x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
¨ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware | 38-2760940 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o |
Page | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
ITEM 1. | FINANCIAL STATEMENTS |
March 31, 2013 | December 31, 2012 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 97,204 | $ | 94,711 | |||
Accounts receivable, net (Note 1) | 416,789 | 426,899 | |||||
Inventories (Note 1) | 39,075 | 43,253 | |||||
Prepaid expenses and other | 30,594 | 36,589 | |||||
Total current assets | 583,662 | 601,452 | |||||
Property, plant and equipment, net (Note 1) | 113,602 | 125,832 | |||||
Goodwill (Note 2) | 632,438 | 632,438 | |||||
Other intangible assets, net (Note 2) | 211,442 | 215,171 | |||||
Other assets | 13,414 | 14,142 | |||||
Total assets | $ | 1,554,558 | $ | 1,589,035 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Current portion long-term debt (Note 3) | $ | 26,250 | $ | 22,500 | |||
Accounts payable | 276,565 | 281,320 | |||||
Progress billings | 36,319 | 39,595 | |||||
Accrued expenses (Note 4) | 79,161 | 107,467 | |||||
Total current liabilities | 418,295 | 450,882 | |||||
Long-term debt (Note 3) | 557,561 | 565,061 | |||||
Deferred income taxes | 57,624 | 57,258 | |||||
Other non-current liabilities | 40,701 | 42,271 | |||||
Total liabilities | 1,074,181 | 1,115,472 | |||||
Commitments and contingencies (Note 5) | |||||||
Stockholders’ equity: | |||||||
Preferred stock ($0.01 par value; 25,000,000 shares authorized; no shares issued or outstanding at March 31, 2013 and December 31, 2012) | — | — | |||||
Common stock ($0.01 par value; 100,000,000 shares authorized; 65,394,999 shares issued at March 31, 2013 and December 31, 2012; 38,859,824 and 38,766,530 shares outstanding at March 31, 2013 and December 31, 2012, respectively) | 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 (26,535,175 and 26,628,469 shares at March 31, 2013 and December 31, 2012, respectively) | (756,280 | ) | (761,578 | ) | |||
Total stockholders’ equity | 480,377 | 473,563 | |||||
Total liabilities and stockholders’ equity | $ | 1,554,558 | $ | 1,589,035 |
Three Months Ended | |||||||
March 31, | |||||||
2013 | 2012 | ||||||
Revenues | $ | 482,522 | $ | 518,585 | |||
Costs and expenses: | |||||||
Cost of sales | 360,768 | 388,894 | |||||
Selling, general and administrative | 76,332 | 77,617 | |||||
Amortization expense | 3,729 | 3,156 | |||||
Total costs and expenses | 440,829 | 469,667 | |||||
Earnings from operations | 41,693 | 48,918 | |||||
Other expenses and income: | |||||||
Interest expense | 7,679 | 7,054 | |||||
Interest income | (62 | ) | (58 | ) | |||
Other income, net | (302 | ) | (697 | ) | |||
Total other expenses, net | 7,315 | 6,299 | |||||
Earnings before income taxes | 34,378 | 42,619 | |||||
Income tax expense (Note 1) | 12,709 | 16,198 | |||||
Net earnings | $ | 21,669 | $ | 26,421 | |||
Net earnings per common share, basic (Note 6) | $ | 0.56 | $ | 0.63 | |||
Net earnings per common share, diluted (Note 6) | $ | 0.54 | $ | 0.60 | |||
Weighted-average common shares outstanding, basic (Note 6) | 38,308 | 42,114 | |||||
Weighted-average common shares outstanding, diluted (Note 6) | 39,806 | 44,045 | |||||
Dividends declared per common share | $ | 0.31 | $ | — |
Three Months Ended | |||||||
March 31, | |||||||
2013 | 2012 | ||||||
Net earnings | $ | 21,669 | $ | 26,421 | |||
Other comprehensive income (loss), net of tax: | |||||||
Unrealized changes in fair value of cash flow hedges | 206 | (404 | ) | ||||
Realized losses on cash flow hedges reclassified from accumulated other comprehensive income into earnings | 422 | — | |||||
Foreign currency translation adjustment | (1,122 | ) | 350 | ||||
Total other comprehensive loss | $ | (494 | ) | $ | (54 | ) | |
Comprehensive income | $ | 21,175 | $ | 26,367 |
Three Months Ended | |||||||
March 31, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 21,669 | $ | 26,421 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 13,287 | 14,710 | |||||
Amortization of debt issuance costs | 905 | 518 | |||||
Provision for losses on accounts receivable | 751 | 543 | |||||
Loss (gain) on derivatives, net | 170 | (178 | ) | ||||
Loss (gain) on sale of property, plant and equipment | 920 | (79 | ) | ||||
Stock-based compensation expense | 2,986 | 2,287 | |||||
Deferred income taxes | 1,179 | 1,004 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable, net | 9,359 | 30,767 | |||||
Inventories | 4,178 | 7,184 | |||||
Prepaid expenses and other | 6,307 | 10,939 | |||||
Other assets | (582 | ) | 873 | ||||
Accounts payable | (4,755 | ) | (52,505 | ) | |||
Progress billings | (3,276 | ) | 4,156 | ||||
Accrued expenses | (28,240 | ) | (31,629 | ) | |||
Other non-current liabilities | (1,408 | ) | (637 | ) | |||
Total adjustments | 1,781 | (12,047 | ) | ||||
Net cash provided by operating activities | 23,450 | 14,374 | |||||
Cash flows from investing activities: | |||||||
Additions to property, plant and equipment | (3,342 | ) | (9,265 | ) | |||
Proceeds from sale of property, plant and equipment | 5,099 | 79 | |||||
Net cash provided by (used in) investing activities | 1,757 | (9,186 | ) | ||||
Cash flows from financing activities: | |||||||
Repayments of long-term debt | (3,750 | ) | (3,750 | ) | |||
Dividends paid on common shares and restricted stock | (12,011 | ) | — | ||||
Repurchases of common stock | (21,168 | ) | (1,366 | ) | |||
Proceeds from issuance of common stock | 14,836 | 5,685 | |||||
Net cash (used in) provided by financing activities | (22,093 | ) | 569 | ||||
Effect of exchange rate changes on cash and cash equivalents | (621 | ) | (529 | ) | |||
Net increase in cash and cash equivalents | 2,493 | 5,228 | |||||
Cash and cash equivalents at beginning of period | 94,711 | 101,971 | |||||
Cash and cash equivalents at end of period | $ | 97,204 | $ | 107,199 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for interest | $ | 11,003 | $ | 11,192 | |||
Cash paid during the period for income taxes | $ | 2,640 | $ | 7,630 |
(in thousands of U.S. dollars) | March 31, 2013 | December 31, 2012 | |||||
Raw materials | $ | 29,219 | $ | 30,960 | |||
Work in progress | 9,856 | 12,293 | |||||
Inventories | $ | 39,075 | $ | 43,253 |
Useful Lives | March 31, 2013 | December 31, 2012 | |||||||
(in years) | (in thousands of U.S. dollars) | ||||||||
Land, at cost | N/A | $ | 7,195 | $ | 7,185 | ||||
Buildings, at cost | 10 - 30 | 38,036 | 37,961 | ||||||
Machinery and equipment, at cost | 3 - 20 | 222,896 | 228,605 | ||||||
Office furniture and equipment, at cost | 3 - 10 | 235,312 | 233,948 | ||||||
Leasehold improvements, at cost | 5 - 10 | 28,910 | 28,916 | ||||||
532,349 | 536,615 | ||||||||
Less accumulated depreciation | (418,747 | ) | (410,783 | ) | |||||
Property, plant and equipment, net | $ | 113,602 | $ | 125,832 |
(in thousands of U.S. dollars) | Shared Mail | Neighborhood Targeted | Free-standing Inserts | International, Digital Media & Services | Total | ||||||||||||||
Total goodwill acquired | $ | 721,384 | $ | 5,325 | $ | 22,357 | $ | 96,957 | $ | 846,023 | |||||||||
Accumulated impairment losses | (187,200 | ) | (3,985 | ) | — | (22,400 | ) | (213,585 | ) | ||||||||||
Goodwill | 534,184 | 1,340 | 22,357 | 74,557 | 632,438 |
March 31, 2013 | December 31, 2012 | ||||||||||||||||||||||||||
(in thousands of U.S. dollars) | Gross Amount | Accumulated Amortization | Net Amount | Weighted Average Remaining Useful Life (in years) | Gross Amount | Accumulated Amortization | Net Amount | Weighted Average Remaining Useful Life (in years) | |||||||||||||||||||
Finite-lived intangible assets: | |||||||||||||||||||||||||||
Mailing lists, non-compete agreements and other | $ | 47,320 | $ | (14,067 | ) | $ | 33,253 | 12.1 | $ | 47,320 | $ | (13,025 | ) | $ | 34,295 | 12.2 | |||||||||||
Customer relationships | 142,200 | (57,953 | ) | 84,247 | 7.9 | 142,200 | (55,266 | ) | 86,934 | 8.2 | |||||||||||||||||
Total | $ | 189,520 | (72,020 | ) | 117,500 | $ | 189,520 | (68,291 | ) | 121,229 | |||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||||||
Valassis name, tradenames, trademarks and other | 93,942 | 93,942 | |||||||||||||||||||||||||
Other intangible assets, net | $ | 211,442 | $ | 215,171 |
(in thousands of U.S. dollars) | March 31, 2013 | December 31, 2012 | |||||
Senior Secured Revolving Credit Facility | $ | 50,000 | $ | 50,000 | |||
Senior Secured Term Loan A | 273,750 | 277,500 | |||||
Senior Secured Convertible Notes due 2033, net of discount | 61 | 61 | |||||
6 5/8% Senior Notes due 2021 | 260,000 | 260,000 | |||||
Total debt | 583,811 | 587,561 | |||||
Current portion long-term debt | 26,250 | 22,500 | |||||
Long-term debt | $ | 557,561 | $ | 565,061 |
• | a five-year term loan A in an aggregate principal amount equal to $300.0 million, with principal repayable in quarterly installments at a rate of 5.0% during each of the first two years from issuance, 10.0% during the third year from issuance, 15.0% during the fourth year from issuance and 11.25% during the fifth year from issuance, with the remaining 53.75% due at maturity (the “Term Loan A”); |
• | a five-year revolving credit facility in an aggregate principal amount of $100.0 million (the “Revolving Line of Credit”), including $15.0 million available in Euros, Pounds Sterling or Canadian Dollars, $50.0 million available for letters of credit and a $20.0 million swingline loan subfacility, of which $50.0 million was drawn at closing and remains outstanding as of March 31, 2013 (exclusive of outstanding letters of credit described below); and |
• | an incremental facility pursuant to which, prior to the maturity of the Senior Secured Credit Facility, we may incur additional indebtedness in an amount up to $150.0 million under the Revolving Line of Credit or the Term Loan A or a combination thereof, subject to certain conditions, including receipt of additional lending commitments for such additional indebtedness. The terms of the incremental facility will be substantially similar to the terms of the Senior Secured Credit Facility, except with respect to the pricing of the incremental facility, the interest rate for which could be higher than that for the Revolving Line of Credit and the Term Loan A. |
• | the payment of other obligations; |
• | the maintenance of organizational existences, including, but not limited to, maintaining our property and insurance; |
• | compliance with all material contractual obligations and requirements of law; |
• | limitations on the incurrence of indebtedness; |
• | limitations on creation and existence of liens; |
• | limitations on certain fundamental changes to our corporate structure and nature of our business, including mergers; |
• | limitations on asset sales; |
• | limitations on restricted payments, including certain dividends and stock repurchases and redemptions; |
• | limitations on capital expenditures; |
• | limitations on any investments, provided that certain “permitted acquisitions” and strategic investments are allowed; |
• | limitations on optional prepayments and modifications of certain debt instruments; |
• | limitations on modifications to organizational documents; |
• | limitations on transactions with affiliates; |
• | limitations on entering into certain swap agreements; |
• | limitations on negative pledge clauses or clauses restricting subsidiary distributions; |
• | limitations on sale-leaseback and other lease transactions; and |
• | limitations on changes to our fiscal year. |
• | a maximum consolidated leverage ratio, as defined in our Senior Secured Credit Facility (generally, the ratio of our consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the most recent four quarters), of 3.50:1.00; and |
• | a minimum consolidated interest coverage ratio, as defined in our Senior Secured Credit Facility (generally, the ratio of our consolidated EBITDA to consolidated interest expense for the most recent four quarters), of 3.00:1.00. |
Required Ratio | Actual Ratio | ||
Maximum consolidated leverage ratio | No greater than 3.50:1.00 | 1.99:1.00 | |
Minimum consolidated interest coverage ratio | No less than 3.00:1.00 | 10.79:1.00 |
Year | Percentage | |
2016 | 103.313% | |
2017 | 102.208% | |
2018 | 101.104% | |
2019 and thereafter | 100.000% |
(in thousands of U.S. dollars) | March 31, 2013 | December 31, 2012 | |||||
Accrued interest | $ | 3,046 | $ | 7,275 | |||
Accrued compensation and benefits | 30,658 | 50,305 | |||||
Dividends payable | 12,024 | 12,011 | |||||
Other accrued expenses | 33,433 | 37,876 | |||||
Accrued expenses | $ | 79,161 | $ | 107,467 |
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands, except per share data and percentages) | 2013 | 2012 | ||||||
Numerator: | ||||||||
Net earnings | $ | 21,669 | $ | 26,421 | ||||
Less: Dividends declared — common shares and restricted shares (participating securities) | (12,024 | ) | — | |||||
Undistributed earnings | 9,645 | 26,421 | ||||||
Percentage allocated to common shares1 | 98.3 | % | 100.0 | % | ||||
Undistributed earnings — common shares | 9,481 | 26,421 | ||||||
Add: Dividends declared — common shares | 11,818 | — | ||||||
Numerator for basic and diluted earnings per share | $ | 21,299 | $ | 26,421 | ||||
Denominator: | ||||||||
Denominator for basic earnings per common share — weighted-average common shares | 38,308 | 42,114 | ||||||
Incremental shares for stock awards2 | 1,498 | 1,931 | ||||||
Denominator for diluted earnings per common share — adjusted weighted-average common shares and assumed conversion | 39,806 | 44,045 | ||||||
Net earnings per common share, basic | $ | 0.56 | $ | 0.63 | ||||
Net earnings per common share, diluted | $ | 0.54 | $ | 0.60 | ||||
1 | Weighted-average common shares outstanding | 38,308 | 42,114 | |||||
Weighted-average restricted shares outstanding (participating securities) | 668 | — | ||||||
Total | 38,976 | 42,114 | ||||||
Percentage allocated to common shares | 98.3 | % | 100.0 | % | ||||
2 | Anti-dilutive shares excluded from calculation of weighted-average incremental shares for stock awards | 2,486 | 3,486 |
Notional Amounts | Fair Values | ||||||||||||||||
(in millions of U.S. dollars) | March 31, 2013 | December 31, 2012 | March 31, 2013 | December 31, 2012 | Balance Sheet Location | ||||||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||
Interest rate swap contract | $ | 177.8 | $ | 180.6 | $ | (5.1 | ) | $ | (5.8 | ) | Accrued expenses / Other non-current liabilities | ||||||
Foreign exchange contracts | 6.4 | 6.4 | 0.4 | 0.1 | Prepaid expenses | ||||||||||||
Derivatives not receiving hedge accounting treatment: | |||||||||||||||||
Foreign exchange contracts | 1.6 | 4.7 | 0.2 | 0.3 | Prepaid expenses | ||||||||||||
Total derivative financial instruments | $ | 185.8 | $ | 191.7 | $ | (4.5 | ) | $ | (5.4 | ) |
Three Months Ended | |||||||||||||||||||||||
March 31, | |||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
(in millions of U.S. Dollars) | Amount of Pre-tax Gain (Loss) Recognized in Earnings* | Amount of Pre-tax Gain (Loss) Recognized in OCI | Amount of Pre-tax Loss Reclassified from AOCI into Earnings* | ||||||||||||||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||||||||
Interest rate swap contract | $ | — | $ | — | $ | — | $ | (0.7 | ) | $ | (0.7 | ) | $ | — | |||||||||
Foreign exchange contracts | — | — | 0.3 | — | — | — | |||||||||||||||||
Derivatives not receiving hedge accounting treatment: | |||||||||||||||||||||||
Interest rate swap contracts | — | (0.1 | ) | — | — | — | — | ||||||||||||||||
Foreign exchange contracts | (0.1 | ) | 1.1 | — | — | — | — | ||||||||||||||||
Total | $ | (0.1 | ) | $ | 1.0 | $ | 0.3 | $ | (0.7 | ) | $ | (0.7 | ) | $ | — |
* | Amounts recognized in earnings related to interest rate swap contracts are included in interest expense in the unaudited condensed consolidated statements of income and amounts recognized in earnings related to foreign exchange contracts are included in cost of sales in the unaudited condensed consolidated statements of income. |
Three Months Ended | |||||||
March 31, | |||||||
(in thousands, except per share data) | 2013 | 2012 | |||||
Shares repurchased | 726 | 59 | |||||
Aggregate repurchase price | $ | 21,168 | $ | 1,366 | |||
Average price paid per share | $ | 29.18 | $ | 23.10 |
Three Months Ended | |||||||||||||||||||
March 31, | |||||||||||||||||||
(in millions of U.S. dollars) | Shared Mail | FSI | Neighborhood Targeted | International, Digital Media & Services | Total | ||||||||||||||
2013 | |||||||||||||||||||
Revenues from external customers | $ | 327.1 | $ | 85.7 | $ | 23.3 | $ | 46.4 | $ | 482.5 | |||||||||
Intersegment revenues | $ | 4.4 | $ | 10.1 | $ | 18.0 | $ | — | $ | 32.5 | |||||||||
Depreciation/amortization | $ | 6.8 | $ | 3.5 | $ | 1.2 | $ | 1.8 | $ | 13.3 | |||||||||
Segment profit (loss)1 | $ | 38.9 | $ | 11.1 | $ | (4.4 | ) | $ | (3.9 | ) | $ | 41.7 | |||||||
2012 | |||||||||||||||||||
Revenues from external customers | $ | 328.1 | $ | 76.3 | $ | 72.2 | $ | 42.0 | $ | 518.6 | |||||||||
Intersegment revenues | $ | 4.5 | $ | 10.0 | $ | 13.0 | $ | — | $ | 27.5 | |||||||||
Depreciation/amortization | $ | 8.3 | $ | 3.2 | $ | 1.1 | $ | 2.1 | $ | 14.7 | |||||||||
Segment profit (loss)1 | $ | 42.4 | $ | 5.4 | $ | (1.6 | ) | $ | 2.7 | $ | 48.9 |
Three Months Ended | |||||||
March 31, | |||||||
(in millions of U.S. dollars) | 2013 | 2012 | |||||
United States | $ | 471.6 | $ | 506.2 | |||
Foreign | 10.9 | 12.4 | |||||
Revenues | $ | 482.5 | $ | 518.6 |
(in millions of U.S. dollars) | March 31, 2013 | December 31, 2012 | |||||
United States | $ | 105.8 | $ | 118.1 | |||
Foreign | 7.8 | 7.7 | |||||
Property, plant and equipment, net | $ | 113.6 | $ | 125.8 |
• | The sale or other transfer or disposition of all of the Guarantor Subsidiary's capital stock to any person that is not an affiliate of the Parent Company; |
• | The sale or other transfer of all or substantially all the assets or capital stock of a Guarantor Subsidiary, by way of merger, consolidation or otherwise, to any person that is not an affiliate of the Parent Company; |
• | If a Guarantor Subsidiary ceases to be a “Domestic Restricted Subsidiary” for purposes of the indenture covenants; and |
• | Legal defeasance or covenant defeasance of the indenture obligations when provision has been made for them to be fully satisfied. |
Parent Company | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Consolidating Adjustments | Consolidated Total | |||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 66,820 | $ | 13,699 | $ | 16,685 | $ | — | $ | 97,204 | |||||||||
Accounts receivable, net | 105,193 | 288,152 | 23,444 | — | 416,789 | ||||||||||||||
Inventories | 31,976 | 7,096 | 3 | — | 39,075 | ||||||||||||||
Prepaid expenses and other (including intercompany) | 1,676,941 | 4,214,870 | 1,994 | (5,863,211 | ) | 30,594 | |||||||||||||
Total current assets | 1,880,930 | 4,523,817 | 42,126 | (5,863,211 | ) | 583,662 | |||||||||||||
Property, plant and equipment, net | 22,775 | 89,721 | 1,106 | — | 113,602 | ||||||||||||||
Goodwill | 23,699 | 601,750 | 6,989 | — | 632,438 | ||||||||||||||
Other intangible assets, net | 11,529 | 199,913 | — | — | 211,442 | ||||||||||||||
Investments | 664,519 | 17,471 | — | (679,264 | ) | 2,726 | |||||||||||||
Intercompany note receivable (payable) | 328,973 | (312,717 | ) | (16,256 | ) | — | — | ||||||||||||
Other assets | 7,420 | 3,256 | 12 | — | 10,688 | ||||||||||||||
Total assets | $ | 2,939,845 | $ | 5,123,211 | $ | 33,977 | $ | (6,542,475 | ) | $ | 1,554,558 | ||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Current portion, long-term debt | $ | 26,250 | $ | — | $ | — | $ | — | $ | 26,250 | |||||||||
Accounts payable and intercompany payable | 1,799,764 | 4,325,807 | 14,205 | (5,863,211 | ) | 276,565 | |||||||||||||
Progress billings | 18,145 | 6,934 | 11,240 | — | 36,319 | ||||||||||||||
Accrued expenses | 45,067 | 27,524 | 6,570 | — | 79,161 | ||||||||||||||
Total current liabilities | 1,889,226 | 4,360,265 | 32,015 | (5,863,211 | ) | 418,295 | |||||||||||||
Long-term debt | 557,561 | — | — | — | 557,561 | ||||||||||||||
Deferred income taxes | (3,765 | ) | 65,398 | (4,009 | ) | — | 57,624 | ||||||||||||
Other non-current liabilities | 16,446 | 35,466 | (11,211 | ) | — | 40,701 | |||||||||||||
Total liabilities | 2,459,468 | 4,461,129 | 16,795 | (5,863,211 | ) | 1,074,181 | |||||||||||||
Stockholders’ equity | 480,377 | 662,082 | 17,182 | (679,264 | ) | 480,377 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 2,939,845 | $ | 5,123,211 | $ | 33,977 | $ | (6,542,475 | ) | $ | 1,554,558 |
Parent Company | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Consolidating Adjustments | Consolidated Total | |||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 62,836 | $ | 10,745 | $ | 21,130 | $ | — | $ | 94,711 | |||||||||
Accounts receivable, net | 116,821 | 287,230 | 22,848 | — | 426,899 | ||||||||||||||
Inventories | 35,421 | 7,829 | 3 | — | 43,253 | ||||||||||||||
Prepaid expenses and other (including intercompany) | 1,520,526 | 3,706,682 | 1,998 | (5,192,617 | ) | 36,589 | |||||||||||||
Total current assets | 1,735,604 | 4,012,486 | 45,979 | (5,192,617 | ) | 601,452 | |||||||||||||
Property, plant and equipment, net | 19,159 | 105,667 | 1,006 | — | 125,832 | ||||||||||||||
Goodwill | 23,699 | 601,750 | 6,989 | — | 632,438 | ||||||||||||||
Other intangible assets, net | 11,534 | 203,637 | — | — | 215,171 | ||||||||||||||
Investments | 645,411 | 15,375 | — | (658,355 | ) | 2,431 | |||||||||||||
Intercompany note receivable (payable) | 364,921 | (360,830 | ) | (4,091 | ) | — | — | ||||||||||||
Other assets | 7,543 | 4,157 | 11 | — | 11,711 | ||||||||||||||
Total assets | $ | 2,807,871 | $ | 4,582,242 | $ | 49,894 | $ | (5,850,972 | ) | $ | 1,589,035 | ||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Current portion, long-term debt | $ | 22,500 | $ | — | $ | — | $ | — | $ | 22,500 | |||||||||
Accounts payable and intercompany payable | 1,653,928 | 3,804,209 | 15,800 | (5,192,617 | ) | 281,320 | |||||||||||||
Progress billings | 16,459 | 7,758 | 15,378 | — | 39,595 | ||||||||||||||
Accrued expenses | 61,741 | 38,878 | 6,848 | — | 107,467 | ||||||||||||||
Total current liabilities | 1,754,628 | 3,850,845 | 38,026 | (5,192,617 | ) | 450,882 | |||||||||||||
Long-term debt | 565,061 | — | — | — | 565,061 | ||||||||||||||
Deferred income taxes | (4,131 | ) | 65,398 | (4,009 | ) | — | 57,258 | ||||||||||||
Other non-current liabilities | 18,750 | 22,722 | 799 | — | 42,271 | ||||||||||||||
Total liabilities | 2,334,308 | 3,938,965 | 34,816 | (5,192,617 | ) | 1,115,472 | |||||||||||||
Stockholders’ equity | 473,563 | 643,277 | 15,078 | (658,355 | ) | 473,563 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 2,807,871 | $ | 4,582,242 | $ | 49,894 | $ | (5,850,972 | ) | $ | 1,589,035 |
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated Total | |||||||||||||||
Revenues | $ | 137,070 | $ | 440,441 | $ | 14,822 | $ | (109,811 | ) | $ | 482,522 | ||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales | 108,443 | 299,013 | 10,736 | (57,424 | ) | 360,768 | |||||||||||||
Selling, general and administrative | 21,625 | 103,825 | 3,269 | (52,387 | ) | 76,332 | |||||||||||||
Amortization expense | 6 | 3,723 | — | — | 3,729 | ||||||||||||||
Total costs and expenses | 130,074 | 406,561 | 14,005 | (109,811 | ) | 440,829 | |||||||||||||
Earnings from operations | 6,996 | 33,880 | 817 | — | 41,693 | ||||||||||||||
Other expenses and income: | |||||||||||||||||||
Interest expense | 7,679 | — | — | — | 7,679 | ||||||||||||||
Interest income | (18 | ) | — | (44 | ) | — | (62 | ) | |||||||||||
Intercompany interest | (9,050 | ) | 9,050 | — | — | — | |||||||||||||
Other expenses (income), net | 7 | 712 | (1,021 | ) | — | (302 | ) | ||||||||||||
Total other expenses (income), net | (1,382 | ) | 9,762 | (1,065 | ) | — | 7,315 | ||||||||||||
Earnings before income taxes | 8,378 | 24,118 | 1,882 | — | 34,378 | ||||||||||||||
Income tax expense | 941 | 11,472 | 296 | — | 12,709 | ||||||||||||||
Equity in net earnings of subsidiaries | 14,232 | 1,586 | — | (15,818 | ) | — | |||||||||||||
Net earnings | $ | 21,669 | $ | 14,232 | $ | 1,586 | $ | (15,818 | ) | $ | 21,669 | ||||||||
Other comprehensive loss | (494 | ) | (1,112 | ) | (1,112 | ) | 2,224 | (494 | ) | ||||||||||
Comprehensive income | $ | 21,175 | $ | 13,120 | $ | 474 | $ | (13,594 | ) | $ | 21,175 |
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated Total | |||||||||||||||
Revenues | $ | 171,291 | $ | 430,014 | $ | 17,382 | $ | (100,102 | ) | $ | 518,585 | ||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales | 145,142 | 283,095 | 11,928 | (51,271 | ) | 388,894 | |||||||||||||
Selling, general and administrative | 20,370 | 102,794 | 3,284 | (48,831 | ) | 77,617 | |||||||||||||
Amortization expense | 6 | 3,150 | — | — | 3,156 | ||||||||||||||
Total costs and expenses | 165,518 | 389,039 | 15,212 | (100,102 | ) | 469,667 | |||||||||||||
Earnings from operations | 5,773 | 40,975 | 2,170 | — | 48,918 | ||||||||||||||
Other expenses and income: | |||||||||||||||||||
Interest expense | 7,054 | — | — | — | 7,054 | ||||||||||||||
Interest income | (22 | ) | — | (36 | ) | — | (58 | ) | |||||||||||
Intercompany interest | (8,967 | ) | 8,967 | — | — | — | |||||||||||||
Other expenses (income), net | (144 | ) | (616 | ) | 63 | — | (697 | ) | |||||||||||
Total other expenses (income), net | (2,079 | ) | 8,351 | 27 | — | 6,299 | |||||||||||||
Earnings before income taxes | 7,852 | 32,624 | 2,143 | — | 42,619 | ||||||||||||||
Income tax expense | 2,418 | 13,360 | 420 | — | 16,198 | ||||||||||||||
Equity in net earnings of subsidiaries | 20,987 | 1,723 | — | (22,710 | ) | — | |||||||||||||
Net earnings | $ | 26,421 | $ | 20,987 | $ | 1,723 | $ | (22,710 | ) | $ | 26,421 | ||||||||
Other comprehensive income (loss) | (54 | ) | 350 | 350 | (700 | ) | (54 | ) | |||||||||||
Comprehensive income | $ | 26,367 | $ | 21,337 | $ | 2,073 | $ | (23,410 | ) | $ | 26,367 |
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated Total | |||||||||||||||
Net cash provided by (used in) operating activities | $ | 13,200 | $ | 13,877 | $ | (3,627 | ) | $ | — | $ | 23,450 | ||||||||
Cash flows from investing activities: | |||||||||||||||||||
Additions to property, plant and equipment | (568 | ) | (2,577 | ) | (197 | ) | — | (3,342 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | — | 5,099 | — | — | 5,099 | ||||||||||||||
Net cash provided by (used in) investing activities | (568 | ) | 2,522 | (197 | ) | — | 1,757 | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Cash provided by (used in) intercompany activity | 13,445 | (13,445 | ) | — | — | — | |||||||||||||
Repayments of long-term debt | (3,750 | ) | — | — | — | (3,750 | ) | ||||||||||||
Dividends paid on common shares and restricted stock | (12,011 | ) | — | — | — | (12,011 | ) | ||||||||||||
Repurchases of common stock | (21,168 | ) | — | — | — | (21,168 | ) | ||||||||||||
Proceeds from issuance of common stock | 14,836 | — | — | — | 14,836 | ||||||||||||||
Net cash used in financing activities | (8,648 | ) | (13,445 | ) | — | — | (22,093 | ) | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | (621 | ) | — | (621 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 3,984 | 2,954 | (4,445 | ) | — | 2,493 | |||||||||||||
Cash and cash equivalents at beginning of period | 62,836 | 10,745 | 21,130 | — | 94,711 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 66,820 | $ | 13,699 | $ | 16,685 | $ | — | $ | 97,204 |
Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated Total | |||||||||||||||
Net cash provided by (used in) operating activities | $ | 35,072 | $ | (19,760 | ) | $ | (938 | ) | $ | — | $ | 14,374 | |||||||
Cash flows from investing activities: | |||||||||||||||||||
Additions to property, plant and equipment | (2,372 | ) | (6,736 | ) | (157 | ) | — | (9,265 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 79 | — | — | — | 79 | ||||||||||||||
Net cash used in investing activities | (2,293 | ) | (6,736 | ) | (157 | ) | — | (9,186 | ) | ||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Cash provided by (used in) intercompany activity | (24,889 | ) | 24,889 | — | — | — | |||||||||||||
Repayments of long-term debt | (3,750 | ) | — | — | — | (3,750 | ) | ||||||||||||
Repurchases of common stock | (1,366 | ) | — | — | — | (1,366 | ) | ||||||||||||
Proceeds from issuance of common stock | 5,685 | — | — | — | 5,685 | ||||||||||||||
Net cash provided by (used in) financing activities | (24,320 | ) | 24,889 | — | — | 569 | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | (529 | ) | — | (529 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 8,459 | (1,607 | ) | (1,624 | ) | — | 5,228 | ||||||||||||
Cash and cash equivalents at beginning of period | 68,887 | 7,543 | 25,541 | — | 101,971 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 77,346 | $ | 5,936 | $ | 23,917 | $ | — | $ | 107,199 |
Three Months Ended | |||||||
March 31, | |||||||
(in millions of U.S. dollars, except per share data) | 2013 | 2012 | |||||
Revenues: | |||||||
Shared Mail | $ | 327.1 | $ | 328.1 | |||
Free-standing Inserts | 85.7 | 76.3 | |||||
Neighborhood Targeted | 23.3 | 72.2 | |||||
International, Digital Media & Services | 46.4 | 42.0 | |||||
Total revenues | 482.5 | 518.6 | |||||
Cost of sales | 360.8 | 388.9 | |||||
Gross profit | 121.7 | 129.7 | |||||
Selling, general and administrative | 76.3 | 77.6 | |||||
Amortization expense | 3.7 | 3.2 | |||||
Earnings from operations | 41.7 | 48.9 | |||||
Other expenses and income: | |||||||
Interest expense, net | 7.6 | 7.0 | |||||
Other income, net | (0.3 | ) | (0.7 | ) | |||
Total other expenses, net | 7.3 | 6.3 | |||||
Earnings before income taxes | 34.4 | 42.6 | |||||
Income tax expense | 12.7 | 16.2 | |||||
Net earnings | $ | 21.7 | $ | 26.4 | |||
Net earnings per common share, diluted | $ | 0.54 | $ | 0.60 | |||
Weighted-average common shares outstanding, diluted | 39,806 | 44,045 |
• | Shared Mail – Products that have the ability to reach 9 out of 10 U.S. households through shared mail distribution. Our Shared Mail programs combine the individual print advertisements of various clients into a single shared mail package delivered primarily through the United States Postal Service (“USPS”). |
• | Free-standing Inserts – Four-color booklets that contain promotions, primarily coupons, from multiple advertisers (cooperative), which we publish and distribute to approximately 60 million households through newspapers and shared mail. |
• | Neighborhood Targeted – Products that are targeted to specific newspaper zones or neighborhoods based on geographic and demographic characteristics. |
(in millions of U.S. dollars) | Facility Amount | Amount Outstanding | Available | |||||||
Cash and cash equivalents | $ | 97.2 | (a) | |||||||
Debt facilities: | ||||||||||
Senior Secured Revolving Credit Facility | $ | 100.0 | 57.4 | (b) | 42.6 | |||||
Total Available | $ | 139.8 |
(a) | The foreign subsidiaries for which we have elected to permanently reinvest earnings outside of the U.S. held $16.7 million of cash and cash equivalents as of March 31, 2013. In the event we alter our current position and repatriate funds in the future, we may be required to accrue and pay U.S. taxes on a portion thereof. |
(b) | Represents $50.0 million outstanding under our Revolving Line of Credit (as defined below) and $7.4 million in outstanding letters of credit. |
Three Months Ended | |||
(in millions of U.S. dollars) | March 31, 2013 | ||
Net cash provided by operating activities | $ | 23.5 | |
Net cash provided by investing activities | 1.8 | ||
Net cash used in financing activities | (22.1 | ) | |
Effect of exchange rate changes on cash and cash equivalents | (0.7 | ) | |
Net increase in cash and cash equivalents | 2.5 | ||
Cash and cash equivalents at beginning of period | 94.7 | ||
Cash and cash equivalents at end of period | $ | 97.2 |
• | net cash inflows of $9.4 million associated with the decrease in accounts receivable, net, which was partially offset by net cash outflows of $4.8 million related to the decrease in accounts payable, both of which reflect customary fluctuations in the timing of working capital inflows and outflows; and |
• | net cash outflows of $28.2 million associated with the decrease in accrued expenses, which resulted primarily from payments related to certain annual incentive programs. |
• | a five-year term loan A in an aggregate principal amount equal to $300.0 million, with principal repayable in quarterly installments at a rate of 5.0% during each of the first two years from issuance, 10.0% during the third year from issuance, 15.0% during the fourth year from issuance and 11.25% during the fifth year from issuance, with the remaining 53.75% due at maturity (the “Term Loan A”); |
• | a five-year revolving credit facility in an aggregate principal amount of $100.0 million (the “Revolving Line of Credit”), including $15.0 million available in Euros, Pounds Sterling or Canadian Dollars, $50.0 million available for letters of credit and a $20.0 million swingline loan subfacility, of which $50.0 million was drawn at closing and remains outstanding as of March 31, 2013 (exclusive of outstanding letters of credit described below); and |
• | an incremental facility pursuant to which, prior to the maturity of the Senior Secured Credit Facility, we may incur additional indebtedness in an amount up to $150.0 million under the Revolving Line of Credit or the Term Loan A or a combination thereof, subject to certain conditions, including receipt of additional lending commitments for such additional indebtedness. The terms of the incremental facility will be substantially similar to the terms of the Senior Secured Credit Facility, except with respect to the pricing of the incremental facility, the interest rate for which could be higher than that for the Revolving Line of Credit and the Term Loan A. |
• | the payment of other obligations; |
• | the maintenance of organizational existences, including, but not limited to, maintaining our property and insurance; |
• | compliance with all material contractual obligations and requirements of law; |
• | limitations on the incurrence of indebtedness; |
• | limitations on creation and existence of liens; |
• | limitations on certain fundamental changes to our corporate structure and nature of our business, including mergers; |
• | limitations on asset sales; |
• | limitations on restricted payments, including certain dividends and stock repurchases and redemptions; |
• | limitations on capital expenditures; |
• | limitations on any investments, provided that certain “permitted acquisitions” and strategic investments are allowed; |
• | limitations on optional prepayments and modifications of certain debt instruments; |
• | limitations on modifications to organizational documents; |
• | limitations on transactions with affiliates; |
• | limitations on entering into certain swap agreements; |
• | limitations on negative pledge clauses or clauses restricting subsidiary distributions; |
• | limitations on sale-leaseback and other lease transactions; and |
• | limitations on changes to our fiscal year. |
• | a maximum consolidated leverage ratio, as defined in our Senior Secured Credit Facility (generally, the ratio of our consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the most recent four quarters), of 3.50:1.00; and |
• | a minimum consolidated interest coverage ratio, as defined in our Senior Secured Credit Facility (generally, the ratio of our consolidated EBITDA to consolidated interest expense for the most recent four quarters), of 3.00:1.00. |
Required Ratio | Actual Ratio | ||
Maximum consolidated leverage ratio | No greater than 3.50:1.00 | 1.99:1.00 | |
Minimum consolidated interest coverage ratio | No less than 3.00:1.00 | 10.79:1.00 |
Year | Percentage | |
2016 | 103.313% | |
2017 | 102.208% | |
2018 | 101.104% | |
2019 and thereafter | 100.000% |
Period | Total Number of Shares Purchased | Average Price Paid per Share (including broker commissions) | Total Number of Shares Purchased as Part of Publicly Announced Plan (a) | Maximum Number of Shares that May Yet be Purchased under the Plan (b) | |||||||||
January 1, 2013 to January 31, 2013 | — | $ | — | — | 2,372,222 | ||||||||
February 1, 2013 to February 28, 2013 | 90,000 | $ | 27.15 | 90,000 | 2,282,222 | ||||||||
March 1, 2013 to March 31, 2013 | 635,512 | $ | 29.46 | 635,512 | 1,646,710 | ||||||||
725,512 | $ | 29.18 | 725,512 |
(a) | On August 25, 2005, our Board of Directors approved the repurchase of 5 million shares of our common stock. This share repurchase plan was suspended in February 2006. On May 6, 2010, our Board of Directors reinstated this share repurchase plan. In May 2011, our Board of Directors approved an increase of 6 million shares to this share repurchase plan. In May 2012, our Board of Directors approved an additional increase of 6 million shares to this share repurchase plan. On May 3, 2013, our Board of Directors approved an additional increase of 6 million shares to this share repurchase plan. |
(b) | Our ability to make share repurchases may be limited by the documents governing our indebtedness. |
Exhibit Number | Description |
10.1 | Amended and Restated Employment Agreement, dated as of May 7, 2013, by and between Valassis Communications, Inc. and Ronald L. Goolsby. |
10.2 | Employment Agreement, as amended, between Valassis Communications, Inc. and James D. Parkinson (incorporated by reference to Exhibit 10.1 to Valassis' Form 8-K (SEC File No. 001-10991) filed on April 30, 2013). |
10.3 | Amended and Restated Employment Agreement, dated as of May 7, 2013, by and between Valassis Communications, Inc. and Suzanne Brown. |
10.4 | Form of Change in Control Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 to Valassis' Form 8-K (SEC File No. 001-10991) filed on April 18, 2013). |
10.5 | Amended and Restated Valassis Communications, Inc. 2008 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit C to Valassis' Proxy Statement (SEC File No. 001-10991) filed on April 3, 2013). |
10.6 | Amended and Restated Valassis Communications, Inc. 2008 Senior Executives Bonus Plan (incorporated by reference to Exhibit D to Valassis' Proxy Statement (SEC File No. 001-10991) filed on April 3, 2013). |
31.1 | Section 302 Certification of Robert A. Mason |
31.2 | Section 302 Certification of Robert L. Recchia |
32.1 | Section 906 Certification of Robert A. Mason |
32.2 | Section 906 Certification of Robert L. Recchia |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase |
101.LAB* | XBRL Taxonomy Extension Label Linkbase |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase |
* | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included as Exhibits 101 hereto (i) shall not be deemed “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, (ii) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and (iii) otherwise are not subject to liability under those sections. |
Valassis Communications, Inc. (Registrant) | ||
By: | /s/ Robert L. Recchia | |
Robert L. Recchia | ||
Executive Vice President and Chief Financial Officer | ||
Signing on behalf of the Registrant and as principal financial and accounting officer. |
Exhibit Number | Description |
10.1 | Amended and Restated Employment Agreement, dated as of May 7, 2013, by and between Valassis Communications, Inc. and Ronald L. Goolsby. |
10.2 | Employment Agreement, as amended, between Valassis Communications, Inc. and James D. Parkinson (incorporated by reference to Exhibit 10.1 to Valassis' Form 8-K (SEC File No. 001-10991) filed on April 30, 2013). |
10.3 | Amended and Restated Employment Agreement, dated as of May 7, 2013, by and between Valassis Communications, Inc. and Suzanne Brown. |
10.4 | Form of Change in Control Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 to Valassis' Form 8-K (SEC File No. 001-10991) filed on April 18, 2013). |
10.5 | Amended and Restated Valassis Communications, Inc. 2008 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit C to Valassis' Proxy Statement (SEC File No. 001-10991) filed on April 3, 2013). |
10.6 | Amended and Restated Valassis Communications, Inc. 2008 Senior Executives Bonus Plan (incorporated by reference to Exhibit D to Valassis' Proxy Statement (SEC File No. 001-10991) filed on April 3, 2013). |
31.1 | Section 302 Certification of Robert A. Mason |
31.2 | Section 302 Certification of Robert L. Recchia |
32.1 | Section 906 Certification of Robert A. Mason |
32.2 | Section 906 Certification of Robert L. Recchia |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase |
101.LAB* | XBRL Taxonomy Extension Label Linkbase |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase |
* | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included as Exhibits 101 hereto (i) shall not be deemed “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, (ii) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and (iii) otherwise are not subject to liability under those sections. |
1. | Employment and Term. |
(a) | The Corporation agrees to employ the Executive, and the Executive agrees to remain in the employ of the Corporation, in accordance with the terms and provisions of this Agreement for the period set forth below (the “Employment Period”). |
(b) | The Employment Period shall commence as of March 18, 1992 and shall continue until the close of business on December 31, 2015. |
2. | Duties and Powers of Executive. |
(a) | Position. The Executive shall serve as the Chief Operating Officer. This title is subject to change during the Employment Period. |
(b) | Duties. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote substantially his full business time and attention during normal business hours to the business and affairs of the Corporation and to the discharge of his duties hereunder. The Executive shall perform his duties hereunder subject to the customary oversight by the Chief Executive Officer and the Board of Directors of the Corporation (the “Board”). |
3. | Compensation. |
(a) | Salary. The Executive's Annual Base Salary (“Annual Base Salary”), payable on a biweekly basis, shall be at the annual rate of not less than $500,000. The Board may from time to time direct such upward adjustments in Annual Base Salary and other compensation and benefits as the Board deems to be necessary or desirable, including, without limitation, adjustments in order to reflect increases in the cost of living. Annual Base Salary shall not be reduced after any increase thereof. Any increase in Annual Base Salary and/or other compensation and benefits shall not serve to limit or reduce any other obligation of the Corporation under this Agreement. |
(b) | Annual Cash Bonus. Commencing on January 1, 2013, with respect to each six month period ending on June 30 and December 31 thereafter during the Employment Period, the Executive shall be paid by the Corporation a cash bonus on the following basis: (i) 50% in accordance with the performance targets (the “Targets”) set by the Board and/or the Compensation/Stock Option Committee (the “Committee”), and (ii) 50% in accordance with performance targets set by the President & Chief Executive Officer of the Corporation. Such targets may be semi-annual, annual or a combination of both. The target annual cash bonus will be 100% of the Annual Base Salary (the “Target Award”). The actual amount of the award shall range from zero to 130% of the Target Award based upon achievement of specified performance objectives as set by the Board, the Committee and/or the President & Chief Executive Officer, as applicable. Each such bonus shall be paid promptly after the end of the applicable performance period. |
(c) | Retirement, Incentive and Welfare Benefit Plans. During the Employment Period and so long as the Executive is employed by the Corporation, he shall be eligible to participate in all incentive, savings, retirement and welfare plans, practices, policies and programs including, without limitation, Valassis Employees' Profit Sharing Plan, its 401(k) Retirement Savings Plan, its Flex Plan, its death benefit plans, its disability benefit plans, and its medical, dental and health and welfare plans (the “Plans”) applicable generally to employees and/or other executives of the Corporation. |
(d) | Expenses. The Corporation agrees to reimburse the Executive for all expenses, including those for travel and entertainment, properly incurred by him in the performance of his duties hereunder in accordance with policies established from time to time by each Board and the Executive shall account to the Corporation for such expenses. Any reimbursements or payments under this subsection (d) shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of legal fees and expenses that the Corporation may require, but in no event will the reimbursement payment be made later that the end of the calendar year following the calendar year in which the expense is incurred. |
(e) | Fringe Benefits. During the Employment Period and so long as the Executive is employed by the Corporation, the Corporation shall furnish an automobile to the Executive and pay all of the related expenses for gasoline, insurance, maintenance and repairs, in each case according to the policy of the Corporation. Any amounts paid by the Corporation under this subsection (e) shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of legal fees and expenses that the Corporation may require, but in no event will the reimbursement payment be made later that the end of the calendar year following the calendar year in which the expense is incurred. |
(f) | Vacation and Other Absences. During the Employment Period and so long as the Executive is employed by the Corporation, he shall be entitled to paid vacation and such other paid absences whether for holidays, illness, personal time or any similar purposes, in accordance with the plans, policies, programs and practices of the Corporation in effect from time to time. |
(g) | Financial Planning. During the Employment Period, the Corporation shall furnish to the Executive financial planning, tax and estate preparation services. |
4. | Termination of Employment. |
(a) | Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Corporation determines in good faith that Disability (as defined below) of the Executive has occurred during the Employment Period, it may give to the Executive written notice in accordance with Section 9(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Corporation shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided, that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive's duties with the Corporation for a period of at least 180 days during any 12 month period as a result of incapacity due to mental or physical illness. |
(b) | By the Corporation for Cause. The Corporation may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean (i) the conviction of the Executive for the commission of a felony, (ii) action by the Executive involving willful malfeasance or gross negligence or failure to act by the Executive involving material nonfeasance, which, at the time of such willful malfeasance or gross negligence or material nonfeasance, has a material adverse effect on the Corporation or (iii) the failure by the Executive to follow directives of the Board (to the extent permitted by law) or the Chief Executive Officer of the Corporation or the failure to meet reasonable performance standards established by the Chief Executive Officer of the Corporation. |
(c) | Notice of Termination. Any termination by the Corporation for Cause shall be communicated by Notice of Termination to the Executive in accordance with Section 9(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination,” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined in Section 4(d)) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Corporation hereunder or preclude the Corporation from asserting such fact or circumstance in enforcing the Corporation's rights hereunder. |
(d) | Date of Termination. “Date of Termination” means (i) if the Executive's employment is terminated by the Corporation for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notify the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. |
(e) | Relocation. The Corporation reserves the right to require the Executive to relocate Executive's principal place of business to the Corporation's headquarters in Livonia, Michigan (“Headquarters”) and to relocate Executive's household to within 100 miles of Headquarters by providing reasonable notice of the requirement. Requiring such relocation shall not constitute a termination or other breach of this Agreement. Executive's refusal or failure to timely relocate in compliance with such notice of this relocation requirement shall constitute a voluntary resignation and the Executive shall not be entitled to severance pay or further compensation under this Agreement or otherwise. |
5. | Obligations of the Corporation upon Termination |
(a) | Termination Other Than for Cause. During the Employment Period, if the Corporation shall terminate the Executive's employment (other than in the case of a termination for Cause) or the Executive's employment shall terminate by reason of death or Disability (termination in any such case referred to as “Termination”): |
(i) | the Corporation shall pay to the Executive in a lump sum in cash the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid and (2) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “Accrued Obligations”). The amounts specified in this Section 5(a)(i) shall be paid within 30 days after the Date of Termination; and |
(ii) | in the event of Termination other than by reason of the Executive's death or Disability, then beginning on the biweekly payment date next following the Termination and on each biweekly payment date thereafter until the end of the Employment Period (the period from such Date of Termination until the end of the Employment Period herein called the “Severance Period”), the Corporation shall pay to the Executive an amount equal to the biweekly installment of the Executive's rate of Annual Base Salary in effect as of such Date of Termination; and |
(iii) | in the event of Termination other than by reason of the Executive's death or Disability, the Corporation shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination an amount equal to the Executive's then current maximum annual bonus opportunity; and |
(iv) | in the event of Termination other than by reason of the Executive's death or Disability, then, during the Severance Period, the Corporation shall continue medical and welfare benefits on a monthly basis to the Executive and/or the Executive's family at least equal to those which would have been provided if the Executive's employment had not been terminated, such benefits to be in accordance with the most favorable medical and welfare benefit plans, practices, programs or policies (the “M&W Plans”) of the Corporation as in effect and applicable generally to other senior executives of the Corporation and their families during the 90-day period immediately preceding the Date of Termination or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other senior executives of the Corporation (but on a prospective basis only unless, and then only to the extent, such more favorable M&W Plans are by their terms retroactive), provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the benefits under the M&W Plans shall be reduced as provided in Section 6 of this Agreement. For purposes of determining eligibility of the Executive for benefits under the M&W Plans, the Executive shall be considered to have remained employed until the end of the Severance Period. The parties intend that continued coverage under the M&W Plans shall not constitute a 'deferral of compensation' under Treas. Reg. Section 1.409A- 1 (b) during the period the Executive would be entitled to continuation coverage under Section 4980B (COBRA) (typically 18 months) or during any period in which such continued coverage qualifies as a 'limited payment' of an 'in kind' benefit under Treas. Reg. Section 1.409A-l(b)(9)(v)(C) and (D). Any portion of the continued coverage under the M&W Plans that is subject to Section 409A of the Code is intended to qualify as a 'reimbursement or in-kind benefit plan' under Treas. Reg. Section 1.409A-3(i)(1)(iv). If the Corporation reimburses the Executive for the amount of any benefit under this subsection (iv), such reimbursement shall be made on or before the last day of the Executive's taxable year following the taxable year in which the expense was incurred. In no event shall the amount that the Corporation pays for any such benefit in any one year affect the amount that it will pay in any other year, and in no event shall the benefits described in this paragraph be subject to liquidation or exchange. |
(v) | Notwithstanding the payment schedules contained elsewhere in this Section 5, to the extent necessary to comply with the requirements of Section 409A of the Code, if the Executive is a 'specified employee' (as defined below) at the time of his termination of employment, the payments under Section 5(a)(ii) shall not be made before the date which is six (6) months and one (1) day after the date of the Executive's termination of employment (or, if earlier, the date of his death). For purposes of the preceding sentence, a 'specified employee' shall have the meaning set forth in Section 1.409A-1(i) of the Final Regulations under Section 409A of the Code. As provided by Section 409A of the Code and the regulations thereunder, however, no delay shall apply to payments under Section 5(a)(ii) of the Agreement to the extent the aggregate amount of such payments does not exceed the lesser of: two (2) times the Executive's annualized compensation based upon his annual rate of pay for services provided to the Corporation for the calendar year preceding the Corporation's taxable year in which the Executive has a 'separation from service' (as such term is used in Section 409A of the Code) or two (2) times the limit on compensation set forth in Section 401(a)(l7) of the Code for the year in which the Executive has a separation from service (the 'Designated Compensation Amount'). Any (1) amounts otherwise payable under the terms of Section 5(a)(ii) during the six (6) month period beginning on the date of the Executive's termination of employment that are in excess of the Designated Compensation Amount and (2) other payments under this Section 5 that are delayed as provided for in this Section 5(c) will be paid in full within thirty (30) days after the end of such six (6) month period, with the remaining payments made on the schedule provided in the applicable subsection of this Section 5. |
(b) | Termination by the Corporation for Cause. Subject to the provisions of Section 6 of this Agreement, if the Executive's employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under this Agreement other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. |
6. | Full Settlement; Mitigation. |
7. | Confidential Information and Competitive Conduct. |
(a) | Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all secret, confidential information, knowledge or data relating to the Corporation or any of its affiliated companies, and its respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation or any of its affiliated companies and which shall not have been or now or hereafter have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During the Employment Period and for a period of 5 years thereafter, the Executive shall not, without the prior written consent of the Corporation or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by it. |
(b) | Covenant Not to Compete or Solicit. During the Employment Period, the Executive shall not offer or sell any products or services that compete for sales promotion dollars in any market with the businesses of the Corporation, nor shall he render services to any firm, person or corporation so competing with the Corporation, nor shall he have any interest, direct or indirect, in any business that is so competing with the businesses of the Corporation; provided, however, that ownership of five percent or less of any class of debt or equity securities which are publicly traded securities shall not be a violation of this covenant. The Corporation, at its sole option and in its sole discretion, may choose to subject the Executive to additional non-competition and non-solicitation provisions for up to two additional years (which may be exercised in separate one year periods) after the end of the Employment Period (or up to two additional years after the Date of Termination in the event of the termination of this Agreement prior to the end of the Employment Period) so long as the Corporation shall pay to the Executive with respect to each such additional year as to which it has exercised its option an amount equal to the Executive's then Annual Base Salary in biweekly installments during such year. The first year of such extension shall be exercised (if at all) at the option of the Corporation upon written notice to the Executive not later than 60 days prior to the end of the Employment Period (or within ten business days after the Date of Termination in the event of the termination of this Agreement prior to the end of the Employment Period). The second year of such extension shall be exercised (if at all) at the option of the Corporation upon written notice to the Executive not later than 60 days prior to the end of the exercised first year of such extension. So long as the Executive is employed hereunder, and for any additional period of time described in the preceding sentences of this Section 7(b), the Executive shall not, directly or indirectly, (i) solicit any employee of the Corporation or of any of its affiliated companies with a view to inducing or encouraging such employee to leave the employ of the Corporation or any of its affiliated companies for the purpose of being hired by the Executive, any employer affiliated with the Executive or any other organization, or (ii) solicit, take away, attempt to take away, or otherwise interfere with the Corporation's or its affiliated companies business relationship with any of its respective customers. |
(c) | In the event of a breach or threatened breach of this Section 7, the Executive agrees that the Corporation shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate and insufficient. |
8. | Successors. |
(a) | This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. |
(b) | This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. |
9. | Miscellaneous. |
(a) | This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of such amendment, modification, repeal, waiver, extension or discharge is sought. No person, other than pursuant to a resolution of the Board or a committee thereof, shall have authority on behalf of the Corporation to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto. |
If to the Executive: |
Ronald L. Goolsby |
c/o Valassis Communications, Inc. |
19975 Victor Parkway |
Livonia, MI 41852 |
If to the Corporation: |
Valassis Communications, Inc. |
19975 Victor Parkway |
Livonia, MI 48152 |
Attention: Todd L. Wiseley, Esq. |
(c) | The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. |
(d) | The Corporation may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. |
(e) | This instrument contains the entire agreement of the Executive and the Corporation with respect to the subject matter hereof and all promises, representations, understandings, arrangements and prior agreements are merged herein and superseded hereby. |
(f) | The parties intend that the payments and benefits provided for in this Agreement to either be exempt from Section 409A of the Code or be provided in a manner that complies with Section 409A of the Code. Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a 'separation from service' from the Corporation within the meaning of Section 409A of the Code (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-l(h)(1)). |
VALASSIS COMMUNICATIONS, INC. |
By: /s/ Todd L. Wiseley |
Name: Todd L. Wiseley |
Title: General Counsel, Executive Vice President, Administration and Secretary |
/s/ Ronald L. Goolsby |
Ronald L. Goolsby |
1. | Employment and Term. |
(a) | The Corporation agrees to employ the Executive, and the Executive agrees to remain in the employ of the Corporation, in accordance with the terms and provisions of this Agreement for the period set forth below (the “Employment Period”). |
(b) | The Employment Period shall commence as of September 6, 2001 and shall continue until the close of business on June 30, 2015. |
2. | Duties and Powers of Executive. |
(a) | Position. During the Employment Period, the Executive shall serve as Executive Vice President, Sales and Marketing. This title is subject to change during the Employment Period. |
(b) | Duties. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote substantially her full business time and attention during normal business hours to the business and affairs of the Corporation and to the discharge of her duties hereunder. The Executive shall perform her duties hereunder subject to the customary oversight by the Chief Executive Officer and the Board of Directors of the Corporation (the “Board”). |
3. | Compensation. |
(a) | Salary. The Executive's Annual Base Salary (“Annual Base Salary”), payable on a biweekly basis, shall be at the annual rate of not less than $319,300. The Board may from time to time direct such upward adjustments in Annual Base Salary and other compensation and benefits as the Board deems to be necessary or desirable, including, without limitation, adjustments in order to reflect increases in the cost of living. Annual Base Salary shall not be reduced after any increase thereof. Any increase in Annual Base Salary and/or other compensation and benefits shall not serve to limit or reduce any other obligation of the Corporation under this Agreement. |
(b) | Commencing on January 1, 2013, with respect to each six month period ending on June 30 and December 31 thereafter during the Employment Period, the Executive shall be paid by the Corporation a cash bonus on the following basis: (i) 50% in accordance with the performance targets (the “Targets”) set by the Board and/or the Compensation/Stock Option Committee (the “Committee”), and (ii) 50% in accordance with performance targets set by the President & Chief Executive Officer of the Corporation. Such targets may be semi-annual, annual or a combination of both. The target annual cash bonus will be 100% of the Annual Base Salary (the “Target Award”). The actual amount of the award shall range from zero to 130% of the Target Award based upon achievement of specified performance objectives as set by the Board, the Committee and/or the President & Chief Executive Officer, as applicable. Each such bonus shall be paid promptly after the end of the applicable performance period. |
(c) | Retirement and Welfare Benefit Plans. During the Employment Period and so long as the Executive is employed by the Corporation, she shall be eligible to participate in all savings, retirement and welfare plans, practices, policies and programs including, without limitation, Valassis Employees' Profit Sharing Plan, its 401(k) Retirement Savings Plan, its Flex Plan, its death benefit plans, its disability benefit plans, and its medical, dental and health and welfare plans (the “Plans”) applicable generally to employees and/or other executives of the Corporation. |
(d) | Expenses. The Corporation agrees to reimburse the Executive for all expenses, including those for travel and entertainment, properly incurred by her in the performance of her duties hereunder in accordance with policies established from time to time by the Board, and the Executive shall account to the Corporation for such expenses. Any such reimbursements shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of expenses that the Corporation may require, but in no event will the reimbursement payment be made later than the end of the calendar year following the calendar year in which the expense is incurred. |
(e) | Fringe Benefits. During the Employment Period, the Corporation shall furnish an automobile to the Executive and pay all of the related expenses for gasoline, insurance, maintenance and repairs, in accordance with the policies of the Corporation in effect from time to time. Any amounts paid by the Corporation hereunder shall be made within thirty (30) days after the proper delivery by the Executive of such evidence of expenses that the Corporation may require, but in no event will the reimbursement payment be made later than the end of the calendar year following the calendar year in which the expense is incurred. |
(f) | Vacation and Other Absences. During the Employment Period and so long as the Executive is employed by the Corporation, she shall be entitled to paid vacation and such other paid absences whether for holidays, illness, personal time or any similar purposes, in accordance with the plans, policies, programs and practices of the Corporation in effect from time to time. |
(g) | Financial Planning. During the Employment Period, the Corporation shall furnish to the Executive financial planning, tax and estate preparation services. |
4. | Termination of Employment. |
(a) | Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Corporation determines in good faith that Disability (as defined below) of the Executive has occurred during the Employment Period, it may give to the Executive written notice in accordance with Section 9(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Corporation shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive's duties with the Corporation for a period of at least 180 days during any 12-month period as a result of incapacity due to mental or physical illness. |
(b) | By the Corporation for Cause. The Corporation may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean (i) the conviction of the Executive for the commission of a felony; (ii) action by the Executive involving willful malfeasance or gross negligence or failure to act by the Executive involving material nonfeasance, which, at the time of such willful malfeasance or gross negligence or material nonfeasance, has a material adverse effect on the Corporation; or (iii) the failure by the Executive to follow directives of the Chief Executive Officer of the Corporation or the failure to meet reasonable performance standards established by the Chief Executive Officer of the Corporation. |
(c) | Notice of Termination. Any termination by the Corporation for Cause shall be communicated by Notice of Termination to the Executive in accordance with Section 9(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and (iii) if the Date of Termination (as defined in Section 4(d)) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporation to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Corporation hereunder or preclude the Corporation from asserting such fact or circumstance in enforcing the Corporation's rights hereunder. |
(d) | Date of Termination. “Date of Termination” means (i) if the Executive's employment is terminated by the Corporation for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (ii) if the Executive's employment is terminated by the Corporation other than for Cause or other than by reason of death or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination; and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. |
5. | Obligations of the Corporation Upon Termination. |
(a) | Termination Other Than for Cause. During the Employment Period, if the Corporation shall terminate the Executive's employment (other than in the case of a termination for Cause) or the Executive's employment shall terminate by reason of death or Disability (termination in any such case referred to as “Termination”): |
(i) | the Corporation shall pay to the Executive in a lump sum in cash the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid and (2) any accrued vacation pay, to the extent not theretofore paid. To the extent not theretofore paid, the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “Accrued Obligations.” The amounts specified in this Section 5(a)(i) shall be paid within 30 days after the Date of Termination; and |
(ii) | in the event of Termination other than by reason of the Executive's death or Disability or other than for Cause, then beginning on the biweekly payment date next following the Termination and on each biweekly payment date thereafter until the end of the Employment Period (the period from such Date of Termination until the end of the Employment Period herein called the “Severance Period”), the Corporation shall pay to the Executive an amount equal to the biweekly installment of the Executive's Annual Base Salary in effect as of such Date of Termination; and |
(iii) | in the event of Termination other than by reason of the Executive's death or Disability, the Corporation shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination an amount equal to the Executive's then current maximum annual bonus opportunity; and |
(iv) | in the event of Termination other than by reason of the Executive's death or Disability or other than for Cause, then, during the Severance Period, the Corporation shall continue medical and welfare benefits on a monthly basis to the Executive and/or the Executive's family at least equal to those which would have been provided if the Executive's employment had not been terminated, such benefits to be in accordance with the most favorable medical and welfare benefit plans, practices, programs or policies (the “M&W Plans”) of the Corporation as in effect and applicable generally to other executives of the Corporation and their families during the 90-day period immediately preceding the Date of Termination or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other executives of the Corporation (but on a prospective basis only unless, and then only to the extent, such more favorable M&W Plans are by their terms retroactive); provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the benefits under the M&W Plans shall be reduced as provided in Section 6 of this Agreement. For purposes of determining eligibility of the Executive for benefits under the M&W Plans, the Executive shall be considered to have remained employed until the end of the Severance Period. The parties intend that continued coverage under the M&W Plans shall not constitute a 'deferral of compensation' under Treas. Reg. Section 1.409A- 1 (b) during the period the Executive would be entitled to continuation coverage under Section 4980B (COBRA) (typically 18 months) or during any period in which such continued coverage qualifies as a 'limited payment' of an 'in kind' benefit under Treas. Reg. Section 1.409A-l(b)(9)(v)(C) and (D). Any portion of the continued coverage under the M&W Plans that is subject to Section 409A of the Code is intended to qualify as a 'reimbursement or in-kind benefit plan' under Treas. Reg. Section 1.409A-3(i)(1)(iv). If the Corporation reimburses the Executive for the amount of any benefit under this subsection (iv), such reimbursement shall be made on or before the last day of the Executive's taxable year following the taxable year in which the expense was incurred. In no event shall the amount that the Corporation pays for any such benefit in any one year affect the amount that it will pay in any other year, and in no event shall the benefits described in this paragraph be subject to liquidation or exchange. |
(v) | Notwithstanding the payment schedules contained elsewhere in this Section 5, to the extent necessary to comply with the requirements of Section 409A of the Code, if the Executive is a 'specified employee' (as defined below) at the time of her termination of employment, the payments under Section 5(a)(ii) shall not be made before the date which is six (6) months and one (1) day after the date of the Executive's termination of employment (or, if earlier, the date of her death). For purposes of the preceding sentence, a 'specified employee' shall have the meaning set forth in Section 1.409A-1(i) of the Final Regulations under Section 409A of the Code. As provided by Section 409A of the Code and the regulations thereunder, however, no delay shall apply to payments under Section 5(a)(ii) of the Agreement to the extent the aggregate amount of such payments does not exceed the lesser of: two (2) times the Executive's annualized compensation based upon her annual rate of pay for services provided to the Corporation for the calendar year preceding the Corporation's taxable year in which the Executive has a 'separation from service' (as such term is used in Section 409A of the Code) or two (2) times the limit on compensation set forth in Section 401(a)(l7) of the Code for the year in which the Executive has a separation from service (the 'Designated Compensation Amount'). Any (1) amounts otherwise payable under the terms of Section 5(a)(ii) during the six (6) month period beginning on the date of the Executive's termination of employment that are in excess of the Designated Compensation Amount and (2) other payments under this Section 5 that are delayed as provided for in this Section 5(c) will be paid in full within thirty (30) days after the end of such six (6) month period, with the remaining payments made on the schedule provided in the applicable subsection of this Section 5. |
(b) | Termination by the Corporation for Cause. If the Executive's employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under this Agreement other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive (if any), in each case to the extent theretofore unpaid. |
(c) | The provisions of this Section 5 are subject to the provisions of Section 6 of this Agreement. |
6. | Full Settlement; Mitigation. |
7. | Confidential Information and Competitive Conduct. |
(a) | Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all secret, confidential information, knowledge or data relating to the Corporation and/or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation or any of its affiliated companies and which shall not have been or now or hereafter have become public knowledge (other than by acts (direct or indirect) by the Executive or representatives of the Executive in violation of this Agreement). During the Employment Period and for a period of five years thereafter (or five years after the Date of Termination in the event of the termination of this Agreement prior to the end of the Employment Period), the Executive shall not, without the prior written consent of the Corporation or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by them. |
(b) | Covenant Not to Compete or Solicit. During the Employment Period, the Executive shall not offer or sell any products or services that compete for sales promotion dollars in any market with the businesses of the Corporation, nor shall she render services to any firm, person or corporation so competing with the Corporation, nor shall she have any interest, direct or indirect, in any business that is so competing with the businesses of the Corporation; provided, however, that ownership of five percent or less of any class of debt or equity securities which are publicly traded securities shall not be a violation of this covenant. The Corporation, at its sole option and in its sole discretion, may choose to subject the Executive to additional non-competition and non-solicitation provisions for up to two additional years (which may be exercised in separate one year periods) after the end of the Employment Period (or up to two additional years after the Date of Termination in the event of the termination of this Agreement prior to the end of the Employment Period) so long as the Corporation shall pay to the Executive with respect to each such additional year as to which it has exercised its option an amount equal to the Executive's then Annual Base Salary in biweekly installments during such year. The first year of such extension shall be exercised (if at all) at the option of the Corporation upon written notice to the Executive not later than 60 days prior to the end of the Employment Period (or within ten business days after the Date of Termination in the event of the termination of this Agreement prior to the end of the Employment Period). The second year of such extension shall be exercised (if at all) at the option of the Corporation upon written notice to the Executive not later than 60 days prior to the end of the exercised first year of such extension. So long as the Executive is employed hereunder, and for any additional period of time described in the preceding sentences of this Section 7(b), the Executive shall not, directly or indirectly, (i) solicit any employee of the Corporation or of any of its affiliated companies with a view to inducing or encouraging such employee to leave the employ of the Corporation or any of its affiliated companies for the purpose of being hired by the Executive, any employer affiliated with the Executive or any other organization, or (ii) solicit, take away, attempt to take away, or otherwise interfere with the Corporation's or its affiliated companies business relationship with any of its respective customers. |
(c) | In the event of a breach or threatened breach of this Section 7, the Executive agrees that the Corporation shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate and insufficient. |
8. | Successors. |
(a) | This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution, and any such assignment or attempted assignment other than as expressly permitted hereunder shall be null and void. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representative. |
(b) | This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. |
9. | Miscellaneous. |
(a) | The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of such amendment, modification, repeal, waiver, extension or discharge is sought. No person, other than pursuant to a resolution of the Board or a committee thereof, shall have authority on behalf of the Corporation to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto. |
(b) | All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: |
If to the Executive: |
Suzanne C. Brown |
c/o Valassis Communications, Inc. |
19975 Victor Parkway |
Livonia, MI 41852 |
If to the Corporation: |
Valassis Communications, Inc. |
19975 Victor Parkway |
Livonia, MI 48152 |
Attention: Todd L. Wiseley, Esq. |
(c) | The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. |
(d) | The Corporation may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. |
(e) | This instrument contains the entire agreement of the Executive and the Corporation with respect to the subject matter hereof and subject to any Non-Qualified Stock Option Agreement(s) previously entered into between the Executive and the Corporation, all promises, representations, understandings, arrangements and prior agreements are merged herein and superseded hereby. |
(f) | The parties intend that the payments and benefits provided for in this Agreement to either be exempt from Section 409A of the Code or be provided in a manner that complies with Section 409A of the Code. Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a 'separation from service' from the Corporation within the meaning of Section 409A of the Code (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-l(h)(1)). |
VALASSIS COMMUNICATIONS, INC. |
By: /s/ Todd L. Wiseley |
Name: Todd L. Wiseley |
Title: General Counsel, Executive Vice President, Administration and Secretary |
/s/ Suzanne Brown |
Suzanne Brown |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Robert A. Mason | |
Robert A. Mason Chief Executive Officer |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Robert L. Recchia | |
Robert L. Recchia Chief Financial Officer |
Dated: | May 7, 2013 | /s/ Robert A. Mason |
Robert A. Mason Chief Executive Officer |
Dated: | May 7, 2013 | /s/ Robert L. Recchia |
Robert L. Recchia Chief Financial Officer |
Domestic and Foreign Long-Lived Assets (Property, Plant and Equipment, Net) (Detail) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
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Dec. 31, 2012
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Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Property, plant and equipment, net (Note 1) | $ 113,602 | $ 125,832 |
UNITED STATES
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Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Property, plant and equipment, net (Note 1) | 105,800 | 118,100 |
Foreign
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Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Property, plant and equipment, net (Note 1) | $ 7,800 | $ 7,700 |
Long-Term Debt (Detail) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
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Dec. 31, 2012
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Debt Instrument [Line Items] | ||
Total Debt | $ 583,811 | $ 587,561 |
Current portion, long-term debt | 26,250 | 22,500 |
Long-term debt | 557,561 | 565,061 |
Senior Secured Revolving Credit Facility
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Debt Instrument [Line Items] | ||
Total Debt | 50,000 | 50,000 |
Senior Secured Term Loan A
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Debt Instrument [Line Items] | ||
Total Debt | 273,750 | 277,500 |
Senior Secured Convertible Notes due 2033, net of discount
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Debt Instrument [Line Items] | ||
Total Debt | 61 | 61 |
Senior Notes due 2021
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Debt Instrument [Line Items] | ||
Debt Instrument, Interest Rate, Stated Percentage | 6.625% | 6.625% |
Total Debt | $ 260,000 | $ 260,000 |
REPURCHASES OF COMMON STOCK (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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REPURCHASES OF COMMON STOCK | The following table summarizes our repurchases of common stock during the indicated periods:
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DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |||||||||
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Mar. 31, 2013
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Dec. 31, 2012
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Mar. 31, 2013
Currency, Mexican Pesos
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Mar. 31, 2013
Currency, Polish Zloty
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Jun. 30, 2012
Interest Rate Swap with Three Month LIBOR at 2.005% Plus Applicable Margin
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Dec. 17, 2009
Interest Rate Swap with Three Month LIBOR at 2.005% Plus Applicable Margin
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Jul. 06, 2011
Interest Rate Swap with Three Month LIBOR at 1.8695% Plus Applicable Margin
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Jul. 06, 2011
Interest Rate Swap with Three Month LIBOR at 1.8695% Plus Applicable Margin
July 2011 Through September 2013
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Jul. 06, 2011
Interest Rate Swap with Three Month LIBOR at 1.8695% Plus Applicable Margin
September 2013 Through September 2014
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Jul. 06, 2011
Interest Rate Swap with Three Month LIBOR at 1.8695% Plus Applicable Margin
September 2014 Through June 2015
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Derivative [Line Items] | ||||||||||
Notional amount of derivatives | $ 185.8 | $ 191.7 | $ 300.0 | $ 186.3 | ||||||
Fixed interest rate under swap agreement | 2.005% | 1.8695% | ||||||||
Effective Interest Rate of Variable Rate Debt | 4.255% | 3.6195% | ||||||||
Amortization of Notional Amount | 40.0 | 2.8 | 5.6 | 8.4 | ||||||
Minimum notional amount of interest rate swap at the date of expiration | 100.0 | |||||||||
Purchase commitment to be settled with foreign currency, dollar value | 7.8 | 0.2 | ||||||||
Long-term Borrowing, Amount of Carrying Value Exceeding Fair Value | $ 15.2 | $ 12.6 |
Accrued Expenses (Detail) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
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Dec. 31, 2012
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Schedule of Accrued Liabilities [Line Items] | ||
Accrued interest | $ 3,046 | $ 7,275 |
Accrued compensation and benefits | 30,658 | 50,305 |
Dividends Payable, Current | 12,024 | 12,011 |
Other accrued expenses | 33,433 | 37,876 |
Accrued expenses | $ 79,161 | $ 107,467 |
Domestic and Foreign Revenues (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
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Mar. 31, 2013
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Mar. 31, 2012
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Segment Reporting Information [Line Items] | ||
Revenues | $ 482,522 | $ 518,585 |
UNITED STATES
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Segment Reporting Information [Line Items] | ||
Revenues | 471,600 | 506,200 |
Foreign
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Segment Reporting Information [Line Items] | ||
Revenues | $ 10,900 | $ 12,400 |
LONG-TERM DEBT
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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LONG-TERM DEBT | LONG-TERM DEBT Long-term debt included on the unaudited condensed consolidated balance sheets consisted of:
Senior Secured Credit Facility General On June 27, 2011, we entered into a senior secured credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders jointly arranged by J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBS Securities Inc. (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility and related loan documents replaced and terminated our prior credit agreement, dated as of March 2, 2007, as amended (the “Prior Senior Secured Credit Facility”), by and among Valassis, Bear Stearns Corporate Lending Inc., as Administrative Agent, and a syndicate of lenders jointly arranged by Bear, Stearns & Co. Inc. and Banc of America Securities LLC. In connection with the termination of the Prior Senior Secured Credit Facility, all obligations and rights under the related guarantee, security and collateral agency agreement, dated as of March 2, 2007, as amended (the “Prior Security Agreement”), by Valassis and certain of its domestic subsidiaries signatory thereto, as grantors, in favor of Bear Stearns Corporate Lending Inc., in its capacity as collateral agent for the benefit of the Secured Parties (as defined in the Prior Security Agreement), were also simultaneously terminated. The Senior Secured Credit Facility consists of:
All borrowings under our Senior Secured Credit Facility, including, without limitation, amounts drawn under the Revolving Line of Credit, are subject to the satisfaction of customary conditions, including absence of a default and accuracy of representations and warranties. As of March 31, 2013, we had approximately $42.6 million available under the Revolving Line of Credit portion of our Senior Secured Credit Facility (after giving effect to the reductions in availability pursuant to $7.4 million in standby letters of credit outstanding as of March 31, 2013). Interest and Fees Borrowings under our Senior Secured Credit Facility bear interest, at our option, at either the alternate base rate (defined as the higher of the prime rate announced by the Administrative Agent, the federal funds effective rate or one-month LIBOR, in each case, plus an applicable interest rate margin) (the “Base Rate”) or at the Eurodollar Rate (one-, two-, three- or six-month LIBOR, at our election, as defined in the credit agreement governing the Senior Secured Credit Facility), except for borrowings made in alternate currencies which may not accrue interest based upon the alternate base rate, in each case, plus an applicable interest rate margin. The applicable margins are currently 0.75% per annum for Base Rate loans and 1.75% per annum for Eurodollar Rate loans. The margins applicable to the borrowings under our Senior Secured Credit Facility may be adjusted based on our consolidated leverage ratio, with 1.00% being the maximum Base Rate margin and 2.00% being the maximum Eurodollar Rate margin. See Note 7, Derivative Financial Instruments and Fair Value Measurements, for discussion regarding our various interest rate swap agreements. Guarantees and Security Our Senior Secured Credit Facility is guaranteed by certain of our existing and future domestic restricted subsidiaries pursuant to a Guarantee and Collateral Agreement. In addition, our obligations under our Senior Secured Credit Facility and the guarantee obligations of the subsidiary guarantors are secured by first priority liens on substantially all of our and our subsidiary guarantors’ present and future assets and by a pledge of all of the equity interests in our domestic subsidiary guarantors and 65% of the capital stock of certain of our existing and future foreign subsidiaries. The Guarantee and Collateral Agreement also secures our Senior Secured Convertible Notes due 2033 on an equal and ratable basis with the indebtedness under our Senior Secured Credit Facility to the extent required by the indenture governing such notes. Prepayments The Senior Secured Credit Facility also contains a requirement that we make mandatory principal prepayments on the Term Loan A and Revolving Line of Credit in certain circumstances, including, without limitation, with 100% of the aggregate net cash proceeds from certain asset sales, casualty events or condemnation recoveries (in each case, to the extent not otherwise used for reinvestment in our business or related business and subject to certain other exceptions). The Senior Secured Credit Facility further provides that, subject to customary notice and minimum amount conditions, we may make voluntary prepayments without payment of premium or penalty. Covenants Subject to customary and otherwise agreed upon exceptions, our Senior Secured Credit Facility contains affirmative and negative covenants, including, but not limited to:
Our Senior Secured Credit Facility also requires us to comply with:
The following table shows the required and actual financial ratios under our Senior Secured Credit Facility as of March 31, 2013:
In addition, we are required to give notice to the administrative agent and the lenders under our Senior Secured Credit Facility of defaults under the facility documentation and other material events, make any new wholly-owned domestic subsidiary (other than an immaterial subsidiary) a subsidiary guarantor and pledge substantially all after-acquired property as collateral to secure our and our subsidiary guarantors’ obligations in respect of the facility. Events of Default Our Senior Secured Credit Facility contains customary events of default, including upon a change in control. If such an event of default occurs, the lenders under our Senior Secured Credit Facility would be entitled to take various actions, including in certain circumstances increasing the effective interest rate and accelerating the amounts due under our Senior Secured Credit Facility. 6 5/8% Senior Notes due 2021 On January 28, 2011, we issued in a private placement $260.0 million aggregate principal amount of our 6 5/8% Senior Notes due 2021 (the “2021 Notes”). Interest on the 2021 Notes is payable every six months on February 1 and August 1. The 2021 Notes are fully and unconditionally guaranteed, jointly and severally, by substantially all of our existing and future domestic restricted subsidiaries on a senior unsecured basis. We capitalized related debt issuance costs of approximately $5.1 million, which are being amortized over the term of the 2021 Notes. In July 2011, in accordance with the terms of the registration rights agreement between us and the initial purchasers of the 2021 Notes, we completed an exchange offer to exchange the original notes issued in the private placement for a like principal amount of exchange notes registered under the Securities Act of 1933, as amended. An aggregate principal amount of $260.0 million, or 100%, of the original notes were exchanged for exchange notes in the exchange offer. The exchange notes are substantially identical to the original notes, except that the exchange notes are not subject to certain transfer restrictions. The 2021 Notes were issued under an indenture with Wells Fargo Bank, National Association, as trustee (the “2021 Indenture”). Subject to a number of exceptions, the 2021 Indenture restricts our ability and the ability of our restricted subsidiaries (as defined in the 2021 Indenture) to incur or guarantee additional indebtedness, transfer or sell assets, make certain investments, pay dividends or make distributions or other restricted payments, create certain liens, merge or consolidate, repurchase stock, create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us and enter into transactions with affiliates. We may redeem all or a portion of the 2021 Notes at our option at any time prior to February 1, 2016, at a redemption price equal to 100% of the principal amount of 2021 Notes to be redeemed, plus a make-whole premium as described in the 2021 Indenture, plus accrued and unpaid interest to the redemption date, if any. At any time on or after February 1, 2016, we may redeem all or a portion of the 2021 Notes at our option at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on February 1 of the years set forth below:
In addition, we must pay accrued and unpaid interest to the redemption date, if any. On or prior to February 1, 2014, we may also redeem at our option up to 35% of the principal amount of the outstanding 2021 Notes with the proceeds of certain equity offerings at the redemption price specified in the 2021 Indenture, plus accrued and unpaid interest to the date of redemption, if any. Upon the occurrence of a change of control, as defined in the 2021 Indenture, we must make a written offer to purchase all of the 2021 Notes for cash at a purchase price equal to 101% of the principal amount of the 2021 Notes, plus accrued and unpaid interest to the date of repurchase, if any. Additional Provisions The indenture governing the Senior Secured Convertible Notes due 2033 contains a cross-default provision which becomes applicable if we default under any mortgage, indenture or instrument evidencing indebtedness for money borrowed by us and the default results in the acceleration of such indebtedness prior to its express maturity, and the principal amount of any such accelerated indebtedness aggregates in excess of $25.0 million. The 2021 Indenture contains a cross-default provision which becomes applicable if we (a) fail to pay the stated principal amount of any of our indebtedness at its final maturity date, or (b) default under any of our indebtedness and the default results in the acceleration of indebtedness, and, in each case, the principal amount of any such indebtedness, together with the principal amount of any other such indebtedness under which there has been a payment default or the maturity of which has been so accelerated, aggregates $50.0 million or more. Our credit agreement contains a cross-default provision which becomes applicable if we (a) fail to make any payment under any indebtedness for money borrowed by us (other than the obligations under such credit agreement) in an aggregate outstanding principal amount of at least $50.0 million or, (b) otherwise default under any such indebtedness, or trigger another event which causes such indebtedness to become due or to be repurchased, prepaid, defeased or redeemed or become subject to an offer to repurchase, prepay, defease or redeem such indebtedness prior to its stated maturity. Repurchases of Debt Subject to applicable limitations in our Senior Secured Credit Facility and indentures, we may from time to time repurchase our debt in the open market, through tender offers, through exchanges for debt or equity securities, in privately negotiated transactions or otherwise. Covenant Compliance As of March 31, 2013, we were in compliance with all of our indenture and Senior Secured Credit Facility covenants. |