Exhibit 99.1
VALASSIS REPORTS REVENUES OF $260.6 MILLION IN THE SECOND QUARTER
COMPANY ENGAGED IN PLANS TO INTEGRATE ADVO
LIVONIA, Mich., July 27 /PRNewswire-FirstCall/ -- Valassis (NYSE: VCI), the
leading company in marketing services and Connective Media(TM), today announced
financial results for the second quarter ended June 30, 2006. The company
reported quarterly revenues of $260.6 million, down 5.7% from the second quarter
of 2005. Second-quarter net earnings were $19.7 million, or $0.41 in earnings
per share (EPS), within the company's revised EPS guidance range for the quarter
of $0.38 to $0.42. EPS for the first six months of 2006 was $0.79 compared to
$1.05* in 2005.
"The first half of 2006 has been disappointing for our business and the
industry in general," said Alan F. Schultz, Chairman, President and CEO of
Valassis. "We are working toward improved revenue results and cost control for
the back half of 2006. We are excited about the prospects of our pending
acquisition of ADVO and the positive impact we believe the combination will have
in creating value for both customers and shareholders."
Quarterly Highlights
-- Entered into a definitive merger agreement to acquire ADVO, Inc., the
nation's leading direct mail media company. The combined company will be
positioned to capture growth across the expanded product and service
portfolio, delivering customized, targeted marketing solutions on a
national, regional, ZIP code, sub-ZIP code and household basis.
-- Signed a strategic alliance with Insignia Systems, Inc., a developer and
marketer of in-store promotions, enabling Valassis to sell the Insignia
POPSigns product line as a complement to the company's existing product
portfolio.
-- Elected Joseph B. Anderson, Jr., Chairman and CEO of TAG Holdings, LLC,
to the Valassis Board of Directors. Anderson's success in building
businesses in the United States and Asia and his experience and
accomplishments as a leader will prove an asset to shareholders and
employees.
-- Named to IndustryWeek's "50 Best Manufacturing Companies" list for the
third consecutive year. Valassis was distinguished for its outstanding
manufacturing and financial performance.
Financial Highlights
Three Months Ended Six Months Ended
------------------------------------- -------------------------------------
June 30, June 30, June 30, June 30,
2006 2005 % Change 2006 2005 % Change
---------- ---------- ---------- ---------- ---------- ----------
Total Revenues $ 260.6 $ 276.4 -5.7% $ 508.2 $ 555.7 -8.5%
Net Earnings $ 19.7 $ 25.5* -22.9% $ 37.7 $ 53.8* -29.8%
EPS, diluted $ 0.41 $ 0.50* -18.0% $ 0.79 $ 1.05* -24.8%
* Excludes the pro-forma effect of stock option expense; including this
expense, earnings for the three months ended June 30, 2005 would have been $23.7
million and EPS would have been $0.47, while earnings for the six months ended
June 30, 2005 would have been $50.1 million and EPS would have been $0.98.
-- SG&A expense was down 12.0%, despite an additional $1.3 million in stock
option expense, to $30.7 million for the second quarter due to
reductions in headcount and incentive compensation expenses.
-- Cash and auction-rate securities at the end of the quarter were $148.7
million.
-- The company's debt position, net of cash and auction-rate securities,
was $111.3 million at quarter-end. The company noted that on June 6,
2006, the majority holders of the remaining Valassis Zero Coupon Senior
Convertible Notes due 2021 put their notes to the company for $14.4
million in cash. The remaining $97,000 of these notes was called by
Valassis on June 28, 2006 with an expected settlement in cash during the
third quarter.
-- Capital expenditures through the first six months of 2006 were $4.4
million in comparison to $15.8 million for the first six months of 2005.
-- On July 6, 2006 the company announced it entered into a definitive
merger agreement to acquire all outstanding common shares of ADVO stock
for $37 per share in cash. The fully financed transaction is valued at
approximately $1.3 billion (on a diluted basis), including approximately
$125 million in existing ADVO debt which Valassis expects to refinance.
Business Segment Discussion
-- Market Delivered Free-standing Insert (FSI): Co-op FSI revenues for the
second quarter were $117.0 million, down 12.9% from the second quarter
of 2005. This decrease was due to a reduction in FSI pricing and a
decline in industry volume, coupled with a slight decrease in market
share, compared to the second quarter of 2005. Management noted that FSI
cost of goods sold was down by a percentage in the mid-single digits for
the quarter on a cost per thousand (CPM) basis due to a slight reduction
in the cost of paper and a decrease in media costs resulting from higher
page counts per book during the quarter and lower negotiated media
rates.
-- Market Delivered Run of Press (ROP): ROP revenues, generated from the
brokering of advertising space on behalf of newspapers, were up 26.0% in
the second quarter to $34.4 million due to a rebound in business from
the telecommunications industry and new business from the pharmaceutical
customer category. The ROP business segment earned $3.7 million in
profit for the quarter, an increase of 146.7% over the second quarter of
2005.
-- Neighborhood Targeted Products (Cluster Targeted): Neighborhood Targeted
product revenues decreased 6.6% for the quarter to $67.4 million. This
segment was impacted by a pullback in spending due to industry
consolidations in the telecommunications and appliance manufacturing
industries, and the reduction in spending of a specialty retail
customer. The company also noted the timing of large sampling programs
is skewed to the third quarter compared to 2005. Segment gross margin
percentage declined over 300 basis points due to lower volumes and
pricing pressure.
-- Household Targeted Products (1 to 1): Household Targeted product
revenues for the second quarter were $14.2 million, down 15.0% primarily
due to the discontinuance of PreVision's agency business. The Household
Targeted product segment was profitable for the quarter.
-- International & Services: International & Services revenues are
comprised of NCH Marketing Services, Valassis Canada and Promotion
Watch. International & Services reported revenues of $27.6 million for
the second quarter, up 7.0%, driven by new media products in France and
Germany and increased revenue from Valassis Canada. Management also
noted that the U.S. coupon clearing revenue and profit were down as a
result of a reduced number of coupons distributed and redeemed.
Outlook
On June 26, 2006, the company announced that it lowered its diluted earnings
per share (EPS) range for 2006 to be between $1.60 and $1.80. This EPS range
excludes any impact of the pending acquisition of ADVO. Due to this pending
acquisition expected to close in the September to October 2006 timeframe, the
company has not provided specific guidance for the third and fourth quarter. The
company expects to provide 2007 earnings guidance for the combined company
before calendar year end, assuming the acquisition is closed.
Conference Call Information
Valassis will hold an investor call today to discuss its second-quarter
results at 11 a.m. (EDT). The call-in number is (800) 218-0204. The call will
simulcast on the company's Web site, at http://www.valassis.com , and replay
through Aug. 9, 2006 at (800) 405-2236, pass code 11040294. This press release
and the webcast will be archived on the company's Web site under "Investor."
About Valassis
Valassis offers a wide range of marketing services to consumer packaged
goods manufacturers, retailers, technology companies and other customers with
operations in the United States, Europe, Mexico and Canada. Valassis' products
and services portfolio includes: newspaper-delivered promotions and
advertisements such as inserts, sampling, polybags and on-page advertisements;
direct-to-door advertising and sampling; direct mail; Internet-delivered
marketing; loyalty marketing software; coupon and promotion clearing; and
promotion planning and analytic services. Valassis has been listed as one of
FORTUNE magazine's "Best Companies to Work For" for nine consecutive years.
Valassis subsidiaries include 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 .
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 Valassis 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 Valassis' existing competitors; new competitors in any of Valassis'
businesses; a shift in customer preference for different promotional materials,
strategies or coupon delivery methods; an unforeseen increase in Valassis' paper
costs; economic disruptions caused by terrorist activity, armed conflict or
changes in general economic conditions; changes which affect the businesses of
Valassis customers and lead to reduced sales promotion spending; the ability and
timing for the closing conditions to be satisfied in connection with Valassis'
merger agreement with ADVO; and the ability for Valassis to achieve synergies in
connection with the merger and the integration of ADVO successfully into its
business. Valassis disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
VALASSIS COMMUNICATIONS, INC.
Consolidated Balance Sheets
(in thousands)
June 30, Dec. 31,
Assets 2006 2005
- ------------------------------------------- ------------ -----------
Current assets:
Cash and cash equivalents $ 58,828 $ 64,320
Auction-rate securities 89,902 72,031
Accounts receivable 261,228 273,863
Inventories 28,709 25,235
Refundable income taxes 3,129 -
Deferred income taxes 2,577 2,573
Other 18,307 12,894
Total current assets 462,680 450,916
Property, plant and equipment, at cost 257,242 255,472
Less accumulated depreciation (151,039) (147,325)
Net property, plant and equipment 106,203 108,147
Intangible assets 208,689 208,689
Less accumulated amortization (75,001) (74,724)
Net intangible assets 133,688 133,965
Investments 676 614
Other assets 9,892 4,041
Total assets $ 713,139 $ 697,683
VALASSIS COMMUNICATIONS, INC.
Consolidated Balance Sheets, Continued
(in thousands)
June 30, Dec. 31,
Liabilities and Stockholders' Equity 2006 2005
- ------------------------------------------- ------------ ------------
Current liabilities:
Current portion, long-term debt $ 97 $ 14,260
Accounts payable and accruals 256,320 264,877
Progress billings 37,643 44,314
Total current liabilities 294,060 323,451
Long-term debt 259,913 259,896
Other liabilities 10,661 10,811
Stockholders' equity:
Common stock 632 632
Additional paid-in capital 40,493 38,177
Retained earnings 624,673 586,927
Treasury stock (520,376) (523,600)
Accumulated other comprehensive
gain 3,083 1,389
Total stockholders' equity 148,505 103,525
Total liabilities and stockholders'
equity $ 713,139 $ 697,683
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Quarter Ended Quarter Ended
------------------------------
June 30, June 30, %
2006 2005 Change
------------- ------------- -------------
Revenues $ 260,593 $ 276,427 - 5.7%
Costs and expenses:
Costs of products sold 197,972 200,009 - 1.0%
Selling, general and
administrative 30,653 34,830 - 12.0%
Total costs and expenses 228,625 234,839 - 2.6%
Earnings from operations 31,968 41,588 - 23.1%
Other expenses and income:
Interest expense 2,216 2,695 - 17.8%
Other (income) and expenses (728) (746) - 2.4%
Total other expenses and
income 1,488 1,949 - 23.7%
Earnings before income taxes 30,480 39,639 - 23.1%
Income taxes 10,791 14,115 - 23.5%
Net earnings $ 19,689 $ 25,524 - 22.9%
Net earnings per common share,
diluted $ 0.41 $ 0.50 - 18.0%
Weighted average shares outstanding,
diluted 47,863 50,808 - 5.8%
Supplementary Data
Amortization $ 138 $ 185
Depreciation 3,542 3,672
Capital expenditures 2,552 6,742
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
6 Months Ended 6 Months Ended
June 30, June 30, %
2006 2005 Change
-------------- -------------- -------------
Revenue $ 508,238 $ 555,711 - 8.5%
Costs and expenses:
Costs of products sold 383,241 399,665 - 4.1%
Selling, general and
administrative 63,533 68,897 - 7.8%
Total costs and expenses 446,774 468,562 - 4.6%
Earnings from operations 61,464 87,149 - 29.5%
Other expenses and income:
Interest expense 5,071 5,372 - 5.6%
Other (income) and expenses (2,082) (1,820) + 14.4%
Total other expenses and
income 2,989 3,552 - 15.9%
Earnings before income taxes 58,475 83,597 - 30.1%
Income taxes 20,729 29,831 - 30.5%
Net earnings $ 37,746 $ 53,766 - 29.8%
Net earnings per common share,
diluted $ 0.79 $ 1.05 - 24.8%
Weighted average shares outstanding,
diluted 47,812 51,120 - 6.5%
Supplementary Data
Amortization $ 278 $ 321
Depreciation 7,081 7,329
Capital expenditures 4,386 15,796
SOURCE Valassis
-0- 07/27/2006
/CONTACT: Sherry Lauderback of Valassis, +1-734-591-7374,
Fax: +1-734-591-4503, lauderbacks@valassis.com /
/Web site: http://www.valassis.com /