Exhibit 99.1
VALASSIS REPORTS REVENUES OF $1.044 BILLION FOR THE YEAR
COMPANY PROVIDES 2007 OUTLOOK
LIVONIA, Mich., Feb. 7 /PRNewswire-FirstCall/ -- Valassis (NYSE: VCI) today
announced financial results for the fourth quarter and year ended Dec. 31, 2006.
Valassis reported quarterly revenues of $286.4 million, down 7.4% from the
fourth quarter of 2005. Fourth-quarter net earnings were $6.9 million, or $0.14
in earnings per share (EPS). Earnings prior to charges of $13.7 million (net of
tax of $0.8 million) related to the pending acquisition of ADVO and
non-recurring items were $20.6 million, or $0.43 in EPS. Full-year revenues were
down 7.7% to $1,043.5 million. Reported annual net earnings were $51.3 million,
or $1.07 in EPS. Without the ADVO transaction-related charges and non-recurring
items, earnings for the year were $77.3 million, or $1.62 in EPS.
"In 2006, we acted upon our strategy to further diversify our product
portfolio and customer base with the pending acquisition of ADVO, Inc.," said
Alan F. Schultz, Valassis Chairman, President and CEO. "This acquisition will
enable us to offer our customers unique and diverse media plans of unmatched
scale and reach and allow us to build market share in the product segments and
customer verticals in which we compete and serve. We will be positioned to
provide optimal results to customers seeking measurable performance. At the
close of the transaction, our plan will include: maximizing free cash flow;
reducing our debt; capitalizing on the best revenue-producing opportunities; and
ensuring a seamless transition as our integration planning efforts progress. I
believe there is significant upside and we intend to seize the opportunity to
grow our business while making the combined company a great place to work."
Financial Highlights
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
----------------------------------------- ------------------------------------------
(in millions,
except per share data) 2006 2005(4) % Change 2006 2005(4) % Change
- ------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenues $ 286.4 $ 309.2 -7.4% $ 1,043.5 $ 1,131.0 -7.7%
Net Earnings $ 6.9 $ 20.3 -66.0% $ 51.3 $ 95.4 -46.2%
ADVO Transaction-
related Costs $ 14.6(1) $ 0.0 n/a $ 24.6(1) $ 0.0 n/a
Non-recurring Items $ -0.9(2) $ 4.5(3) n/a $ 1.4(2) $ 4.5(3) n/a
Adjusted Earnings,
Prior to ADVO
Transaction-related
Costs and Non-
recurring Items(5) $ 20.6 $ 24.8 -16.9% $ 77.3 $ 99.9 -22.6%
EPS, diluted $ 0.14 $ 0.42 -66.7% $ 1.07 $ 1.90 -43.7%
Adjusted EPS, Prior to
ADVO Transaction-
related Costs and
Non-recurring Items,
diluted(5) $ 0.43 $ 0.52 -17.3% $ 1.62 $ 1.99 -18.6%
(1) During the fourth quarter of 2006, the following charges related to
the pending acquisition of ADVO were incurred: $0.8 million, net of
tax, related to the premium on a swaption contract entered into in
contemplation of the financing of the pending ADVO transaction; and
$13.8 million in legal and professional costs of litigation related to
the pending ADVO transaction which was settled between the parties on
Dec. 18, 2006. During the twelve months ended Dec. 31, 2006, the
following charges related to the pending acquisition of ADVO were
incurred: $8.8 million, net of tax, related to the termination of a
swap contract and the premium on a swaption contract both entered into
in contemplation of the financing of the pending ADVO transaction; and
$15.8 million, net of tax of $0.3 million, in legal and professional
costs related to the pending ADVO transaction and related litigation
which was settled between the parties on Dec. 18, 2006.
(2) Costs related to the close-down of both the French agency business and
the eSettlement business unit of NCH Marketing Services and related
tax benefits.
(3) A $4.5 million, net of tax, restructuring charge was incurred in the
fourth quarter of 2005 related to headcount reductions and associated
costs resulting from the integration of the components of our
Household Targeted business segment, right-sizing of coupon-clearing
operations in Europe and other efficiency-related headcount reductions
completed in the fourth quarter of 2005.
(4) Excludes the pro-forma effect of stock option expense; including this
expense, earnings for the three months ended Dec. 31, 2005 would have
been $8.2 million and EPS would have been $0.17, while earnings for
the twelve months ended Dec. 31, 2005 would have been $76.7 million
and EPS would have been $1.53.
(5) Adjusted Earnings and Adjusted EPS, in each case, prior to ADVO
transaction-related costs and non-recurring items, are non-GAAP
financial measures, have limitations as analytical tools and should
not be considered in isolation from, or as an alternative to, net
income, cash flow or other income or cash flow data prepared in
accordance with GAAP. These financial measures are considered by
management to be more comparable measures of Valassis' performance
versus prior years and are consistent with the information used to
develop the earnings guidance shared with investors.
* Reported SG&A expense was up 21.7% to $49.8 million for the fourth
quarter of 2006 primarily due to $13.3 million in litigation expenses
related to the pending ADVO acquisition. Reported SG&A was up 6.0% for
the year to $151.9 million including $3.6 million in costs related to
the close-down of both the French agency business and the eSettlement
business unit of NCH and $16.1 million in expenses related to the
pending ADVO acquisition and related litigation in 2006. SG&A expense
for 2005 included $6.9 million in restructuring charges in the fourth
quarter of 2005. Without these charges, SG&A expense was down 3.1% to
$132.2 million compared to the year-ended 2005, despite the inclusion
of an additional $5.5 million in stock option expense in 2006 in
accordance with FAS123R.
* Cash and auction-rate securities at the end of the year were $155.2
million.
* Valassis' debt position, net of cash and auction-rate securities, was
$104.8 million as of Dec. 31, 2006.
* Capital expenditures for 2006 were $16.3 million in comparison to
$24.7 million for 2005. The $16.3 million incurred in 2006 includes
$4.3 million in capital expenditures associated with the purchase of
equipment to print the ADVO wrap product.
* We settled our litigation with ADVO and amended our merger agreement
with ADVO to provide for a purchase price per share of $33.00
reflecting a decrease of $4.00 per share. We anticipate the closing of
the transaction to be during March 2007.
Business Segment Discussion
* Market Delivered Free-standing Insert (FSI): Co-op free-standing
insert (FSI) revenues for the fourth quarter were $103.0 million, down
17.2% from the fourth quarter of 2005 due to a decline in FSI pricing
and a decrease in market share. FSI revenues for the year were $441.2
million, down 12.5% due to a decline in FSI pricing and a slight
decrease in market share. As expected, Valassis' FSI market share
during the second half of 2006 was up slightly versus the first half
of 2006. Management noted that unit growth in the co-op FSI industry
was up approximately 4% for the second half of 2006, resulting in
approximately 1% industry unit growth for the year. FSI cost of goods
sold was down approximately 5% for the fourth quarter on a cost per
thousand (CPM) basis. FSI cost of goods sold was down approximately 3%
on a CPM basis for the year due to reductions in the cost of paper,
media insertion and printing. The FSI segment profit for 2006 was
$65.9 million.
* Market Delivered Run of Press (ROP): ROP revenues, generated from the
brokering of advertising space on behalf of newspapers, were up 6.5%
in the fourth quarter to $37.6 million due to continued strength in
the telecommunications and financial services customer verticals.
Revenues were down 4.6% for the year to $116.9 million due to a higher
percentage of ROP business booked on a fee basis. Segment
profitability increased to $14.0 million for the year, exceeding
management's expectations.
* Neighborhood Targeted Products (Cluster Targeted): Neighborhood
Targeted product revenues decreased 2.9% for the quarter to $101.8
million, and ended the year down 7.1% at $315.1 million. As previously
noted, the decrease in revenues was impacted by a pullback in spending
due to consolidations in the telecommunications and appliance
manufacturing industries, and the reduction in spending of a specialty
retail customer. Segment profits for the year were $29.5 million.
* Household Targeted Products (1 to 1): Household Targeted product
revenues decreased 6.7% for the quarter to $13.9 million and decreased
6.8% to $58.9 million for the year ended Dec. 31, 2006 due to the loss
of revenue associated with the discontinuance of PreVision's agency
business. The Household Targeted segment profits were $3.0 million for
the year.
* International & Services: International & Services revenues are
comprised of NCH Marketing Services (NCH), Valassis Canada and
Promotion Watch. International & Services reported revenues of $30.1
million for the fourth quarter, up 0.7% year-over-year, driven by
increased revenue from the French media business and Valassis Canada.
International & Services reported revenues for the year of $111.4
million, up 9.4%. During 2006, Valassis recognized a $3.6 million
non-recurring charge related to the close-down of the French agency
business and the eSettlement unit of NCH. Segment profit for the year
was $5.7 million.
Outlook
Management currently expects to close the ADVO transaction during the first
half of March, 2007. The following information is presented on a pro- forma
basis, assuming that the closing of the ADVO acquisition occurred on Jan. 1,
2007. Actual results for 2007 will differ from such expectations set forth below
as they will only reflect the actual partial year impact of the acquisition.
* Pro-forma combined revenue of $2.5 billion to $2.6 billion
* Pro-forma combined EBITDA of $255.0 to $265.0 million (includes
synergies)
* Expected cost synergies of $18.0 million for the remaining 10 months
of 2007; expected to increase to $32.0 million for 2008 and $40.0
million for 2009
* Expected one time cost-to-achieve synergies of $25.0 million to be
incurred in 2007, which includes $10.5 million of capital expenditures
included in the $60.5 million below.
* Expected capital expenditures for 2007 of $60.5 million; 2008 and 2009
are expected to be approximately $35.0 million each year
* Expected depreciation and amortization for 2007 of $65.7 million (does
not include any effect of purchase accounting)
Conference Call Information
Valassis will hold an investor call today to discuss its fourth-quarter and
year-end results at 11 a.m. (EST). The call-in number is (800) 240-4186. The
call will simulcast on Valassis' Web site, at http://www.valassis.com, and
replay through Feb. 20, 2007 at (800) 405-2236, pass code 11072110. This
earnings release and the Web cast will be archived on Valassis' 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" from 1998 to 2006. Valassis
subsidiaries include Valassis Canada, Promotion Watch, Valassis Relationship
Marketing Systems, LLC and NCH Marketing Services, Inc. For additional
information, visit Valassis' Web site at http://www.valassis.com.
Safe Harbor and Forward-looking Statements
Certain statements found in this document, including those statements in
the "Outlook" section above 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; risks associated with the
availability, timing and cost of financing Valassis' proposed acquisition of
ADVO, Inc., which may affect the timing of the closing of the acquisition; the
failure of ADVO's shareholders to approve Valassis' proposed acquisition of
ADVO; and the challenges and costs of achieving synergies in connection with the
proposed ADVO acquisition and integrating ADVO's operations. 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)
Dec. 31, Dec. 31,
Assets 2006 2005
- -------------------------------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 52,619 $ 64,320
Auction-rate securities 102,533 72,031
Accounts receivable 339,079 273,863
Inventories 25,834 25,235
Refundable income taxes 3,957 -
Deferred income taxes 3,724 2,573
Other 16,681 12,894
Total current assets 544,427 450,916
Property, plant and equipment, at cost 262,876 255,472
Less accumulated depreciation (153,490) (147,325)
Net property, plant and equipment 109,386 108,147
Intangible assets 208,689 208,689
Less accumulated amortization (75,280) (74,724)
Net intangible assets 133,409 133,965
Investments and advances to investees 4,899 614
Other assets 11,240 4,041
Total assets $ 803,361 $ 697,683
VALASSIS COMMUNICATIONS, INC.
Consolidated Balance Sheets, Continued
(in thousands)
Dec. 31, Dec. 31,
Liabilities and Stockholders' Equity 2006 2005
- ----------------------------------------------- ------------ ------------
Current liabilities:
Current portion, long-term debt $ - $ 14,260
Accounts payable and accruals 312,962 264,877
Progress billings 49,258 44,314
Total current liabilities 362,220 323,451
Long-term debt 259,931 259,896
Other liabilities 8,195 8,090
Deferred income taxes 5,441 2,721
Stockholders' equity:
Common stock 633 632
Additional paid-in capital 44,224 38,177
Retained earnings 638,210 586,927
Treasury stock (520,227) (523,600)
Accumulated other comprehensive gain 4,734 1,389
Total stockholders' equity 167,574 103,525
Total liabilities and stockholders' equity $ 803,361 $ 697,683
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Quarter Quarter
Ended Ended
Dec. 31, Dec. 31, %
2006 2005 Change
------------ ------------ ------------
Revenue $ 286,370 $ 309,246 -7.4%
Costs and expenses:
Costs of products sold 219,114 237,503 -7.7%
Selling, general and
administrative and amortization 49,788 40,902 +21.7%
Total costs and expenses 268,902 278,405 -3.4%
Earnings from operations 17,468 30,841 -43.4%
Other expenses and income:
Interest expense 3,817 2,758 +38.4%
Other (income) and expenses (1,641) (1,698) -3.4%
Total other expenses and (income) 2,176 1,060 +105.3%
Earnings before income taxes 15,292 29,781 -48.7%
Income taxes 8,378 9,456 -11.4%
Net earnings $ 6,914 $ 20,325 -66.0%
Net earnings per common share,
diluted $ 0.14 $ 0.42 -66.7%
Weighted average shares outstanding,
diluted 47,800 48,145 -0.7%
Supplementary Data
Amortization $ 139 $ 139
Depreciation 3,807 4,091
Capital expenditures 7,845 2,665
VALASSIS COMMUNICATIONS, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
12 Months 12 Months
Ended Ended
Dec. 31, Dec. 31, %
2006 2005 Change
------------ ------------ ------------
Revenue $ 1,043,491 $ 1,131,043 -7.7%
Costs and expenses:
Costs of products sold 789,588 836,331 -5.6%
Selling, general and
administrative and amortization 151,914 143,255 +6.0%
Total costs and expenses 941,502 979,586 -3.9%
Earnings from operations 101,989 151,457 -32.7%
Other expenses and income:
Interest expense 24,749 10,927 +126.5%
Other (income) and expenses (6,298) (5,695) +10.6%
Total other expenses and (income) 18,451 5,232 +252.7%
Earnings before income taxes 83,538 146,225 -42.9%
Income taxes 32,256 50,829 -36.5%
Net earnings $ 51,282 $ 95,396 -46.2%
Net earnings per common share,
diluted $ 1.07 $ 1.90 -43.7%
Weighted average shares outstanding,
diluted 47,780 50,183 -4.8%
Supplementary Data
Amortization $ 556 $ 599
Depreciation 14,374 15,374
Capital expenditures 16,256 24,666
SOURCE Valassis
-0- 02/07/2007
/CONTACT: Sherry Lauderback of Valassis, +1-734-591-7374, or Fax
+1-734-591-4503, or lauderbacks@valassis.com /
/Web site: http://www.valassis.com/
(VCI)