be read in conjunction with these filings. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Contact:
Mary Broaddus
Director, Investor Relations and Corporate Communications
734-591-7375
broaddusm@valassis.com
VALASSIS COMMUNICATIONS, INC.
Consolidated Balance Sheets
(dollars in thousands)
Unaudited
| March 31, | Dec. 31, | |||||||
| 2013 | 2012 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 97,204 | $ | 94,711 | ||||
Accounts receivable, net | 416,789 | 426,899 | ||||||
Inventories | 39,075 | 43,253 | ||||||
Prepaid expenses and other | 30,594 | 36,589 | ||||||
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Total current assets | 583,662 | 601,452 | ||||||
Property, plant and equipment, net | 113,602 | 125,832 | ||||||
Goodwill | 632,438 | 632,438 | ||||||
Other intangible assets, net | 211,442 | 215,171 | ||||||
Other assets | 13,414 | 14,142 | ||||||
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Total assets | $ | 1,554,558 | $ | 1,589,035 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current portion long-term debt | $ | 26,250 | $ | 22,500 | ||||
Accounts payable | 276,565 | 281,320 | ||||||
Progress billings | 36,319 | 39,595 | ||||||
Accrued expenses | 79,161 | 107,467 | ||||||
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Total current liabilities | 418,295 | 450,882 | ||||||
Long-term debt | 557,561 | 565,061 | ||||||
Deferred income taxes | 57,624 | 57,258 | ||||||
Other non-current liabilities | 40,701 | 42,271 | ||||||
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Total liabilities | 1,074,181 | 1,115,472 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 654 | 654 | ||||||
Additional paid-in capital | 94,738 | 102,373 | ||||||
Retained earnings | 1,138,185 | 1,128,540 | ||||||
Accumulated other comprehensive income | 3,080 | 3,574 | ||||||
Treasury stock, at cost | (756,280 | ) | (761,578 | ) | ||||
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Total stockholders’ equity | 480,377 | 473,563 | ||||||
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Total liabilities and stockholders’ equity | $ | 1,554,558 | $ | 1,589,035 | ||||
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More tables to follow . . .
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
| Quarter Ended | ||||||||||||
| March 31, | % | |||||||||||
| 2013 | 2012 | Change | ||||||||||
Revenues | $ | 482,522 | $ | 518,585 | -7.0 | % | ||||||
Costs and expenses: | ||||||||||||
Cost of sales | 360,768 | 388,894 | -7.2 | % | ||||||||
Selling, general and administrative | 76,332 | 77,617 | -1.7 | % | ||||||||
Amortization expense | 3,729 | 3,156 | 18.2 | % | ||||||||
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Total costs and expenses | 440,829 | 469,667 | -6.1 | % | ||||||||
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Operating income | 41,693 | 48,918 | -14.8 | % | ||||||||
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Other expenses and income: | ||||||||||||
Interest expense | 7,679 | 7,054 | 8.9 | % | ||||||||
Interest income | (62 | ) | (58 | ) | 6.9 | % | ||||||
Other expense (income), net | (302 | ) | (697 | ) | -56.7 | % | ||||||
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Total other expenses, net | 7,315 | 6,299 | 16.1 | % | ||||||||
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Earnings before income taxes | 34,378 | 42,619 | -19.3 | % | ||||||||
Income tax expense | 12,709 | 16,198 | -21.5 | % | ||||||||
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Net earnings | $ | 21,669 | $ | 26,421 | -18.0 | % | ||||||
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Net earnings per common share, diluted | $ | 0.54 | $ | 0.60 | -10.0 | % | ||||||
Weighted average common shares, diluted | 39,806 | 44,045 | -9.6 | % | ||||||||
Supplementary Data | ||||||||||||
Amortization | 3,729 | 3,156 | ||||||||||
Depreciation | 9,558 | 11,554 | ||||||||||
Stock-based Compensation | 2,986 | 2,287 | ||||||||||
Capital Expenditures | 3,342 | 9,263 | ||||||||||
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