[logo] NEWS RELEASE
Valassis Announces 2008 Guidance
--------------------------------
Expects Adjusted EBITDA* Growth in 2008
LIVONIA, Mich., Dec. 18 /PRNewswire-FirstCall/ -- Valassis (NYSE: VCI) today
provided financial guidance for 2008, expecting increased adjusted EBITDA* of
between $260 and $280 million compared to 2007 guidance. The company expects
low-to mid-single digit pro forma revenue growth, most of which is expected to
come in the second half of 2008. In 2008, capital expenditures are planned to be
$35 million, resulting in expected adjusted cash earnings per share (EPS)* of
between $2.14 and $2.39.
"The ADVO, Inc. integration cost synergies have exceeded our 2007 targets
and our shared mail optimization efforts have improved margins," said Alan F.
Schultz, Valassis Chairman, President and CEO. "We expect to continue driving
cost synergies and optimization in the first half of 2008. In the second half of
2008, we will transition our focus to revenue synergies. This is expected to set
the stage for long-term revenue and earnings growth."
Positives and negatives impacting projected 2008 Adjusted EBITDA*:
(+) Expected organic growth;
(+) Management expects cost synergies to increase to $36 million in
2008;
(+) Consolidation of January and February ADVO results;
(+) Business optimization improving Direct Mail package profit;
(-) Increased paper costs;
(-) Increased selling, general and administrative costs;
(-) Decreased Free-standing Insert (FSI) margin from price pressure; and
(-) Reduction in profit associated with the elimination of the Detached
Address Label (DAL).
Debt Repayment:
To date in 2007, Valassis has made $78 million in repayments on the Term
Loan B portion of our Senior Secured Credit Facility. The holders of our Senior
Convertible Notes due 2033 have the ability to put their notes to the company in
May 2008. The company expects to finance the purchase of these notes, if
applicable, using the $160 million Delayed Draw Term Loan (DDTL) portion of our
Senior Secured Credit Facility. This may result in an approximate $15 million
recapture tax payment during 2008.
In 2008 the company expects approximately $7.1 million in mandatory debt
repayments. The company expects to use excess cash to, among other things, make
voluntary debt repayments.
Non-GAAP Financial Measures:
*We define adjusted EBITDA as earnings before interest and other expenses,
income taxes, depreciation, amortization, stock-based compensation expense
associated with SFAS No. 123R and amortization of a customer contract incentive.
We define adjusted cash EPS as net earnings plus depreciation, amortization,
stock-based compensation expense associated with SFAS No. 123R and amortization
of a customer contract incentive, less capital expenditures, divided by weighted
shares outstanding. Adjusted EBITDA and adjusted cash EPS 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 adjusted EBITDA and adjusted
cash EPS may be useful in assessing our operating performance and our ability to
meet our debt service requirements. In addition, adjusted EBITDA is used by
management to determine our operating performance and, along with other data, as
internal measures for setting annual operating budgets, assessing financial
performance of numerous business segments and as a measurement component of
incentive compensation. However, these non-GAAP financial measures have
limitations as analytical tools and should not be considered in isolation from,
or as an alternative to, operating income, cash flow 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 does 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 does not reflect the impact of earnings or charges
resulting from matters we consider not to be indicative of our ongoing
operations;
-- management believes adjusted cash EPS is a better measure of the
performance of the business than reported GAAP EPS. The primary reason
for this is because depreciation and amortization charged against
earnings to calculate GAAP EPS are in excess of capital expenditures by
approximately $39.6 million in 2008; and
-- other companies, including companies in our industry, may calculate these
measures differently and as the number of differences in the way two
different companies calculate these measures increases, the degree of
their usefulness as a comparative measure correspondingly decreases.
There are material limitations to using measures such as adjusted EBITDA and
adjusted cash EPS, including the difficulty associated with using them as the
sole measure to compare the results of one company to another, and the inability
to analyze certain significant items that directly affect a company's net income
or loss. In addition, our calculations of adjusted EBITDA and adjusted cash EPS
may not be consistent with similarly titled measures of other companies and
should be viewed in conjunction with measurements that are computed in
accordance with GAAP, such as gross margin, operating income, net income, and
cash flow from operating activities.
Because of these limitations, adjusted EBITDA and adjusted cash EPS should
not be considered as measures of discretionary cash available to us to invest in
the growth of our business or reduce indebtedness. We compensate for these
limitations by relying primarily on our GAAP results and using these non-GAAP
financial measures only supplementally. Further important information regarding
operating results and reconciliations of these non-GAAP financial measures to
the most comparable GAAP measures can be found below.
Projected Adjusted Cash EPS Calculation*:
- --------------------------------------------------------------------------------
Low End High End
Plan ($ in millions) ($ in millions)
- --------------------------------------------------------------------------------
Net Earnings $ 53.5 $ 65.9
- --------------------------------------------------------------------------------
Add back non-cash items:
Depreciation 65.0 65.0
Amortization 9.6 9.6
FAS123r expense 7.7 7.7
Contract incentive amortization 2.4 2.4
Less:
Capital Expenditures (35.0) (35.0)
- --------------------------------------------------------------------------------
Adjusted Cash Flow* $ 103.2 $ 115.6
- --------------------------------------------------------------------------------
Weighted Shares Outstanding 48,331 48,331
- --------------------------------------------------------------------------------
Adjusted Cash EPS* $ 2.14 $ 2.39
- --------------------------------------------------------------------------------
* Does not include the approximate $15 million recapture tax mentioned above
because it is a one-time only charge.
Projected Adjusted EBITDA Calculation*:
- --------------------------------------------------------------------------------
Low End High End
Plan ($ in millions) ($ in millions)
- --------------------------------------------------------------------------------
Net earnings $ 53.5 $ 65.9
- --------------------------------------------------------------------------------
Add back:
Interest and other, net 89.1 89.1
Income taxes 32.7 40.3
Depreciation and Amortization 74.6 74.6
EBITDA $ 249.9 $ 269.9
Add back:
FAS123r expense 7.7 7.7
Contract incentive amortization 2.4 2.4
- --------------------------------------------------------------------------------
Adjusted EBITDA* $ 260.0 $ 280.0
- --------------------------------------------------------------------------------
Conference Call Information
Valassis will hold an investor call today to discuss its 2008 guidance at 2
p.m. (EST). The call-in number is (800) 257-7063. The call will simulcast on
Valassis' Web site, at http://www.valassis.com, and replay through Dec. 31, 2007
at (800) 405-2236, pass code 11104733. This release and the webcast will be
archived on Valassis' Web site under "Investor."
About Valassis
Valassis is the nation's leading marketing services company, offering unique
and diverse media platforms with the most comprehensive product and client
portfolio in the industry. Valassis offers products and services including
shared mail; solo mail; newspaper-delivered promotions such as inserts,
sampling, polybags and on-page advertisements; in-store marketing;
direct-to-door advertising and sampling; Internet-delivered marketing; loyalty
marketing software; coupon and promotion clearing; promotion planning; and
analytic services. The company's expansive product portfolio reaches over 100
million households each week. Valassis has relationships with more than 15,000
advertisers worldwide in various industries. Headquartered in Livonia, Michigan
with approximately 7,000 associates in 29 states and nine countries, Valassis is
widely recognized for its associate and corporate citizenship programs,
including its Have You Seen Me?(R) missing child program. Valassis companies
include ADVO, Inc., Valassis Canada, Promotion Watch, Valassis Relationship
Marketing Systems, LLC and NCH Marketing Services, Inc. For additional
information, visit the company Web site at http://www.valassis.com.
Safe Harbor and Forward-Looking Statements
Certain statements found in this document constitute "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 the actual results, performance
or achievements of the Company 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 the Company's existing competitors; new competitors in
any of the Company's businesses; a shift in customer preference for different
promotional materials, strategies or coupon delivery methods; an unforeseen
increase in the Company's paper or postal costs; changes which affect the
businesses of the Company's customers and lead to reduced sales promotion
spending; challenges and costs of achieving synergies and cost savings in
connection with the ADVO acquisition and integrating ADVO's operations may be
greater than expected; the Company's substantial indebtedness, and its ability
to incur additional indebtedness, may affect the Company's financial health;
certain covenants in the Company's debt documents could adversely restrict the
Company's financial and operating flexibility; fluctuations in the amount,
timing, pages and weight, and kinds of advertising pieces from period to period,
due to a change in the Company's customers' promotional needs, inventories and
other factors; the Company's failure to attract and retain qualified personnel
may affect its business and results of operations; a rise in interest rates
could increase the Company's borrowing costs; the outcome of ADVO's pending
shareholder lawsuits; possible governmental regulation or litigation affecting
aspects of the Company's business; and general economic conditions, whether
nationally or in the market areas in which the Company conducts its business,
may be less favorable than expected. These and other risks and uncertainties
related to the Company's business are described in greater detail in its filings
with the United States Securities and Exchange Commission, including the
Company's reports on Forms 10-K and 10-Q, and the foregoing information should
be read in conjunction with these filings. The Company disclaims any intention
or obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
SOURCE Valassis
-0- 12/18/2007
/CONTACT: Michell Zarem, Investor Relations, +1-734-432-2727,
zaremm@valassis.com, or Mary Broaddus, Corporate Communications,
+1-734-591-7375, broaddusm@valassis.com, both of Valassis/ /First Call Analyst:
/ /FCMN Contact: zaremm@valassis.com / /Web site: http://www.valassis.com /
(VCI)
CO: Valassis
ST: Michigan
IN: ADV PUB
SU: ERP