10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2011

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-10991

VALASSIS COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	38-2760940
(State or Other Jurisdiction of	(IRS Employer Identification Number)
Incorporation or Organization)

19975 Victor Parkway
Livonia, Michigan 48152
(Address of Principal Executive Offices)

Registrant’s Telephone Number: (734) 591-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):

Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer þ Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o     No þ

As of August 3, 2011, there were 47,107,690 shares of the Registrant’s Common Stock outstanding.

VALASSIS COMMUNICATIONS, INC.
Index to Quarterly Report on Form 10-Q

Quarter Ended June 30, 2011

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010		1
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010		2
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2011 and 2010		3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010		4
Notes to Condensed Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. Controls and Procedures		35
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 3. Defaults Upon Senior Securities		37
Item 4. Removed and Reserved		37
Item 5. Other Information		37
Item 6. Exhibits		38
Signature		39
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALASSIS COMMUNICATIONS, INC.
Condensed Consolidated Balance Sheets
(U.S. dollars in thousands)
(unaudited)

	June 30,			December 31,
	2011			2010
Assets
Current assets:
Cash and cash equivalents	$	118,962		$	245,935
Accounts receivable, net (Note 1)		411,423			459,952
Inventories (Note 1)		39,219			41,987
Prepaid expenses and other		62,622			38,657
Total current assets		632,226			786,531
Property, plant and equipment, net (Note 1)		162,399			175,567
Goodwill (Note 2)		636,471			636,471
Other intangible assets, net (Note 2)		227,506			233,817
Other assets		17,573			13,272
Total assets	$	1,676,175		$	1,845,658
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion long-term debt (Note 3)	$	15,000		$	7,058
Accounts payable		320,193			329,602
Progress billings		44,615			53,001
Accrued expenses (Note 4)		85,589			99,612
Total current liabilities		465,397			489,273
Long-term debt (Note 3)		595,060			699,169
Deferred income taxes		80,003			78,764
Other non-current liabilities		45,830			49,568
Total liabilities		1,186,290			1,316,774
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock ($0.01 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2011 and December 31, 2010)		—			—
Common stock ($0.01 par value; 100,000,000 shares authorized; 65,371,689 and 65,283,749 shares issued at June 30, 2011 and December 31, 2010, respectively; 47,079,040 and 50,361,749 shares outstanding at June 30, 2011 and December 31, 2010, respectively)		654			653
Additional paid-in capital		123,898			124,988
Retained earnings		959,799			908,136
Accumulated other comprehensive earnings		6,776			3,299
Treasury stock, at cost (18,292,649 and 14,922,000 shares at June 30, 2011 and December 31, 2010, respectively)		(601,242	)		(508,192	)
Total stockholders’ equity		489,885			528,884
Total liabilities and stockholders’ equity	$	1,676,175		$	1,845,658

See accompanying notes to condensed consolidated financial statements.

1

VALASSIS COMMUNICATIONS, INC.
Condensed Consolidated Statements of Income
(U.S. dollars in thousands, except per share data)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenues	$	565,252		$	579,950		$	1,112,231		$	1,129,952
Costs and expenses:
Cost of sales		418,040			423,765			826,617			827,154
Selling, general and administrative		80,831			92,663			159,258			183,621
Amortization expense		3,155			3,155			6,311			6,311
Total costs and expenses		502,026			519,583			992,186			1,017,086
Gain from litigation settlement, net (Note 6)		—			—			—			490,085
Earnings from operations		63,226			60,367			120,045			602,951
Other expenses and income:
Interest expense		11,726			17,837			21,501			37,993
Interest income		(122	)		(248	)		(261	)		(394	)
Loss on extinguishment of debt (Note 3)		2,966			23,873			16,318			23,873
Other income, net		(1,436	)		(561	)		(2,312	)		(2,351	)
Total other expenses, net		13,134			40,901			35,246			59,121
Earnings before income taxes		50,092			19,466			84,799			543,830
Income tax expense (Note 1)		19,840			8,361			33,136			210,197
Net earnings	$	30,252		$	11,105		$	51,663		$	333,633
Net earnings per common share, basic (Note 7)	$	0.63		$	0.22		$	1.06		$	6.77
Net earnings per common share, diluted (Note 7)	$	0.60		$	0.21		$	1.01		$	6.41
Weighted-average common shares outstanding, basic (Note 7)		47,877			49,531			48,903			49,251
Weighted-average common shares outstanding, diluted (Note 7)		50,167			52,499			51,250			52,028

See accompanying notes to condensed consolidated financial statements.

2

VALASSIS COMMUNICATIONS, INC.
Condensed Consolidated Statements of Comprehensive Income
(U.S. dollars in thousands)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net earnings	$	30,252		$	11,105		$	51,663		$	333,633
Other comprehensive income, net of tax:
Unrealized changes in fair value of cash flow hedges and available-for-sale securities		(83	)		(1,043	)		(370	)		(2,370	)
Realized losses on cash flow hedges reclassified from AOCI into earnings		2,261			—			3,040			—
Amortization of realized losses and unrealized changes in fair value of discontinued cash flow hedges		—			2,763			—			5,538
Foreign currency translation adjustment		(58	)		(1,060	)		807			(1,416	)
Total other comprehensive income		2,120			660			3,477			1,752
Comprehensive income	$	32,372		$	11,765		$	55,140		$	335,385

See accompanying notes to condensed consolidated financial statements.

3

VALASSIS COMMUNICATIONS, INC.
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in thousands)
(unaudited)

	Six Months Ended
	June 30,
	2011			2010
Cash flows from operating activities:
Net earnings	$	51,663		$	333,633
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		31,121			30,663
Amortization of debt issuance costs		1,181			1,607
Provision for losses on accounts receivable		1,589			2,695
Loss on extinguishment of debt		5,748			3,429
Loss on derivatives, net		2,345			10,106
Loss on sale of property, plant and equipment		36			58
Earnings on equity investments		(2,256	)		(1,897	)
Stock-based compensation expense		4,367			13,782
Deferred income taxes		2,159			7,976
Changes in assets and liabilities:
Accounts receivable, net		46,940			13,345
Inventories		2,768			7,198
Prepaid expenses and other		2,874			2,608
Other assets		1,140			(34	)
Other non-current liabilities		(1,829	)		7,228
Accounts payable		(9,409	)		(35,050	)
Progress billings		(8,386	)		(7,395	)
Accrued expenses		(41,018	)		43,954
Total adjustments		39,370			100,273
Net cash provided by operating activities		91,033			433,906
Cash flows from investing activities:
Additions to property, plant and equipment		(11,626	)		(8,401	)
Proceeds from sale of property, plant and equipment		20			36
Proceeds from sale of available-for-sale securities		1,494			—
Net cash used in investing activities		(10,112	)		(8,365	)
Cash flows from financing activities:
Borrowings of long-term debt		610,000			—
Repayments of long-term debt		(706,169	)		(301,312	)
Debt issuance costs		(11,266	)		—
Repurchases of common stock		(105,856	)		(54,623	)
Proceeds from issuance of common stock		4,672			30,433
Net cash used in financing activities		(208,619	)		(325,502	)
Effect of exchange rate changes on cash and cash equivalents		725			(1,177	)
Net increase (decrease) in cash and cash equivalents		(126,973	)		98,862
Cash and cash equivalents at beginning of period		245,935			129,846
Cash and cash equivalents at end of period	$	118,962		$	228,708
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	17,011		$	45,193
Cash paid during the period for income taxes	$	58,042		$	127,050
Non-cash financing activities:
Stock issued under stock-based compensation plans	$	2,684		$	1,399

See accompanying notes to condensed consolidated financial statements.

4

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP principles for complete financial statements. In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the information presented. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of results to be expected for the fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Valassis Communications, Inc. (“Valassis,” “we,” and “our”) Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”).

Significant Accounting Policies

Accounts Receivable

The allowance for doubtful accounts was $7.3 million and $12.1 million as of June 30, 2011 and December 31, 2010, respectively.

Income Taxes

We are required to adjust our effective tax rate each quarter to be consistent with our estimated annual effective tax rate. We are also required to record the tax impact of certain unusual or infrequently occurring items, including the effects of changes in tax laws or rates, in the interim period in which they occur. The effective tax rate during a particular quarter may be higher or lower as a result of the timing of actual earnings versus annual projections.

Inventories

Inventories are accounted for at the lower of cost, determined on a first in, first out (“FIFO”) basis, or market. Inventories included on the condensed consolidated balance sheets consisted of:

	June 30,		December 31,
(in thousands of U.S. dollars)	2011		2010
Raw materials	$	28,439	$	27,035
Work in progress		10,780		14,952
Inventories	$	39,219	$	41,987

5

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Property, Plant and Equipment

The following table summarizes the costs and ranges of useful lives of the major classes of property, plant and equipment and the total accumulated depreciation related to Property, plant and equipment, net included on the condensed consolidated balance sheets:

			June 30,			December 31,
	Useful Lives		2011			2010
	(in years)		(in thousands of U.S. dollars)
Land, at cost		N/A	$	7,208		$	7,195
Buildings, at cost		10 - 30		37,733			37,657
Machinery and equipment, at cost		3 - 20		231,694			225,762
Office furniture and equipment, at cost		3 - 10		226,827			221,804
Leasehold improvements, at cost		5 - 10		28,126			28,174
				531,588			520,592
Less accumulated depreciation				(369,189	)		(345,025	)
Property, plant and equipment, net			$	162,399		$	175,567

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which eliminates the option to present the components of other comprehensive income as a part of the statement of stockholders’ equity. Instead, ASU 2011-05 requires all non-owner transactions that affect an entity’s equity be presented either in a single continuous statement of comprehensive income or in two separate, but consecutive, statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present the components of other comprehensive income, total other comprehensive income and the total of comprehensive income. We have adopted the provisions of ASU 2011-05 and retrospectively applied herein the two-statement approach described above.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The adoption of ASU 2009-13, applied prospectively for revenue arrangements entered into or materially modified beginning on or after January 1, 2011, did not have a material impact on our financial position or results of operations.

2. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
Shared Mail	$	534,184	$	534,184
Neighborhood Targeted		5,325		5,325
Free-standing Inserts		22,357		22,357
International, Digital Media & Services		74,605		74,605
Goodwill	$	636,471	$	636,471

6

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

     The components of other intangible assets, net included on the condensed consolidated balance sheets consisted of:

	June 30, 2011									December 31, 2010
								Weighted									Weighted
			Accum-					Average				Accum-					Average
			ulated					Remaining				ulated					Remaining
	Gross		Amort-			Net		Useful Life		Gross		Amort-			Net		Useful Life
(in thousands of U.S. dollars)	Amount		ization			Amount		(in years)		Amount		ization			Amount		(in years)
Amortizing intangible assets:
Mailing lists, non compete agreements and other	$	48,037	$	(8,881	)	$	39,156		14.5	$	48,037	$	(7,871	)	$	40,166		15.0
Customer relationships		140,000		(39,291	)		100,709		9.5		140,000		(33,990	)		106,010		10.0
Non-amortizing intangible assets:
Valassis name, tradenames, trademarks and other		87,641		—			87,641				87,641		—			87,641
Other intangible assets, net	$	275,678	$	(48,172	)	$	227,506			$	275,678	$	(41,861	)	$	233,817

3. LONG-TERM DEBT

Long-term debt included on the condensed consolidated balance sheets consisted of:

	June 30,		December 31,
(in thousands of U.S. dollars)	2011		2010
New Senior Secured Revolving Credit Facility	$	50,000	$	—
Prior Senior Secured Revolving Credit Facility		—		—
Senior Secured Term Loan A		300,000		—
Senior Secured Convertible Notes due 2033, net of discount		60		58
81/4% Senior Notes due 2015		—		242,224
65/8% Senior Notes due 2021		260,000		—
Senior Secured Term Loan B		—		347,723
Senior Secured Delayed Draw Term Loan		—		116,222
Total debt		610,060		706,227
Current portion long-term debt		15,000		7,058
Long-term debt	$	595,060	$	699,169

Senior Secured Credit Facility

General

On June 27, 2011, we entered into a new 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 “new senior secured credit facility”). The new 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.

7

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The new senior secured credit facility consists of:

• 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, 10% during the third year, 15% during the fourth year and 11.25% during the fifth year, 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 million, 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 (the “revolving line of credit”), of which $50.0 million was drawn at closing and remains outstanding as of June 30, 2011 (exclusive of outstanding letters of credit described below); and

• an incremental facility pursuant to which, prior to the maturity of the new 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 new 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.

We used the initial borrowing under the revolving line of credit, the proceeds from the Term Loan A and existing cash of $120.0 million to repay the $462.2 million outstanding under the Term Loan B and Delayed Draw Term Loan portions of our prior senior secured credit facility (reflecting all outstanding borrowings thereunder), to pay accrued interest with respect to such loans and to pay the fees and expenses related to the new senior secured credit facility. We recognized a pre-tax loss on extinguishment of debt of $3.0 million during the three and six months ended June 30, 2011, which represents the write-off of related capitalized debt issuance costs. In addition, as further discussed in Note 8, Derivative Financial Instruments and Fair Value Measurements, we recorded in interest expense a pre-tax loss of $2.6 million related to the discontinuation of hedge accounting on the related interest rate swap. We capitalized related debt issuance costs of approximately $6.2 million, which will be amortized over the term of the new senior secured credit facility.

All borrowings under our new 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 June 30, 2011, we had approximately $39.0 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 $11.0 million in standby letters of credit outstanding as of June 30, 2011).

Interest and Fees

Borrowings under our new 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 plus 0.5% or one-month LIBOR plus 1%) (the “Base Rate”) or at an Adjusted LIBO Rate (as defined in the credit agreement governing the new senior secured credit facility) (the “Eurodollar Rate”), 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 initially 0.75% per annum for Base Rate loans and 1.75% per annum for Eurodollar Rate loans. Beginning with the delivery of the financial statements and the compliance certificate for the quarter ending September 30, 2011, the margins applicable to the borrowings under our new 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. See Note 8, Derivative Financial Instruments and Fair Value Measurements, for discussion regarding our various interest rate swap agreements.

Guarantees and Security

Our new 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.

8

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

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 new senior secured credit facility to the extent required by the indenture governing such notes.

Prepayments

The new 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 new 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 new senior secured credit facility contains affirmative and negative covenants, including, but not limited to:

• 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.

Our new senior secured credit facility also requires us to comply with:

• 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 new 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.

The following table shows the required and actual financial ratios under our new senior secured credit facility as of June 30, 2011:

	Required Ratio	Actual Ratio
Maximum consolidated leverage ratio	No greater than 3.50:1.00	1.90:1.00
Minimum consolidated interest coverage ratio	No less than 3.00:1.00	7.25:1.00

In addition, we are required to give notice to the administrative agent and the lenders under our new 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

9

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

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 new 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 new 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 new senior secured credit facility.

8¹/4% Senior Notes due 2015

On January 13, 2011, we commenced a cash tender offer and consent solicitation to purchase any and all of our outstanding 8¹/4% Senior Notes due 2015 (the “2015 Notes”) and to amend the indenture governing the 2015 Notes, which we refer to as the 2015 Indenture, to eliminate substantially all of the restrictive covenants and certain events of default. We used the net proceeds from the 2021 Notes (described below) to fund the purchase of the 2015 Notes, the related consent payments pursuant to the tender offer and consent solicitation, and the subsequent redemption of the 2015 Notes that were not tendered and remained outstanding after the expiration of the tender offer and consent solicitation. We recognized a pre-tax loss on extinguishment of debt of $13.3 million during the six months ended June 30, 2011, which represents the difference between the aggregate purchase price and the aggregate principal amount of the 2015 Notes purchased and the write-off of related capitalized debt issuance costs.

During the three and six months ended June 30, 2010, we purchased $297.8 million aggregate principal amount of the 2015 Notes pursuant to a cash tender offer and open market repurchases. We recognized a pre-tax loss on extinguishment of debt of $23.9 million during the three and six months ended June 30, 2010, which represents the difference between the aggregate purchase price and the aggregate principal amount of the 2015 Notes purchased and the proportionate write-off of related capitalized debt issuance costs.

6⁵/8% Senior Notes due 2021

On January 28, 2011, we issued in a private placement $260.0 million aggregate principal amount of our 6⁵/8% Senior Notes due 2021 (the “2021 Notes”). The net proceeds were used to fund the purchase of the outstanding 2015 Notes and the related consent payments in a concurrent tender offer and consent solicitation as described above and the redemption of the remaining outstanding 2015 Notes. We capitalized related debt issuance costs of approximately $5.1 million, which will be amortized over the term of the 2021 Notes.

Interest on the 2021 Notes is payable every six months on February 1 and August 1, commencing August 1, 2011. 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.

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.

10

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

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:

Year	Percentage
2016		103.313	%
2017		102.208	%
2018		101.104	%
2019 and thereafter		100.000	%

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 prices 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.

Covenant Compliance

As of June 30, 2011, we were in compliance with all of our indenture and new senior secured credit facility covenants.

4. ACCRUED EXPENSES

Accrued expenses included on the condensed consolidated balance sheets consisted of:

	June 30,		December 31,
(in thousands of U.S. dollars)	2011		2010
Accrued interest	$	7,352	$	6,710
Accrued compensation and benefits		40,803		57,781
Other accrued expenses		37,434		35,121
Accrued expenses	$	85,589	$	99,612

5. COMMITMENTS AND CONTINGENCIES

The application and interpretation of applicable state sales tax laws to certain of our products is uncertain. Accordingly, we may be exposed to additional sales tax liability to the extent various state jurisdictions determine that certain of our products are subject to such jurisdictions’ sales tax. As of June 30, 2011, we have recorded a liability of $10.0 million, reflecting our best estimate of our potential sales tax liability.

In addition to the above matter, we are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on our financial position, results of operations or liquidity.

6. GAIN FROM LITIGATION SETTLEMENT

On January 30, 2010, we announced that we had reached an agreement to settle our outstanding lawsuits against News America Incorporated, a/k/a News America Marketing Group, News America Marketing, FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/k/a News America Marketing In-Store Services, LLC (collectively “News”). The operative complaint alleged violations of the Sherman Act and various state competitive statutes and the commission of torts by News in connection with the marketing and sale of FSI space and in-store promotion and advertising services.

11

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

On February 4, 2010, we executed a settlement agreement and release (the “Settlement Agreement”) with News, and pursuant to the terms of the Settlement Agreement, News paid us $500.0 million. News America, Inc. also entered into a 10-year shared mail distribution agreement with our subsidiary, Valassis Direct Mail, Inc., which provides for our sale of certain shared mail services to News on specified terms.

In connection with the settlement, the parties worked with the United States District Court for the Eastern District of Michigan (the “Court”), under the Honorable Arthur J. Tarnow, on a set of procedures to handle future disputes among the parties with respect to conduct at issue in the litigation. The Court issued the order on this matter on June 15, 2011.

The settlement resolves all outstanding claims between us and News as of February 4, 2010. As a result, the parties agreed to dismiss all outstanding litigation between them and release all existing and potential claims against each other that were or could have been asserted in the litigation as of the date of the Settlement Agreement.

During the six months ended June 30, 2010, in connection with the successful settlement of these lawsuits, we made $9.9 million in related payments, including special bonuses to certain of our employees (including our named executive officers in our proxy statement) in an aggregate amount of $8.1 million. These expenses were netted against the $500.0 million of proceeds received, and the net proceeds of $490.1 million were recorded as a separate line item “Gain from litigation settlement, net” in our condensed consolidated statement of income for the three and six months ended June 30, 2010.

7. EARNINGS PER SHARE

Earnings per common share data were as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share data)	2011			2010			2011			2010
Net earnings	$	30,252		$	11,105		$	51,663		$	333,633
Weighted-average common shares outstanding, basic		47,877			49,531			48,903			49,251
Shares issued on exercise of dilutive options		5,591			9,142			6,142			8,237
Shares purchased with assumed proceeds of options and unearned restricted shares		(3,305	)		(6,183	)		(3,799	)		(5,469	)
Shares contingently issuable		4			9			4			9
Weighted-average common shares outstanding, diluted		50,167			52,499			51,250			52,028
Net earnings per common share, diluted	$	0.60		$	0.21		$	1.01		$	6.41
Anti-dilutive options excluded from calculation of weighted- average common shares outstanding, diluted		3,285			1,472			2,915			2,729

12

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

We are exposed to market risks arising from adverse changes in foreign exchange rates and interest rates. We manage these risks through a variety of strategies which include the use of derivatives. Certain derivatives are designated as cash flow hedges and qualify for hedge accounting treatment, while others do not qualify or have not been designated as hedges and are marked to market through earnings. The notional amounts of derivative financial instruments and related fair values measured on a recurring basis and included in the condensed consolidated balance sheets were as follows:

	Notional Amounts				Fair Value
	June 30,		December 31,		June 30,			December 31,
(in millions of U.S. Dollars)	2011		2010		2011			2010			Balance Sheet Location
Derivatives designated as cash flow hedging instruments:
Interest rate swap contract		N/A	$	300.0		N/A		$	(4.6	)	Other non-current liabilities
Derivatives not receiving hedge accounting treatment:
Interest rate swap contract		220.0		N/A		(2.7	)		N/A		Other non-current liabilities
Foreign exchange contracts		11.0		11.4		0.7			0.7		Prepaid expenses and other
Total derivative financial instruments	$	231.0	$	311.4	$	(2.0	)	$	(3.9	)

The fair values of our interest rate swap contract and foreign exchange contracts are determined based on third-party valuation models and observable foreign exchange forward contract rates, respectively, both of which represent Level 2 fair value inputs.

The following tables summarize the impact of derivative financial instruments on the condensed consolidated financial statements for the indicated periods:

	Three Months Ended June 30,
	2011			2010			2011			2010			2011			2010
	Amount of Pre-tax Gain												Amount of Pre-tax Loss
	(Loss) Recognized in						Amount of Pre-tax Loss						Reclassified from AOCI
(in millions of U.S. Dollars)	Earnings						Recognized in OCI						into Earnings
Derivatives designated as cash flow hedging instruments:
Interest rate swap contract (a)	$	—		$	—		$	(0.2	)	$	(1.6	)	$	(3.7	)	$	—
Derivatives not receiving hedge accounting treatment:
Interest rate swap contracts (a)	$	(0.1	)	$	0.3		$	—		$	—		$	—		$	(4.4	)
Foreign exchange contracts (b)		(0.2	)		(0.6	)		—			—			—			—
	$	(0.3	)	$	(0.3	)	$	(0.2	)	$	(1.6	)	$	(3.7	)	$	(4.4	)

(a)	Recognized in Interest expense
(b)	Recognized in Cost of sales

	Six Months Ended June 30,
	2011			2010			2011			2010			2011			2010
	Amount of Pre-tax Gain												Amount of Pre-tax Loss
	(Loss) Recognized in						Amount of Pre-tax Loss						Reclassified from AOCI
(in millions of U.S. Dollars)	Earnings						Recognized in OCI						into Earnings
Derivatives designated as cash flow hedging instruments:
Interest rate swap contract (a)	$	—		$	—		$	(0.4	)	$	(3.8	)	$	(5.0	)	$	—
Derivatives not receiving hedge accounting treatment:
Interest rate swap contracts (a)	$	(0.1	)	$	3.2		$	—		$	—		$	—		$	(8.9	)
Foreign exchange contracts (b)		—			(0.1	)		—			—			—			—
	$	(0.1	)	$	3.1		$	(0.4	)	$	(3.8	)	$	(5.0	)	$	(8.9	)

(a)	Recognized in Interest expense
(b)	Recognized in Cost of sales

13

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Interest Rate Swaps

During the second quarter of 2007, we entered into two interest rate swap agreements with an aggregate notional principal amount of $480.0 million. These interest rate swaps effectively fixed three-month LIBOR at 5.045%, for a then-effective interest rate of 6.795%, including the applicable margin, for $480.0 million of our variable rate debt under our senior secured credit facility. In February 2009, we reduced the notional principal amount of the interest rate swaps by $32.8 million and paid termination fees of approximately $2.6 million. The termination fees, or deferred losses, related to the terminated portion of the swaps were amortized to interest expense over the original life of the interest rate swaps, through December 31, 2010. As a result of the reduced notional amount of the swaps, three-month LIBOR was effectively fixed at 5.026%, for a then-effective interest rate of 6.776%, including the applicable margin. We initially designated the swaps as hedging instruments and recorded changes in the fair value of these interest rate swaps as a component of accumulated other comprehensive income. We discontinued cash flow hedge accounting treatment for the interest rate swap agreements effective April 1, 2009. The deferred losses on the interest rate swaps previously charged to accumulated other comprehensive income were amortized to interest expense and subsequent changes in the fair value of the swaps were recognized in earnings as a component of interest expense until the swaps expired on December 31, 2010.

On December 17, 2009, we entered into an interest rate swap agreement with an initial notional amount of $300.0 million to fix three-month LIBOR at 2.005%, for an effective rate of 4.255%, including the applicable margin, for $300.0 million of our variable rate debt under our prior senior secured credit facility. The effective date of this agreement was December 31, 2010. The notional amount of $300.0 million amortizes by $40.0 million at the end of every quarter until it reaches $100.0 million for the quarter ended June 30, 2012, the expiration date. The swap was designated as, and qualified as, a cash flow hedge through the termination of the prior senior secured credit facility on June 27, 2011. During the three and six months ended June 30, 2011, as a result of the termination of the prior senior secured credit facility, pre-tax losses of $2.6 million were reclassified from accumulated other comprehensive income to earnings as a component of interest expense. This interest rate swap remains in effect and subsequent changes in the fair value of this swap will be recognized in earnings as a component of interest expense until the swap expires.

On July 6, 2011, we entered into an interest rate swap agreement with an initial notional amount of $186.3 million. The effective date of this agreement is June 30, 2012, the expiration date of our existing interest rate swap. Under the swap agreement, we are required to make quarterly payments at a fixed interest rate of 1.8695% per annum to the counterparty on an amortizing notional amount in exchange for receiving variable payments based on the three-month LIBOR interest rate for the same notional amount. After giving effect to the swap agreement, our effective interest rate for the notional amount, based on the current applicable margin under the new senior secured credit facility of 1.75% per annum, will be 3.6195% per annum. The initial notional amount of $186.3 million amortizes quarterly by (i) $2,812,500 from the effective date through the quarter ended September 30, 2013, (ii) $5,625,000 from September 30, 2013 through the quarter ended September 30, 2014, and (iii) $8,437,500 from September 30, 2014 until June 30, 2015, the expiration date of the agreement. The swap is designated as and qualifies as a cash flow hedge.

Foreign Currency

Currencies to which we have exposure are the Mexican peso, Canadian dollar, British pound, Polish zloty and Euro. Currency restrictions are not expected to have a significant effect on our cash flows, liquidity, or capital resources. We purchase the Mexican peso and Polish zloty under two to twelve-month forward foreign exchange contracts to stabilize the cost of production. As of June 30, 2011, we had a commitment to purchase $10.7 million in Mexican pesos and $0.3 million in Polish zlotys over the next 12 months.

Long-Term Debt

The estimated fair market value of our long-term debt was $5.5 million below carrying value and $10.6 million above carrying value as of June 30, 2011 and December 31, 2010, respectively. Our 2021 Notes are traded in the market and are classified as a Level 1 measurement with the fair value determined based on the quoted active market prices. Borrowings under our new senior secured credit facility are classified as Level 3 measurements as these securities are not traded in an active market and are valued based on an implied price derived from industry averages and relative loan performance.

14

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents and accruals approximate fair value due to the near-term maturity of these instruments.

9. REPURCHASES OF COMMON STOCK

The following table summarizes our repurchases of common stock during the three and six months ended June 30, 2011 and 2010:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Shares repurchased		2,144,067		1,619,600		3,766,852		1,619,600
Aggregate repurchase price	$	60,326,065	$	54,622,971	$	105,856,445	$	54,622,971
Average price paid per share	$	28.14	$	33.73	$	28.10	$	33.73

As of June 30, 2011, we had authorization to repurchase an additional 6,590,301 shares of our common stock under the share repurchase program approved by our Board of Directors.

10. SEGMENT REPORTING

Our segments meeting the quantitative thresholds to be considered reportable are Shared Mail, Neighborhood Targeted and Free-standing Inserts (“FSI”). All other lines of business fall below a materiality threshold and are, therefore, combined together in an “other” segment named International, Digital Media & Services. These business lines include NCH Marketing Services, Inc., direct mail, software analytics, security services, digital and in-store. Our reportable segments are strategic business units that offer different products and services and are subject to regular review by our chief operating decision-maker. They are managed separately because each business requires different executional strategies and caters to different client marketing needs.

The accounting policies of the segments are the same as those described in the 2010 Form 10-K and Note 1, Basis of Presentation and Significant Accounting Policies. We evaluate reportable segment performance based on segment profit, which we define as earnings from operations excluding unusual or infrequently occurring items. A reconciliation of total segment profit to earnings from operations is provided below. Assets are not allocated in all cases to reportable segments and are not used to assess the performance of a segment.

15

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The following table sets forth, by segment, revenues, depreciation/amortization and segment profit for the indicated periods:

	Three Months Ended June 30,
							International,
			Neighborhood				Digital Media &
(in millions of U.S. dollars)	Shared Mail		Targeted		FSI		Services		Total
2011
Revenues from external customers	$	337.2	$	88.8	$	89.2	$	50.0	$	565.2
Intersegment revenues	$	4.1	$	12.9	$	9.8	$	0.1	$	26.9
Depreciation/amortization	$	9.5	$	1.0	$	3.0	$	1.9	$	15.4
Segment profit	$	47.7	$	0.8	$	8.3	$	6.4	$	63.2
2010
Revenues from external customers	$	326.3	$	116.3	$	94.6	$	42.8	$	580.0
Intersegment revenues	$	3.9	$	6.8	$	9.3	$	—	$	20.0
Depreciation/amortization	$	10.2	$	1.0	$	3.1	$	0.8	$	15.1
Segment profit	$	40.6	$	5.3	$	11.4	$	3.1	$	60.4

	Six Months Ended June 30,
							International,
			Neighborhood				Digital Media &
(in millions of U.S. dollars)	Shared Mail		Targeted		FSI		Services		Total
2011
Revenues from external customers	$	659.8	$	178.9	$	178.4	$	95.1	$	1,112.2
Intersegment revenues	$	8.6	$	22.2	$	19.6	$	0.2	$	50.6
Depreciation/amortization	$	19.5	$	2.0	$	6.0	$	3.6	$	31.1
Segment profit	$	89.8	$	2.7	$	15.7	$	11.8	$	120.0
2010
Revenues from external customers	$	639.2	$	216.1	$	192.1	$	82.6	$	1,130.0
Intersegment revenues	$	7.4	$	12.4	$	18.9	$	—	$	38.7
Depreciation/amortization	$	20.9	$	2.0	$	6.2	$	1.6	$	30.7
Segment profit	$	72.2	$	12.4	$	19.7	$	8.6	$	112.9

The following table provides reconciliations of total segment profit to earnings from operations for the indicated periods:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions of U.S. dollars)	2011		2010		2011		2010
Total segment profit	$	63.2	$	60.4	$	120.0	$	112.9
Unallocated amounts:
Gain from litigation settlement		—		—		—		490.1
Earnings from operations	$	63.2	$	60.4	$	120.0	$	603.0

Domestic and foreign revenues were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions of U.S. dollars)	2011		2010		2011		2010
United States	$	550.3	$	566.2	$	1,085.2	$	1,102.9
Foreign		14.9		13.8		27.0		27.1
Revenues	$	565.2	$	580.0	$	1,112.2	$	1,130.0

16

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Domestic and foreign long-lived assets (property, plant and equipment, net) were as follows:

	June 30,		December 31,
(in millions of U.S. dollars)	2011		2010
United States	$	153.9	$	166.8
Foreign		8.5		8.8
Property, plant and equipment, net	$	162.4	$	175.6

11. GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The following information is presented in accordance with Rule 3-10 of Regulation S-X. The operating and investing activities of the separate legal entities included in the consolidated financial statements are fully interdependent and integrated. Revenues and operating expenses of the separate legal entities include intercompany charges for management and other services. The 2021 Notes issued by Valassis (referred to for purposes of this note only as the “Parent Company”) are guaranteed by substantially all of the Parent Company’s existing and future domestic wholly-owned subsidiaries (collectively, the “Guarantor Subsidiaries”) on a senior unsecured basis. Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by the Parent Company and has guaranteed the 2021 Notes on a joint and several, full and unconditional basis. Non-wholly-owned subsidiaries, joint ventures, partnerships and foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) are not guarantors of these obligations. Substantially all of the Guarantor Subsidiaries also guarantee the Parent Company’s senior secured credit facility.

The following tables present the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010, the condensed consolidating statements of income for the three and six months ended June 30, 2011 and 2010, and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010. As a result of combining our general ledgers of record into an existing, single general ledger module within our enterprise resource planning system on July 1, 2010, the condensed consolidating statements of income for the three and six months ended June 30, 2011 below reflect certain revenues and costs and expenses between the Parent Company and the Guarantor Subsidiaries differently than the condensed consolidating statements of income for the three and six months ended June 30, 2010. Although it is not practicable to reclassify the amounts presented for the three and six months ended June 30, 2010 to reflect these changes in presentation, if such reclassifications could be made they would have no effect on any of the “Consolidated Total” amounts included below and would have no effect on the net income of the Parent Company or the Non-Guarantor Subsidiaries.

17

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Condensed Consolidating Balance Sheet
June 30, 2011
(in thousands of U.S. dollars)

	Parent			Guarantor		Non-Guarantor			Consolidating			Consolidated
Assets	Company			Subsidiaries		Subsidiaries			Adjustments			Total
Current assets:
Cash and cash equivalents	$	84,913		$	5,480	$	28,569		$	—		$	118,962
Accounts receivable, net		114,688			273,820		22,915			—			411,423
Inventories		30,941			8,275		3			—			39,219
Prepaid expenses and other (including intercompany)		1,008,120			1,047,338		1,712			(1,994,548	)		62,622
Total current assets		1,238,662			1,334,913		53,199			(1,994,548	)		632,226
Property, plant and equipment, net		26,154			134,415		1,830			—			162,399
Goodwill and other intangible assets, net		42,735			814,253		6,989			—			863,977
Investments		399,493			21,137		—			(417,566	)		3,064
Intercompany note receivable (payable)		(73,639	)		86,187		(12,548	)		—			—
Other assets		10,478			2,948		1,083			—			14,509
Total assets	$	1,643,883		$	2,393,853	$	50,553		$	(2,412,114	)	$	1,676,175

	Parent			Guarantor		Non-Guarantor			Consolidating			Consolidated
Liabilities and Stockholders’ Equity	Company			Subsidiaries		Subsidiaries			Adjustments			Total
Current liabilities:
Current portion, long-term debt	$	15,000		$	—	$	—		$	—		$	15,000
Accounts payable and intercompany payable		464,676			1,840,636		9,429			(1,994,548	)		320,193
Progress billings		14,800			14,170		15,645			—			44,615
Accrued expenses		42,876			35,601		7,112			—			85,589
Total current liabilities		537,352			1,890,407		32,186			(1,994,548	)		465,397
Long-term debt		595,060			—		—			—			595,060
Deferred income taxes		(3,616	)		87,614		(3,995	)		—			80,003
Other non-current liabilities		25,202			18,377		2,251			—			45,830
Total liabilities		1,153,998			1,996,398		30,442			(1,994,548	)		1,186,290
Stockholders’ equity		489,885			397,455		20,111			(417,566	)		489,885
Total liabilities and stockholders’ equity	$	1,643,883		$	2,393,853	$	50,553		$	(2,412,114	)	$	1,676,175

18

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Condensed Consolidating Balance Sheet
December 31, 2010
(in thousands of U.S. dollars)

	Parent		Guarantor			Non-Guarantor			Consolidating			Consolidated
Assets	Company		Subsidiaries			Subsidiaries			Adjustments			Total
Current assets:
Cash and cash equivalents	$	211,933	$	8,026		$	25,976		$	—		$	245,935
Accounts receivable, net		175,115		259,001			25,836			—			459,952
Inventories		33,305		8,679			3			—			41,987
Prepaid expenses and other (including intercompany)		278,489		630,972			2,083			(872,887	)		38,657
Total current assets		698,842		906,678			53,898			(872,887	)		786,531
Property, plant and equipment, net		31,475		142,006			2,086			—			175,567
Goodwill and other intangible assets, net		42,745		820,554			6,989			—			870,288
Investments		400,404		12,486			—			(409,744	)		3,146
Intercompany note receivable (payable)		479,365		(460,369	)		(18,996	)		—			—
Other assets		6,982		3,130			14			—			10,126
Total assets	$	1,659,813	$	1,424,485		$	43,991		$	(1,282,631	)	$	1,845,658

	Parent			Guarantor		Non-Guarantor			Consolidating			Consolidated
Liabilities and Stockholders’ Equity	Company			Subsidiaries		Subsidiaries			Adjustments			Total
Current liabilities:
Current portion, long-term debt	$	7,058		$	—	$	—		$	—		$	7,058
Accounts payable and intercompany payable		323,277			866,614		12,598			(872,887	)		329,602
Progress billings		26,353			11,751		14,897			—			53,001
Accrued expenses		51,035			41,300		7,277			—			99,612
Total current liabilities		407,723			919,665		34,772			(872,887	)		489,273
Long-term debt		699,169			—		—			—			699,169
Deferred income taxes		(4,044	)		86,804		(3,996	)		—			78,764
Other non-current liabilities		28,081			19,575		1,912			—			49,568
Total liabilities		1,130,929			1,026,044		32,688			(872,887	)		1,316,774
Stockholders’ equity		528,884			398,441		11,303			(409,744	)		528,884
Total liabilities and stockholders’ equity	$	1,659,813		$	1,424,485	$	43,991		$	(1,282,631	)	$	1,845,658

19

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Condensed Consolidating Statement of Income
Three Months Ended June 30, 2011
(in thousands of U.S. dollars)

	Parent			Guarantor			Non-Guarantor			Consolidating			Consolidated
	Company			Subsidiaries			Subsidiaries			Adjustments			Total
Revenues	$	200,589		$	444,629		$	20,281		$	(100,247	)	$	565,252
Cost and expenses:
Cost of sales		168,597			286,880			13,973			(51,410	)		418,040
Selling, general and administrative		21,461			104,561			3,646			(48,837	)		80,831
Amortization expense		5			3,150			—			—			3,155
Total costs and expenses		190,063			394,591			17,619			(100,247	)		502,026
Earnings from operations		10,526			50,038			2,662			—			63,226
Other expenses and income:
Interest expense		11,726			—			—			—			11,726
Interest income		(96	)		—			(26	)		—			(122	)
Intercompany interest		(3,157	)		2,995			162			—			—
Loss on extinguishment of debt		2,966			—			—			—			2,966
Other income, net		9			(1,481	)		36			—			(1,436	)
Total other expenses, net		11,448			1,514			172			—			13,134
Earnings (loss) before income taxes		(922	)		48,524			2,490			—			50,092
Income tax expense		241			18,844			755			—			19,840
Equity in net earnings of subsidiaries		31,415			1,735			—			(33,150	)		—
Net earnings	$	30,252		$	31,415		$	1,735		$	(33,150	)	$	30,252

Condensed Consolidating Statement of Income
Three Months Ended June 30, 2010
(in thousands of U.S. dollars)

	Parent			Guarantor			Non-Guarantor			Consolidating			Consolidated
	Company			Subsidiaries			Subsidiaries			Adjustments			Total
Revenues	$	210,345		$	375,691		$	19,016		$	(25,102	)	$	579,950
Cost and expenses:
Cost of sales		164,074			271,879			12,914			(25,102	)		423,765
Selling, general and administrative		36,274			52,619			3,770			—			92,663
Amortization expense		5			3,150			—			—			3,155
Total costs and expenses		200,353			327,648			16,684			(25,102	)		519,583
Earnings from operations		9,992			48,043			2,332			—			60,367
Other expenses and income:
Interest expense		17,837			—			—			—			17,837
Interest income		(230	)		1			(19	)		—			(248	)
Intercompany interest		(16,298	)		16,186			112			—			—
Loss on extinguishment of debt		23,873			—			—			—			23,873
Other income, net		280			(860	)		19			—			(561	)
Total other expenses (income), net		25,462			15,327			112			—			40,901
Earnings (loss) before income taxes		(15,470	)		32,716			2,220			—			19,466
Income tax (benefit) expense		(3,325	)		10,906			780			—			8,361
Equity in net earnings of subsidiaries		23,250			1,440			—			(24,690	)		—
Net earnings	$	11,105		$	23,250		$	1,440		$	(24,690	)	$	11,105

20

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Condensed Consolidating Statement of Income
Six Months Ended June 30, 2011
(in thousands of U.S. dollars)

	Parent			Guarantor			Non-Guarantor			Consolidating			Consolidated
	Company			Subsidiaries			Subsidiaries			Adjustments			Total
Revenues	$	398,755		$	873,897		$	37,650		$	(198,071	)	$	1,112,231
Cost and expenses:
Cost of sales		334,934			564,712			26,292			(99,321	)		826,617
Selling, general and administrative		45,975			204,939			7,094			(98,750	)		159,258
Amortization expense		11			6,300			—			—			6,311
Total costs and expenses		380,920			775,951			33,386			(198,071	)		992,186
Earnings from operations		17,835			97,946			4,264			—			120,045
Other expenses and income:
Interest expense		21,501			—			—			—			21,501
Interest income		(214	)		—			(47	)		—			(261	)
Intercompany interest		(14,354	)		14,192			162			—			—
Loss on extinguishment of debt		16,318			—			—			—			16,318
Other income, net		(218	)		(2,270	)		176			—			(2,312	)
Total other expenses, net		23,033			11,922			291			—			35,246
Earnings (loss) before income taxes		(5,198	)		86,024			3,973			—			84,799
Income tax expense		566			31,308			1,262			—			33,136
Equity in net earnings of subsidiaries		57,427			2,711			—			(60,138	)		—
Net earnings	$	51,663		$	57,427		$	2,711		$	(60,138	)	$	51,663

Condensed Consolidating Statement of Income
Six Months Ended June 30, 2010
(in thousands of U.S. dollars)

	Parent			Guarantor			Non-Guarantor			Consolidating			Consolidated
	Company			Subsidiaries			Subsidiaries			Adjustments			Total
Revenues	$	404,373		$	737,009		$	36,956		$	(48,386	)	$	1,129,952
Cost and expenses:
Cost of sales		312,663			537,913			24,964			(48,386	)		827,154
Selling, general and administrative		72,194			104,290			7,137			—			183,621
Amortization expense		11			6,300			—			—			6,311
Total costs and expenses		384,868			648,503			32,101			(48,386	)		1,017,086
Gain from litigation settlement, net		490,085			—			—			—			490,085
Earnings from operations		509,590			88,506			4,855			—			602,951
Other expenses and income:
Interest expense		37,993			—			—			—			37,993
Interest income		(373	)		3			(24	)		—			(394	)
Intercompany interest		(33,544	)		33,432			112			—			—
Loss on extinguishment of debt		23,873			—			—			—			23,873
Other income, net		(813	)		(1,416	)		(122	)		—			(2,351	)
Total other expenses (income), net		27,136			32,019			(34	)		—			59,121
Earnings before income taxes		482,454			56,487			4,889			—			543,830
Income tax expense		188,743			20,178			1,276			—			210,197
Equity in net earnings of subsidiaries		39,922			3,613			—			(43,535	)		—
Net earnings	$	333,633		$	39,922		$	3,613		$	(43,535	)	$	333,633

21

VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2011
(in thousands of U.S. dollars)

	Parent			Guarantor			Non-Guarantor			Consolidating		Consolidated
	Company			Subsidiaries			Subsidiaries			Adjustments		Total
Net cash provided by (used in) operating activities	$	134,756		$	(45,665	)	$	1,942		$	—	$	91,033
Cash flows from investing activities:
Additions to property, plant and equipment		(7,124	)		(4,428	)		(74	)		—		(11,626	)
Proceeds from sale of property, plant and equipment		20			—			—			—		20
Proceeds from sale of available-for-sale securities		1,494			—			—			—		1,494
Net cash used in investing activities		(5,610	)		(4,428	)		(74	)		—		(10,112	)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity		(47,547	)		47,547			—			—		—
Borrowings of long-term debt		610,000			—			—			—		610,000
Repayments of long-term debt		(706,169	)		—			—			—		(706,169	)
Debt issuance costs		(11,266	)		—			—			—		(11,266	)
Repurchases of common stock		(105,856	)		—			—			—		(105,856	)
Proceeds from issuance of common stock		4,672			—			—			—		4,672
Net cash provided (used in) by financing activities		(256,166	)		47,547			—			—		(208,619	)
Effect of exchange rate changes on cash and cash equivalents		—			—			725			—		725
Net increase (decrease) in cash and cash equivalents		(127,020	)		(2,546	)		2,593			—		(126,973	)
Cash and cash equivalents at beginning of period		211,933			8,026			25,976			—		245,935
Cash and cash equivalents at end of period	$	84,913		$	5,480		$	28,569		$	—	$	118,962

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2010
(in thousands of U.S. dollars)

	Parent			Guarantor			Non-Guarantor			Consolidating		Consolidated
	Company			Subsidiaries			Subsidiaries			Adjustments		Total
Net cash provided by operating activities	$	339,620		$	86,971		$	7,315		$	—	$	433,906
Cash flows from investing activities:
Additions to property, plant and equipment		(5,393	)		(2,861	)		(147	)		—		(8,401	)
Proceeds from sale of property, plant and equipment		36			—			—			—		36
Net cash used in investing activities		(5,357	)		(2,861	)		(147	)		—		(8,365	)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity		90,923			(90,923	)		—			—		—
Repayments of long-term debt		(301,312	)		—			—			—		(301,312	)
Repurchase of common stock		(54,623	)		—			—			—		(54,623	)
Proceeds from issuance of common stock		30,433			—			—			—		30,433
Net cash provided by (used in) financing activities		(234,579	)		(90,923	)		—			—		(325,502	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,177	)		—		(1,177	)
Net increase (decrease) in cash and cash equivalents		99,684			(6,813	)		5,991			—		98,862
Cash and cash equivalents at beginning of period		104,477			7,614			17,755			—		129,846
Cash and cash equivalents at end of period	$	204,161		$	801		$	23,746		$	—	$	228,708

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: price competition from our existing competitors; new competitors in any of our businesses; a shift in client preference for different promotional materials, strategies or coupon delivery methods, including, without limitation, as a result of declines in newspaper circulation; an unforeseen increase in paper or postal costs; changes which affect the businesses of our clients and lead to reduced sales promotion spending, including, without limitation, a decrease of marketing budgets which are generally discretionary in nature and easier to reduce in the short-term than other expenses; our substantial indebtedness, and ability to refinance such indebtedness, if necessary, and our ability to incur additional indebtedness, may affect our financial health; the financial condition, including bankruptcies, of our clients, suppliers, senior secured credit facility lenders or other counterparties; certain covenants in our debt documents could adversely restrict our financial and operating flexibility; fluctuations in the amount, timing, pages, weight and kinds of advertising pieces from period to period, due to a change in our clients’ promotional needs, inventories and other factors; our failure to attract and retain qualified personnel may affect our business and results of operations; a rise in interest rates could increase our borrowing costs; possible governmental regulation or litigation affecting aspects of our business; clients experiencing financial difficulties, or otherwise being unable to meet their obligations as they become due, could affect our results of operations and financial condition; uncertainty in the application and interpretation of applicable state sales tax laws may expose us to additional sales tax liability; and general economic conditions, whether nationally, internationally, or in the market areas in which we conduct our business, including the adverse impact of the ongoing economic downturn on the marketing expenditures and activities of our clients and prospective clients as well as our vendors, with whom we rely on to provide us with quality materials at the right prices and in a timely manner. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional risks include, but are not limited to, those risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2010, or the 2010 Form 10-K, and other filings by us with the United States Securities and Exchange Commission, or the SEC.

Overview

Valassis is one of the nation’s leading media and marketing services companies, offering unparalleled reach and scale to more than 15,000 advertisers. Our RedPlum™ media portfolio delivers value on a weekly basis to over 100 million shoppers across a multi-media platform — in-home, in-store and in-motion. Through our digital offering, including redplum.com and save.com, consumers can find compelling national and local deals online.

Our products and services are positioned to help our clients reach their customers through mass-delivered or targeted programs. We provide our clients with blended media solutions, including shared mail, newspaper, in-store and digital delivery. We offer the only national shared mail distribution network in the industry. We utilize a proprietary patent pending targeting tool that provides our clients with multi-media recommendations and optimization. We are committed to providing innovative marketing solutions to maximize the efficiency and effectiveness of promotions for our clients and to deliver value to consumers how, when and where they want.

23

Consolidated Results of Operations

The following table sets forth our consolidated results of operations for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in millions of U.S. dollars, except per share data)	2011			2010			2011			2010
Revenues:
Shared Mail	$	337.2		$	326.3		$	659.8		$	639.2
Neighborhood Targeted		88.8			116.3			178.9			216.1
Free-standing Inserts (“FSI”)		89.2			94.6			178.4			192.1
International, Digital Media & Services		50.0			42.8			95.1			82.6
Total revenues		565.2			580.0			1,112.2			1,130.0
Cost of sales		418.0			423.8			826.6			827.2
Gross profit		147.2			156.2			285.6			302.8
Selling, general and administrative		80.8			92.7			159.3			183.6
Amortization expense		3.2			3.1			6.3			6.3
Gain from litigation settlement, net		—			—			—			490.1
Earnings from operations		63.2			60.4			120.0			603.0
Other expenses and income:
Interest expense, net		11.6			17.6			21.2			37.6
Loss on extinguishment of debt		3.0			23.9			16.3			23.9
Other income, net		(1.5	)		(0.6	)		(2.3	)		(2.3	)
Total other expenses, net		13.1			40.9			35.2			59.2
Earnings before income taxes		50.1			19.5			84.8			543.8
Income tax expense		19.8			8.4			33.1			210.2
Net earnings	$	30.3		$	11.1		$	51.7		$	333.6
Net earnings per common share, diluted	$	0.60		$	0.21		$	1.01		$	6.41

Revenues

We reported revenues of $565.2 million and $580.0 million for the three months ended June 30, 2011 and 2010, respectively, and $1,112.2 million and $1,130.0 million for the six months ended June 30, 2011 and 2010, respectively. As further discussed in Segment Results below, these decreases in consolidated revenues resulted from decreased revenues in the Neighborhood Targeted and FSI segments, which were offset, in part, by increased revenues in the Shared Mail segment and International, Digital Media & Services.

Cost of Sales

Cost of sales was $418.0 million and $423.8 million for the three months ended June 30, 2011 and 2010, respectively. Gross profit as a percentage of revenues for the three months ended June 30, 2011 was 26.0%, compared to 26.9% for the three months ended June 30, 2010. Cost of sales was $826.6 million and $827.2 million for the six months ended June 30, 2011 and 2010, respectively. Gross profit as a percentage of revenues for the six months ended June 30, 2011 was 25.7%, compared to 26.8% for the six months ended June 30, 2010. These decreases in gross profit as a percentage of revenues resulted primarily from decreased revenues in the Neighborhood Targeted and FSI segments and cost increases in paper and energy in the FSI segment.

24

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses were $80.8 million and $92.7 million for the three months ended June 30, 2011 and 2010, respectively, and $159.3 million and $183.6 million for the six months ended June 30, 2011 and 2010, respectively. SG&A expenses for the six months ended June 30, 2010 included $2.1 million in legal costs associated with our lawsuits against News (as defined and further described in Gain from Litigation Settlement below). In addition, stock-based compensation expense for the three and six months ended June 30, 2011 decreased $5.4 million and $9.4 million, respectively, as compared to the three and six months ended June 30, 2010. The remaining decreases in SG&A expenses primarily reflect reduced incentive compensation expense and our cost containment efforts.

Gain from Litigation Settlement

On February 4, 2010, we executed a settlement agreement and release (the “Settlement Agreement”) settling our outstanding lawsuits against News America Incorporated, a/k/a News America Marketing Group, News America Marketing, FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/k/a News America Marketing In-Store Services, LLC (collectively, “News”). The operative complaint alleged violations of the Sherman Act and various state competitive statutes and the commission of torts by News in connection with the marketing and sale of FSI space and in-store promotion and advertising services. Pursuant to the terms of the Settlement Agreement, News paid us $500.0 million and entered into a 10-year shared mail distribution agreement with our subsidiary, Valassis Direct Mail, Inc., which provides for our sale of certain shared mail services to News on specified terms.

During the six months ended June 30, 2010, in connection with the successful settlement of these lawsuits, we made $9.9 million in related payments, including special bonuses to certain of our employees (including our named executive officers in our proxy statement) in an aggregate amount of $8.1 million. These expenses were netted against the $500.0 million of proceeds received, and the net proceeds of $490.1 million have been recorded as a separate line item “Gain from litigation settlement, net” in our condensed consolidated statement of income for the six months ended June 30, 2010.

Loss on Extinguishment of Debt

On June 27, 2011, we entered into a new senior secured credit facility, which replaced and terminated our prior senior secured credit facility (both of which as described below). We used the proceeds of the new senior secured credit facility along with existing cash to repay all outstanding borrowings under our prior senior secured credit facility, to pay accrued interest with respect to such loans and to pay the fees and expenses related to the new senior secured credit facility. We recognized a pre-tax loss on extinguishment of debt of $3.0 million during the three and six months ended June 30, 2011, which represents the write-off of related capitalized debt issuance costs.

On January 13, 2011, we commenced a cash tender offer and consent solicitation to purchase any and all of our outstanding 8¹/4% Senior Notes due 2015 (the “2015 Notes”) and to amend the indenture governing the 2015 Notes, which we refer to as the 2015 Indenture, to eliminate substantially all of the restrictive covenants and certain events of default. We used the net proceeds from the 2021 Notes (described below) to fund the purchase of the 2015 Notes, the related consent payments pursuant to the tender offer and consent solicitation, and the subsequent redemption of the 2015 Notes that were not tendered and remained outstanding after the expiration of the tender offer and consent solicitation. We recognized a pre-tax loss on extinguishment of debt of $13.3 million during the six months ended June 30, 2011, which represents the difference between the aggregate purchase price and the aggregate principal amount of the 2015 Notes purchased and the write-off of related capitalized debt issuance costs.

During the three and six months ended June 30, 2010, we purchased $297.8 million aggregate principal amount of the 2015 Notes pursuant to a cash tender offer and open market repurchases. We recognized a pre-tax loss on extinguishment of debt of $23.9 million during the three and six months ended June 30, 2010, which represents the difference between the aggregate purchase price and the aggregate principal amount of the 2015 Notes purchased and the proportionate write-off of related capitalized debt issuance costs.

Interest Expense, Net

Interest expense, net was $11.6 million and $17.6 million for the three months ended June 30, 2011 and 2010, respectively, and $21.2 million and $37.6 million for the six months ended June 30, 2011 and 2010, respectively. The decreases in interest expense, net were primarily due to lower debt balances as a result of our repurchase of $297.8 million aggregate principal amount of the 2015 Notes during the second quarter of 2010 and the reduced interest rate associated with the 2021 Notes as compared to the 2015 Notes.

25

On December 17, 2009, we entered into an interest rate swap agreement with an initial notional amount of $300.0 million to fix three-month LIBOR at 2.005%, plus the applicable margin, for $300.0 million of our variable rate debt under our prior senior secured credit facility. The swap was designated as and qualified as a cash flow hedge through the termination of the prior senior secured credit facility on June 27, 2011. During the three and six months ended June 30, 2011, as a result of the termination of the prior senior secured credit facility, pre-tax losses of $2.6 million were reclassified from accumulated other comprehensive income to earnings as a component of interest expense, which partially offset the decreases in interest expense described above.

Income Tax Expense

Income tax expense represented 39.5% and 43.1% of earnings before income taxes for the three months ended June 30, 2011 and 2010, respectively, and 39.0% and 38.7% of earnings before income taxes for the six months ended June 30, 2011 and 2010, respectively. We are required to adjust our effective tax rate each quarter to be consistent with our estimated annual effective tax rate. We are also required to record the tax impact of certain unusual or infrequently occurring items, including the effects of changes in tax laws or rates, in the interim period in which they occur. The effective tax rate during a particular quarter may be higher or lower as a result of the timing of actual earnings versus annual projections.

Net Earnings

Net earnings were $30.3 million and $11.1 million for the three months ended June 30, 2011 and 2010, respectively, or $0.60 and $0.21, respectively, per common share, diluted. Net earnings were $51.7 million and $333.6 million for the six months ended June 30, 2011 and 2010, respectively, or $1.01 and $6.41, respectively, per common share, diluted. As discussed above, net earnings and net earnings per common share, diluted for the three and six months ended June 30, 2011 and 2010 included certain items affecting the comparability of such periods; specifically, losses on extinguishment of debt and related charges in the each of three and six month periods ended June 30, 2011 and 2010 and a gain from litigation settlement in the six months ended June 30, 2010. In Non-GAAP Financial Measures below, we compare net earnings and net earnings per common share, diluted for the three and six months ended June 30, 2011 and 2010 excluding these items.

Non-GAAP Financial Measures

We define adjusted net earnings and adjusted net earnings per common share, diluted, as net earnings excluding losses on extinguishment of debt, including the related reclassification of previously unrealized losses on interest rate swaps from accumulated other comprehensive income to earnings, net of tax, and the gain from litigation settlement, net of tax. We present adjusted net earnings and adjusted net earnings per common share, diluted, because we believe these measures are useful to investors as they provide measures of our profitability on a more comparable basis to historical periods because they exclude items we do not believe are indicative of our core operating performance. In addition, we exclude these items when we internally evaluate our company’s performance.

Adjusted net earnings and adjusted net earnings per common share, diluted, are not calculated or presented in accordance with U.S. GAAP and have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, operating income, net income, cash flow, EPS or other income or cash flow data prepared in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures only supplementally. Further, other companies, including companies in our industry, may calculate adjusted net earnings and adjusted net earnings per common share, diluted, differently and as the differences in the way two different companies calculate these measures increase, the degree of their usefulness as comparative measures correspondingly decreases.

26

The following tables reconcile net earnings and net earnings per common share, diluted, for the three and six months ended June 30, 2011 and 2010 to adjusted net earnings and adjusted net earnings per common share, diluted:

	Three Months Ended
	June 30,
	2011				2010
	U.S.		Per		U.S.		Per
	Dollars		Common		Dollars		Common
	in		Share,		in		Share,
	Millions		Diluted		Millions		Diluted
Net earnings	$	30.3	$	0.60	$	11.1	$	0.21
Excluding:
Loss on extinguishment of debt and related charges, net of tax		3.4		0.07		14.7		0.28
Adjusted net earnings	$	33.7	$	0.67	$	25.8	$	0.49

	Six Months Ended
	June 30,
	2011				2010
	U.S.		Per		U.S.			Per
	Dollars		Common		Dollars			Common
	in		Share,		in			Share,
	Millions		Diluted		Millions			Diluted
Net earnings	$	51.7	$	1.01	$	333.6		$	6.41
Excluding:
Loss on extinguishment of debt and related charges, net of tax		11.6		0.23		14.7			0.28
Gain from litigation settlement, net of tax		—		—		(301.4	)		(5.79	)
Adjusted net earnings	$	63.3	$	1.24	$	46.9		$	0.90

The increases in adjusted net earnings and adjusted net earnings per common share, diluted, for the three and six months ended June 30, 2011 as compared to the three and six months ended June 30, 2010 reflect a net improvement in our total segment profit and decreased interest expense.

Segment Results

We currently operate our business in the following reportable segments:

• 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”).

• Neighborhood Targeted — Products that are targeted to specific newspaper zones or neighborhoods based on geographic and demographic characteristics.

• 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, as well as customized FSIs (custom co-ops) featuring multiple brands of a single client.

In addition, all other lines of business that are not separately reported are captioned as International, Digital Media & Services, which includes our coupon clearing and analytics business, NCH Marketing Services, Inc. (“NCH”), Valassis Canada, Inc., Promotion Watch, direct mail, analytics, digital and in-store.

We evaluate reportable segment performance based on segment profit, which we define as earnings from operations excluding unusual or non-recurring items. For additional information, including a reconciliation of total segment profit to earnings from operations, see Note 10 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

27

Shared Mail

Shared Mail revenues were $337.2 million and $326.3 million for the three months ended June 30, 2011 and 2010, respectively, an increase of 3.3%, and $659.8 million and $639.2 million for the six months ended June 30, 2011 and 2010, respectively, an increase of 3.2%. These increases were attributable to volume gains in inserts as demonstrated by the growth in Shared Mail pieces distributed. Shared Mail pieces increased 2.3% to 9.2 billion pieces for the three months ended June 30, 2011 as compared to the three months ended June 30, 2010, and increased 3.5% to 18.3 billion pieces for the six months ended June 30, 2011 as compared to the six months ended June 30, 2010. Revenue attributable to the volume gains was offset, in part, by lower revenue from the RedPlum^® wrap product.

Shared Mail packages delivered were 0.9 billion and 1.8 billion, respectively, for the three and six months ended June 30, 2011, increasing 0.7% and 0.1%, respectively, from the three and six months ended June 30, 2010. The growth in Shared Mail pieces, on relatively flat Shared Mail packages volumes, resulted in the increase in average pieces per package. Shared Mail average pieces per package were 9.8 pieces and 9.9 pieces, respectively, for the three and six months ended June 30, 2011 increasing 2.0% and 3.1%, respectively, from the three and six months ended June 30, 2010.

Gross margin as a percentage of revenues was 28.8% and 29.4% for the three months ended June 30, 2011 and 2010, respectively, and 28.5% for each of the six month periods ended June 30, 2011 and 2010. Gross margin as a percentage of revenues was favorably impacted by the flow-through of the increased insert volume and related efficiencies in unused postage. Unused postage as a percentage of base postage was 13.8% and 16.0% for the three months ended June 30, 2011 and 2010, respectively, and 14.3% and 16.8% for the six months ended June 30, 2011 and 2010, respectively. Offsetting the favorable impact of the above items, gross margin as a percentage of revenues was negatively impacted by a product mix shift toward printed products, which drove an increase in print costs. In addition, gross margin as a percentage of revenues for the three months ended June 30, 2011 was unfavorably affected by the reduction in RedPlum^® wrap product revenues.

Segment profit was $47.7 million and $40.6 million for the three months ended June 30, 2011 and 2010, respectively, an increase of 17.5%, and $89.8 million and $72.2 million for the six months ended June 30, 2011 and 2010, respectively, an increase of 24.4%. Segment profit as a percentage of revenues was 14.1% and 12.4% for the three months ended June 30, 2011 and 2010, respectively, and 13.6% and 11.3% for the six months ended June 30, 2011 and 2010, respectively. The increases in segment profit and segment profit as a percentage of revenues were the result of the growth in revenues achieved through the increase in insert volumes and decreased SG&A costs.

Neighborhood Targeted

Neighborhood Targeted revenues were $88.8 million and $116.3 million for the three months ended June 30, 2011 and 2010, respectively, a decrease of 23.6%, and $178.9 million and $216.1 million for the six months ended June 30, 2011 and 2010, respectively, a decrease of 17.2%. These decreases resulted primarily from a decline in Run-of-Press (“ROP”) revenues associated with reduced advertising spending by one client in each of the telecommunications and energy verticals. Based on recent trends, we are projecting ROP revenue being down approximately $80 million for the year ended December 31, 2011 as compared to the year ended December 31, 2010. In addition, during the three months ended June 30, 2011, we experienced reduced revenue from our polybag advertising and sampling business as compared to the three months ended June 30, 2010.

Segment profit was $0.8 million and $5.3 million for the three months ended June 30, 2011 and 2010, respectively, a decrease of 84.9%, and $2.7 million and $12.4 million for the six months ended June 30, 2011 and 2010, respectively, a decrease of 78.2%. Segment profit was negatively impacted by:

• margin pressure associated with a changing client base as we have been strategically targeting larger, higher frequency newspaper insert clients who typically need optimized media solutions that blend newspaper inserts with higher margin shared mail products; and

• the aforementioned decline in ROP and polybag advertising and sampling revenues.

28

Free-standing Inserts

FSI revenues were $89.2 million and $94.6 million for the three months ended June 30, 2011 and 2010, respectively, a decrease of 5.7%, and $178.4 million and $192.1 million for the six months ended June 30, 2011 and 2010, respectively, a decrease of 7.1%. These decreases reflect volume declines associated with reduced market share. In addition, industry units declined approximately 1.5% during the six months ended June 30, 2011 as compared to the six months ended June 30, 2010, which, we believe, reflects our clients’ response to increased coupon redemptions by consumers.

FSI segment profit was $8.3 million and $11.4 million for the three months ended June 30, 2011 and 2010, respectively, a decrease of 27.2%, and, $15.7 million and $19.7 million for the six months ended June 30, 2011 and 2010, respectively, a decrease of 20.3%. In addition to the decline in FSI revenues, segment profit was negatively impacted by increased cost of sales.

International, Digital Media & Services

International, Digital Media & Services revenues were $50.0 million and $42.8 million for the three months ended June 30, 2011 and 2010, respectively, an increase of 16.8%, and $95.1 million and $82.6 million for the six months ended June 30, 2011 and 2010, respectively, an increase of 15.1%. International, Digital Media & Services segment profit was $6.4 million and $3.1 million for the three months ended June 30, 2011 and 2010, respectively, an increase of 106.5%, and $11.8 million and $8.6 million for the six months ended June 30, 2011 and 2010, respectively, an increase of 37.2%. These increases in revenues and segment profit were due primarily to strong performance by NCH, which was driven by increased coupon redemptions in the United States and Italy, and continued growth in our digital and in-store businesses. These contributions to segment profit were offset, in part, by continued investments in our digital business and the expansion of our in-store network.

Financial Condition, Liquidity and Sources of Capital

Our operating cash flows are our primary source of liquidity. We believe we will generate sufficient cash flows from operating activities and will have sufficient existing cash balances and lines of credit available to meet currently anticipated liquidity needs, including interest and required payments of indebtedness, repurchases of our common stock and capital expenditures necessary to support growth and productivity improvement.

The following table presents our available sources of liquidity as of June 30, 2011:

	Facility		Amount
(in millions of U.S. dollars)	Amount		Outstanding			Available
Cash and cash equivalents						$	119.0
Debt facilities:
New Senior Secured Revolving Credit Facility	$	100.0		61.0	(a)		39.0
Total Available						$	158.0

(a) Represents $50.0 million outstanding under the new senior secured revolving line of credit and $11.0 million in outstanding letters of credit.

29

Sources and Uses of Cash and Cash Equivalents

Cash and cash equivalents totaled $119.0 million at June 30, 2011 compared to $245.9 million at December 31, 2010. This decrease in cash and cash equivalents was comprised of net cash provided by operating activities of $91.0 million, offset by net cash used in investing activities of $10.1 million and net cash used in financing activities of $208.6 million during the six months ended June 30, 2011.

Operating Activities — Net cash provided by operating activities was $91.0 million for the six months ended June 30, 2011. In addition to cash received related to our net earnings, the following changes in assets and liabilities affected cash from operating activities for the six months ended June 30, 2011:

• a net cash inflow of $46.9 million associated with the decrease in accounts receivable, net, which was offset by net cash outflows of $9.4 million and $8.4 million related to decreases in accounts payable and progress billings, respectively; and

• a reduction of $41.0 million in accrued expenses due primarily to accrued incentive and profit sharing payments made during the six months ended June 30, 2011.

Investing Activities — Net cash used in investing activities was $10.1 million for the six months ended June 30, 2011, which reflects capital acquisitions of property, plant and equipment of $11.6 million, offset by proceeds of $1.5 million related to the sales of property, plant and equipment and available-for-sale securities.

Financing Activities — Net cash used in financing activities was $208.6 million for the six months ended June 30, 2011, which resulted from $350.0 million in proceeds from the new senior secured credit facility (described below), $260.0 million in proceeds related to the issuance of the 2021 Notes (described below) and $4.7 million of proceeds from stock option exercises, offset by $706.2 million of principal payments of long-term debt, primarily related to the repayment and termination of the prior senior secured credit facility (described below) and the cash tender offer, consent solicitation and redemption of the 2015 Notes (described above) and $11.3 million of costs associated with the new senior secured credit facility and issuance of the 2021 Notes. In addition, during the six months ended June 30, 2011, we repurchased $105.9 million, or 3,766,852 shares, of our common stock at an average price of $28.10 per share.

Current and Long-term Debt

As of June 30, 2011, we had outstanding $610.1 million in aggregate indebtedness, which consisted of $260.0 million of our unsecured 6⁵/8% Senior Notes due 2021, or the 2021 Notes, $300.0 million and $50.0 million under the term loan A and revolving credit facility portions of our senior secured credit facility, respectively, and $0.1 million of our Senior Secured Convertible Notes due 2033, or the 2033 Secured Notes. As of June 30, 2011, we had total outstanding letters of credit of approximately $11.0 million.

Senior Secured Credit Facility

General — On June 27, 2011, we entered into a new 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 “new senior secured credit facility”). The new 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.

30

The new senior secured credit facility consists of:

• 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, 10% during the third year, 15% during the fourth year and 11.25% during the fifth year, 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 million, 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 (the “revolving line of credit”), of which $50.0 million was drawn at closing and remains outstanding as of June 30, 2011 (exclusive of outstanding letters of credit described below); and

• an incremental facility pursuant to which, prior to the maturity of the new 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 new 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.

We used the initial borrowing under the revolving line of credit, the proceeds from the Term Loan A and existing cash of $120.0 million to repay the $462.2 million outstanding under the Term Loan B and Delayed Draw Term Loan portions of our prior senior secured credit facility (reflecting all outstanding borrowings thereunder), to pay accrued interest with respect to such loans and to pay the fees and expenses related to the new senior secured credit facility.

All borrowings under our new 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 June 30, 2011, we had approximately $39.0 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 $11.0 million in standby letters of credit outstanding as of June 30, 2011).

Interest and Fees — Borrowings under our new 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 plus 0.5% or one-month LIBOR plus 1%) (the “Base Rate”) or at an Adjusted LIBO Rate (as defined in the credit agreement governing the new senior secured credit facility) (the “Eurodollar Rate”), 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 initially 0.75% per annum for Base Rate loans and 1.75% per annum for Eurodollar Rate loans. Beginning with the delivery of the financial statements and the compliance certificate for the quarter ending September 30, 2011, the margins applicable to the borrowings under our new 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. See Note 8 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for discussion regarding our various interest rate swap agreements.

Guarantees and Security — Our new 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 2033 Secured Notes on an equal and ratable basis with the indebtedness under our new senior secured credit facility to the extent required by the indenture governing such notes.

Prepayments — The new 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 new 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.

31

Covenants — Subject to customary and otherwise agreed upon exceptions, our new senior secured credit facility contains affirmative and negative covenants, including, but not limited to:

• 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.

Our new senior secured credit facility also requires us to comply with:

• 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 new 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.

The following table shows the required and actual financial ratios under our new senior secured credit facility as of June 30, 2011:

	Required Ratio	Actual Ratio
Maximum consolidated leverage ratio	No greater than 3.50:1.00	1.90:1.00
Minimum consolidated interest coverage ratio	No less than 3.00:1.00	7.25:1.00

In addition, we are required to give notice to the administrative agent and the lenders under our new 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 new 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 new 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 new senior secured credit facility.

8¹/4% Senior Notes due 2015

On January 13, 2011, we commenced a cash tender offer and consent solicitation to purchase any and all of our outstanding 8¹/4% Senior Notes due 2015 (the “2015 Notes”) and to amend the indenture governing the 2015 Notes, which we refer to as the 2015 Indenture, to eliminate substantially all of the restrictive covenants and certain events of default. We used the net proceeds from the 2021 Notes (described below) to fund the purchase of the 2015 Notes, the related consent payments pursuant to the tender offer and consent solicitation, and the subsequent redemption of the 2015 Notes that were not tendered and remained outstanding after the expiration of the tender offer and consent solicitation.

32

During the three and six months ended June 30, 2010, we purchased $297.8 million aggregate principal amount of the 2015 Notes pursuant to a cash tender offer and open market repurchases.

6⁵/8% Senior Notes due 2021

On January 28, 2011, we issued in a private placement $260.0 million aggregate principal amount of our 6⁵/8% Senior Notes due 2021 (the “2021 Notes”). The net proceeds were used to fund the purchase of the outstanding 2015 Notes and the related consent payments in a concurrent tender offer and consent solicitation as described above and the redemption of the remaining outstanding 2015 Notes.

Interest on the 2021 Notes is payable every six months on February 1 and August 1, commencing August 1, 2011. 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.

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:

Year	Percentage
2016		103.313	%
2017		102.208	%
2018		101.104	%
2019 and thereafter		100.000	%

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 prices 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.

Senior Secured Convertible Notes due 2033

In May 2003, we issued $239,794,000 aggregate principal amount of the 2033 Secured Notes in a private placement transaction at an issue price of $667.24 per note, resulting in gross proceeds to us of $160.0 million. During the second quarter of 2008, we conducted a cash tender offer for the 2033 Secured Notes that was intended to satisfy the put rights of the holders of such notes that were exercisable on May 22, 2008 under the indenture governing such notes. Pursuant to the tender offer, we repurchased an aggregate principal amount of $239.7 million (or $159.9 million net of discount) for an aggregate of $159.9 million. We used the delayed draw term loan portion of our prior senior secured credit facility to finance the tender offer. As of June 30, 2011, an aggregate principal amount of $85,000 (or approximately $60,000 net of discount) of the 2033 Secured Notes remained outstanding pursuant to the 2033 Secured Notes indenture.

33

Additional Provisions

The indenture governing the 2033 Secured Notes 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.

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, by exercising rights to call, by satisfying put obligations, or in privately negotiated transactions or otherwise.

Other Indebtedness

We have entered into various interest rate swap agreements. For further detail regarding these agreements, see Note 8 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Covenant Compliance

As of June 30, 2011, we were in compliance with all of our indenture and new senior secured credit facility covenants.

Off-balance Sheet Arrangements

As of June 30, 2011, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Capital Expenditures

Capital expenditures were $11.6 million for the six months ended June 30, 2011, and are expected to be an aggregate amount of approximately $30.0 million for the 2011 fiscal year. It is expected these expenditures will be made using funds provided by operations.

Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details of new accounting pronouncements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that in certain circumstances affect amounts reported in the accompanying condensed consolidated financial statements. The SEC has defined a company’s most critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies have not changed materially from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2010 Form 10-K.

34

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal market risks are interest rates on various debt instruments and foreign exchange rates at our international subsidiaries.

Interest Rates

As described above, our borrowings under our new senior secured credit facility are subject to a variable rate of interest. In December 2009, we entered into an interest rate swap agreement with an effective date of December 31, 2010 and an initial notional amount of $300.0 million, which amortizes by $40.0 million at the end of each quarter subsequent to the effective date to $100.0 million for the quarter ended June 30, 2012, the expiration date of the interest rate swap agreement. This interest rate swap agreement effectively fixes, at 3.755%, the interest rate for the portion of our variable rate debt outstanding under our new senior secured credit facility equal to the outstanding notional amount of the interest rate swap agreement. As of June 30, 2011, the notional amount of this interest rate swap agreement was $220.0 million and the fair value of this derivative was a liability of $2.7 million.

As of June 30, 2011, the variable rate indebtedness outstanding under our new senior secured credit facility in excess of the outstanding notional amount of the interest rate swap agreement described above was an aggregate principal amount of $130.0 million, and is subject to interest rate risk, as our interest payments will fluctuate as the underlying interest rate changes. If there is a 1% increase in the Eurodollar Rate, the interest rate currently applicable to this variable rate indebtedness, and we do not alter the terms of our current interest rate swap agreement or enter into a new interest rate swap agreement, our debt service obligations on our variable rate indebtedness would increase by a total of $13.5 million between July 1, 2011 and June 27, 2016, the maturity date of the new senior secured credit facility. However, as a result of the interest rate swap agreement we entered into on July 6, 2011, the increase in our debt service obligations under the same scenario would be $7.2 million.

Foreign Currency

Currencies to which we have exposure are the Mexican peso, Canadian dollar, Polish zloty, British pound and Euro. Currency restrictions are not expected to have a significant effect on our cash flows, liquidity, or capital resources. Actual exchange losses or gains are recorded against production expense when the contracts are executed. As of June 30, 2011, we had commitments to purchase $10.7 million in Mexican pesos and $0.3 million in Polish zlotys over the next 12 months.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our Disclosure Committee, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, the disclosure controls and procedures are effective in ensuring that the information required to be disclosed in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the three months ended June 30, 2011 that has materially affected, or is likely to materially affect, internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

News

On February 4, 2010, we executed a settlement agreement and release (the “Settlement Agreement”) settling our outstanding lawsuits against News America Incorporated, a/k/a News America Marketing Group, News America Marketing, FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/k/a News America Marketing In-Store Services, LLC (collectively “News”). The operative complaint alleged violations of the Sherman Act and various state competitive statutes and the commission of torts by News in connection with the marketing and sale of FSI space and in-store promotion and advertising services. Pursuant to the terms of the Settlement Agreement,

35

News paid us $500.0 million and entered into a 10-year shared mail distribution agreement with our subsidiary, Valassis Direct Mail, Inc., which provides for our sale of certain shared mail services to News on specified terms.

In connection with the settlement, the parties worked with the United States District Court for the Eastern District of Michigan (the “Court”), under the Honorable Arthur J. Tarnow, on a set of procedures to handle future disputes among the parties with respect to conduct at issue in the litigation. The Court issued the order on this matter on June 15, 2011.

The settlement resolves all outstanding claims between us and News as of February 4, 2010. As a result, the parties agreed to dismiss all outstanding litigation between them and release all existing and potential claims against each other that were or could have been asserted in the litigation as of the date of the Settlement Agreement.

We are involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on our financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, or 2010 Form 10-K, which could materially affect our business, financial condition and future results. As previously disclosed in this Quarterly Report on Form 10-Q, we recently refinanced our senior secured credit facility. Accordingly, any reference to our senior secured credit facility contained in the risk factors of our 2010 Form 10-K shall now refer to the new senior secured credit facility we entered into in June 2011. In addition, as previously disclosed in this Quarterly Report on Form 10-Q, we entered into a new interest rate swap agreement in July 2011. The following risks should be considered in lieu of the risks set forth in our 2010 Form 10-K under the same heading.

Some of our debt, including borrowings under our senior secured credit facility, is based on variable rates of interest, which could result in higher interest expense in the event of an increase in interest rates.

As of June 30, 2011, $350.0 million of our $610.1 million aggregate indebtedness was subject to variable interest rates. However, in December 2009, we entered into an interest rate swap agreement with an effective date of December 31, 2010 and an initial notional amount of $300.0 million, which effectively fixes the interest rate for an amortizing notional amount of this variable rate debt under our senior secured credit facility at an interest rate of 4.255%. The notional amount of $300.0 million amortizes by $40.0 million at the end of every quarter until it reaches $100.0 million for the quarter ended June 30, 2012, the expiration date. In July 2011, we entered into a new interest rate swap agreement with an effective date of June 30, 2012, which effectively fixes the interest rate for an amortizing notional amount (initially $186.3 million) of this variable rate debt under our senior secured credit facility at an interest rate of 3.6195% per annum and expires on June 30, 2015. Our remaining variable rate indebtedness, which was an aggregate principal amount of $130.0 million outstanding under our senior secured credit facility as of June 30, 2011 is subject to interest rate risk, as our interest payments will fluctuate as the underlying interest rate changes. If there is a 1% increase in the Eurodollar Rate (as defined in the credit agreement governing the new senior secured credit facility), the interest rate currently applicable to this variable rate debt, and we do not alter the terms of our current interest rate swap agreements or enter into a new interest rate swap agreement, our debt service obligations on our variable rate indebtedness would increase by a total of $13.5 million between January 1, 2011 and June 27, 2016, the maturity date of the term loan and revolving line of credit under the senior secured credit facility, which would affect our cash flows and results of operations. If we borrow additional amounts under the revolving loan portion of our senior secured credit facility, our interest rate risk may increase.

The risks described above and in our 2010 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

36

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table reflects our repurchases of our common stock during the three months ended June 30, 2011:

			Average Price
	Total		Paid per Share		Total Number		Maximum Number
	Number of		(including		of Shares Purchased		of Shares that May
	Shares		broker		as Part of Publicly		Yet be Purchased
Period	Purchased		commissions)		Announced Plan (a)		under the Plan (b)
April 1, 2011 to April 30, 2011		—	$	—		—		2,734,368
May 1, 2011 to May 31, 2011		1,535,766	$	27.91		1,535,766		7,198,602	(c)
June 1, 2011 to June 30, 2011		608,301	$	28.71		608,301		6,590,301
		2,144,067	$	28.14		2,144,067

(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.
(b)	Our ability to make share repurchases may be limited by the documents governing our indebtedness.
(c)	In May 2011, our Board of Directors approved an increase of 6 million shares to our August 25, 2005 share repurchase plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

None.

37

ITEM 6. EXHIBITS

Exhibit Number	Description
4.1	Second Supplemental Indenture, dated as of June 27, 2011, between Valassis Communications, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture dated as of May 22, 2003 (incorporated by reference to Exhibit 4.1 to Valassis’ Form 8-K (SEC File No. 001-10991) filed on July 1, 2011)
10.1	Credit Agreement, dated as of June 27, 2011, by and among Valassis Communications, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBS Securities Inc., as joint bookrunners and joint lead arrangers, and a syndicate of lenders (incorporated by reference to Exhibit 10.1 to Valassis’ Form 8-K (SEC File No. 001-10991) filed on July 1, 2011)
10.2	Guarantee and Collateral Agreement, dated as of June 27, 2011, by and among Valassis Communications, Inc. and certain of its domestic subsidiaries signatory thereto, as grantors, in favor of JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the benefit of the secured parties thereunder (incorporated by reference to Exhibit 10.2 to Valassis’ Form 8-K (SEC File No. 001-10991) filed on July 1, 2011)
31.1	Section 302 Certification of Alan F. Schultz
31.2	Section 302 Certification of Robert L. Recchia
32.1	Section 906 Certification of Alan F. Schultz
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.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.

38

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: August 9, 2011

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.

39

EXHIBIT INDEX

Exhibit Number	Description
4.1	Second Supplemental Indenture, dated as of June 27, 2011, between Valassis Communications, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture dated as of May 22, 2003 (incorporated by reference to Exhibit 4.1 to Valassis’ Form 8-K (SEC File No. 001-10991) filed on July 1, 2011)
10.1	Credit Agreement, dated as of June 27, 2011, by and among Valassis Communications, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBS Securities Inc., as joint bookrunners and joint lead arrangers, and a syndicate of lenders (incorporated by reference to Exhibit 10.1 to Valassis’ Form 8-K (SEC File No. 001-10991) filed on July 1, 2011)
10.2	Guarantee and Collateral Agreement, dated as of June 27, 2011, by and among Valassis Communications, Inc. and certain of its domestic subsidiaries signatory thereto, as grantors, in favor of JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the benefit of the secured parties thereunder (incorporated by reference to Exhibit 10.2 to Valassis’ Form 8-K (SEC File No. 001-10991) filed on July 1, 2011)
31.1	Section 302 Certification of Alan F. Schultz
31.2	Section 302 Certification of Robert L. Recchia
32.1	Section 906 Certification of Alan F. Schultz
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.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.

40

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Alan F. Schultz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Valassis Communications, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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.

Date: August 9, 2011

/s/ Alan F. Schultz 

Alan F. Schultz 

Chief Executive Officer 

41

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert L. Recchia, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Valassis Communications, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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.

Date: August 9, 2011

/s/ Robert L. Recchia  

Robert L. Recchia 

Chief Financial Officer 

42

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Valassis Communications, Inc. (the “Company”), does hereby certify, to the best of his knowledge and belief that:

     (1) The Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2011	/s/ Alan F. Schultz
	Alan F. Schultz
	Chief Executive Officer

43

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Valassis Communications, Inc. (the “Company”), does hereby certify, to the best of his knowledge and belief that:

     (1) The Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2011	/s/ Robert L. Recchia
	Robert L. Recchia
	Chief Financial Officer

44

XML



Condensed Consolidating Balance Sheets (Detail) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2010	Dec. 31, 2009
Current assets:
Cash and cash equivalents	$ 118,962	$ 245,935	$ 228,708	$ 129,846
Accounts receivable, net	411,423	459,952
Inventories	39,219	41,987
Prepaid expenses and other (including intercompany)	62,622	38,657
Total current assets	632,226	786,531
Property, plant and equipment, net	162,399	175,567
Goodwill and other intangible assets, net	863,977	870,288
Investments	3,064	3,146
Other assets	14,509	10,126
Total assets	1,676,175	1,845,658
Current liabilities:
Current portion, long-term debt	15,000	7,058
Accounts payable and intercompany payable	320,193	329,602
Progress billings	44,615	53,001
Accrued expenses	85,589	99,612
Total current liabilities	465,397	489,273
Long-term debt	595,060	699,169
Deferred income taxes	80,003	78,764
Other non-current liabilities	45,830	49,568
Total liabilities	1,186,290	1,316,774
Stockholders' equity	489,885	528,884
Total liabilities and stockholders' equity	1,676,175	1,845,658
Parent Company
Current assets:
Cash and cash equivalents	84,913	211,933	204,161	104,477
Accounts receivable, net	114,688	175,115
Inventories	30,941	33,305
Prepaid expenses and other (including intercompany)	1,008,120	278,489
Total current assets	1,238,662	698,842
Property, plant and equipment, net	26,154	31,475
Goodwill and other intangible assets, net	42,735	42,745
Investments	399,493	400,404
Intercompany note receivable (payable)	(73,639)	479,365
Other assets	10,478	6,982
Total assets	1,643,883	1,659,813
Current liabilities:
Current portion, long-term debt	15,000	7,058
Accounts payable and intercompany payable	464,676	323,277
Progress billings	14,800	26,353
Accrued expenses	42,876	51,035
Total current liabilities	537,352	407,723
Long-term debt	595,060	699,169
Deferred income taxes	(3,616)	(4,044)
Other non-current liabilities	25,202	28,081
Total liabilities	1,153,998	1,130,929
Stockholders' equity	489,885	528,884
Total liabilities and stockholders' equity	1,643,883	1,659,813
Guarantor Subsidiaries
Current assets:
Cash and cash equivalents	5,480	8,026	801	7,614
Accounts receivable, net	273,820	259,001
Inventories	8,275	8,679
Prepaid expenses and other (including intercompany)	1,047,338	630,972
Total current assets	1,334,913	906,678
Property, plant and equipment, net	134,415	142,006
Goodwill and other intangible assets, net	814,253	820,554
Investments	21,137	12,486
Intercompany note receivable (payable)	86,187	(460,369)
Other assets	2,948	3,130
Total assets	2,393,853	1,424,485
Current liabilities:
Accounts payable and intercompany payable	1,840,636	866,614
Progress billings	14,170	11,751
Accrued expenses	35,601	41,300
Total current liabilities	1,890,407	919,665
Deferred income taxes	87,614	86,804
Other non-current liabilities	18,377	19,575
Total liabilities	1,996,398	1,026,044
Stockholders' equity	397,455	398,441
Total liabilities and stockholders' equity	2,393,853	1,424,485
Non-Guarantor Subsidiaries
Current assets:
Cash and cash equivalents	28,569	25,976	23,746	17,755
Accounts receivable, net	22,915	25,836
Inventories	3	3
Prepaid expenses and other (including intercompany)	1,712	2,083
Total current assets	53,199	53,898
Property, plant and equipment, net	1,830	2,086
Goodwill and other intangible assets, net	6,989	6,989
Intercompany note receivable (payable)	(12,548)	(18,996)
Other assets	1,083	14
Total assets	50,553	43,991
Current liabilities:
Accounts payable and intercompany payable	9,429	12,598
Progress billings	15,645	14,897
Accrued expenses	7,112	7,277
Total current liabilities	32,186	34,772
Deferred income taxes	(3,995)	(3,996)
Other non-current liabilities	2,251	1,912
Total liabilities	30,442	32,688
Stockholders' equity	20,111	11,303
Total liabilities and stockholders' equity	50,553	43,991
Consolidating Adjustments
Current assets:
Prepaid expenses and other (including intercompany)	(1,994,548)	(872,887)
Total current assets	(1,994,548)	(872,887)
Investments	(417,566)	(409,744)
Total assets	(2,412,114)	(1,282,631)
Current liabilities:
Accounts payable and intercompany payable	(1,994,548)	(872,887)
Total current liabilities	(1,994,548)	(872,887)
Total liabilities	(1,994,548)	(872,887)
Stockholders' equity	(417,566)	(409,744)
Total liabilities and stockholders' equity	$ (2,412,114)	$ (1,282,631)

XML



Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	65,371,689	65,283,749
Common stock, shares outstanding	47,079,040	50,361,749
Treasury stock, shares	18,292,649	14,922,000

XML



Condensed Consolidated Statements of Income (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenues	$ 565,252	$ 579,950	$ 1,112,231	$ 1,129,952
Costs and expenses:
Cost of sales	418,040	423,765	826,617	827,154
Selling, general and administrative	80,831	92,663	159,258	183,621
Amortization expense	3,155	3,155	6,311	6,311
Total costs and expenses	502,026	519,583	992,186	1,017,086
Gain from litigation settlement, net (Note 6)				490,085
Earnings from operations	63,226	60,367	120,045	602,951
Other expenses and income:
Interest expense	11,726	17,837	21,501	37,993
Interest income	(122)	(248)	(261)	(394)
Loss on extinguishment of debt (Note 3)	2,966	23,873	16,318	23,873
Other income, net	(1,436)	(561)	(2,312)	(2,351)
Total other expenses (income), net	13,134	40,901	35,246	59,121
Earnings (loss) before income taxes	50,092	19,466	84,799	543,830
Income tax expense (Note 1)	19,840	8,361	33,136	210,197
Net earnings	$ 30,252	$ 11,105	$ 51,663	$ 333,633
Net earnings per common share, basic (Note 7)	$ 0.63	$ 0.22	$ 1.06	$ 6.77
Net earnings per common share, diluted (Note 7)	$ 0.60	$ 0.21	$ 1.01	$ 6.41
Weighted-average common shares outstanding, basic (Note 7)	47,877	49,531	48,903	49,251
Weighted-average common shares outstanding, diluted (Note 7)	50,167	52,499	51,250	52,028

XML



EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2011

Earnings Per Common Share Data

Earnings per common share data were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2011			2010			2011			2010
Net earnings	$	30,252		$	11,105		$	51,663		$	333,633
Weighted-average common shares outstanding, basic		47,877			49,531			48,903			49,251
Shares issued on exercise of dilutive options		5,591			9,142			6,142			8,237
Shares purchased with assumed proceeds of options and unearned restricted shares		(3,305	)		(6,183	)		(3,799	)		(5,469	)
Shares contingently issuable		4			9			4			9
Weighted-average common shares outstanding, diluted		50,167			52,499			51,250			52,028
Net earnings per common share, diluted	$	0.60		$	0.21		$	1.01		$	6.41
Anti-dilutive options excluded from calculation of weighted- average common shares outstanding, diluted		3,285			1,472			2,915			2,729

XML



Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 03, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	VCI
Entity Registrant Name	VALASSIS COMMUNICATIONS INC
Entity Central Index Key	0000883293
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		47,107,690

XML



Domestic and Foreign Revenues (Detail) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Segment Reporting Information [Line Items]
Revenues	$ 565,252	$ 579,950	$ 1,112,231	$ 1,129,952
UNITED STATES
Segment Reporting Information [Line Items]
Revenues	550,300	566,200	1,085,200	1,102,900
Foreign
Segment Reporting Information [Line Items]
Revenues	$ 14,900	$ 13,800	$ 27,000	$ 27,100

XML



SEGMENT REPORTING (Tables)

6 Months Ended

Jun. 30, 2011

Revenues, Depreciation/Amortization and Segment Profit by Segment

The following table sets forth, by segment, revenues, depreciation/amortization and segment profit for the indicated periods:

	Three Months Ended June 30,
(in millions of U.S. dollars)	Shared Mail		Neighborhood Targeted		FSI		International, Digital Media & Services		Total
2011
Revenues from external customers	$	337.2	$	88.8	$	89.2	$	50.0	$	565.2
Intersegment revenues	$	4.1	$	12.9	$	9.8	$	0.1	$	26.9
Depreciation/amortization	$	9.5	$	1.0	$	3.0	$	1.9	$	15.4
Segment profit	$	47.7	$	0.8	$	8.3	$	6.4	$	63.2
2010
Revenues from external customers	$	326.3	$	116.3	$	94.6	$	42.8	$	580.0
Intersegment revenues	$	3.9	$	6.8	$	9.3	$	—	$	20.0
Depreciation/amortization	$	10.2	$	1.0	$	3.1	$	0.8	$	15.1
Segment profit	$	40.6	$	5.3	$	11.4	$	3.1	$	60.4
	Six Months Ended June 30,
(in millions of U.S. dollars)	Shared Mail		Neighborhood Targeted		FSI		International, Digital Media & Services		Total
2011
Revenues from external customers	$	659.8	$	178.9	$	178.4	$	95.1	$	1,112.2
Intersegment revenues	$	8.6	$	22.2	$	19.6	$	0.2	$	50.6
Depreciation/amortization	$	19.5	$	2.0	$	6.0	$	3.6	$	31.1
Segment profit	$	89.8	$	2.7	$	15.7	$	11.8	$	120.0
2010
Revenues from external customers	$	639.2	$	216.1	$	192.1	$	82.6	$	1,130.0
Intersegment revenues	$	7.4	$	12.4	$	18.9	$	—	$	38.7
Depreciation/amortization	$	20.9	$	2.0	$	6.2	$	1.6	$	30.7
Segment profit	$	72.2	$	12.4	$	19.7	$	8.6	$	112.9

Reconciliations to Condensed Consolidated Financial Statement

The following table provides reconciliations of total segment profit to earnings from operations for the indicated periods:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions of U.S. dollars)	2011		2010		2011		2010
Total segment profit	$	63.2	$	60.4	$	120.0	$	112.9
Unallocated amounts:
Gain from litigation settlement		—		—		—		490.1
Earnings from operations	$	63.2	$	60.4	$	120.0	$	603.0

Domestic and Foreign Revenues

Domestic and foreign revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions of U.S. dollars)	2011		2010		2011		2010
United States	$	550.3	$	566.2	$	1,085.2	$	1,102.9
Foreign		14.9		13.8		27.0		27.1
Revenues	$	565.2	$	580.0	$	1,112.2	$	1,130.0

Domestic and Foreign Long-Lived Assets (Property, Plant and Equipment, Net)

Domestic and foreign long-lived assets (property, plant and equipment, net) were as follows:

(in millions of U.S. dollars)	June 30, 2011		December 31, 2010
United States	$	153.9	$	166.8
Foreign		8.5		8.8
Property, plant and equipment, net	$	162.4	$	175.6

XML



Reconciliations to Condensed Consolidated Financial Statement (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Segment Reporting, Revenue Reconciling Item [Line Items]
Total segment profit	$ 63,200,000	$ 60,400,000	$ 120,000,000	$ 112,900,000
Gain from litigation settlement, net (Note 6)				490,085,000
Earnings from operations	$ 63,226,000	$ 60,367,000	$ 120,045,000	$ 602,951,000

XML



GAIN FROM LITIGATION SETTLEMENT

6 Months Ended

Jun. 30, 2011

GAIN FROM LITIGATION SETTLEMENT

6. GAIN FROM LITIGATION SETTLEMENT

On January 30, 2010, we announced that we had reached an agreement to settle our outstanding lawsuits against News America Incorporated, a/k/a News America Marketing Group, News America Marketing, FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/k/a News America Marketing In-Store Services, LLC (collectively “News”). The operative complaint alleged violations of the Sherman Act and various state competitive statutes and the commission of torts by News in connection with the marketing and sale of FSI space and in-store promotion and advertising services.

On February 4, 2010, we executed a settlement agreement and release (the “Settlement Agreement”) with News, and pursuant to the terms of the Settlement Agreement, News paid us $500.0 million. News America, Inc. also entered into a 10-year shared mail distribution agreement with our subsidiary, Valassis Direct Mail, Inc., which provides for our sale of certain shared mail services to News on specified terms.

In connection with the settlement, the parties worked with the United States District Court for the Eastern District of Michigan (the “Court”), under the Honorable Arthur J. Tarnow, on a set of procedures to handle future disputes among the parties with respect to conduct at issue in the litigation. The Court issued the order on this matter on June 15, 2011.

The settlement resolves all outstanding claims between us and News as of February 4, 2010. As a result, the parties agreed to dismiss all outstanding litigation between them and release all existing and potential claims against each other that were or could have been asserted in the litigation as of the date of the Settlement Agreement.

During the six months ended June 30, 2010, in connection with the successful settlement of these lawsuits, we made $9.9 million in related payments, including special bonuses to certain of our employees (including our named executive officers in our proxy statement) in an aggregate amount of $8.1 million. These expenses were netted against the $500.0 million of proceeds received, and the net proceeds of $490.1 million were recorded as a separate line item “Gain from litigation settlement, net” in our condensed consolidated statement of income for the three and six months ended June 30, 2010.

XML



GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Tables)

6 Months Ended

Jun. 30, 2011

Condensed consolidating balance sheet

Condensed Consolidating Balance Sheet

June 30, 2011

(in thousands of U.S. dollars)

Assets	Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current assets:
Cash and cash equivalents	$	84,913		$	5,480	$	28,569		$	—		$	118,962
Accounts receivable, net		114,688			273,820		22,915			—			411,423
Inventories		30,941			8,275		3			—			39,219
Prepaid expenses and other (including intercompany)		1,008,120			1,047,338		1,712			(1,994,548	)		62,622
Total current assets		1,238,662			1,334,913		53,199			(1,994,548	)		632,226
Property, plant and equipment, net		26,154			134,415		1,830			—			162,399
Goodwill and other intangible assets, net		42,735			814,253		6,989			—			863,977
Investments		399,493			21,137		—			(417,566	)		3,064
Intercompany note receivable (payable)		(73,639	)		86,187		(12,548	)		—			—
Other assets		10,478			2,948		1,083			—			14,509
Total assets	$	1,643,883		$	2,393,853	$	50,553		$	(2,412,114	)	$	1,676,175
Liabilities and Stockholders’ Equity	Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current liabilities:
Current portion, long-term debt	$	15,000		$	—	$	—		$	—		$	15,000
Accounts payable and intercompany payable		464,676			1,840,636		9,429			(1,994,548	)		320,193
Progress billings		14,800			14,170		15,645			—			44,615
Accrued expenses		42,876			35,601		7,112			—			85,589
Total current liabilities		537,352			1,890,407		32,186			(1,994,548	)		465,397
Long-term debt		595,060			—		—			—			595,060
Deferred income taxes		(3,616	)		87,614		(3,995	)		—			80,003
Other non-current liabilities		25,202			18,377		2,251			—			45,830
Total liabilities		1,153,998			1,996,398		30,442			(1,994,548	)		1,186,290
Stockholders’ equity		489,885			397,455		20,111			(417,566	)		489,885
Total liabilities and stockholders’ equity	$	1,643,883		$	2,393,853	$	50,553		$	(2,412,114	)	$	1,676,175

Condensed Consolidating Balance Sheet

December 31, 2010

(in thousands of U.S. dollars)

Assets	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current assets:
Cash and cash equivalents	$	211,933		$	8,026		$	25,976		$	—		$	245,935
Accounts receivable, net		175,115			259,001			25,836			—			459,952
Inventories		33,305			8,679			3			—			41,987
Prepaid expenses and other (including intercompany)		278,489			630,972			2,083			(872,887	)		38,657
Total current assets		698,842			906,678			53,898			(872,887	)		786,531
Property, plant and equipment, net		31,475			142,006			2,086			—			175,567
Goodwill and other intangible assets, net		42,745			820,554			6,989			—			870,288
Investments		400,404			12,486			—			(409,744	)		3,146
Intercompany note receivable (payable)		479,365			(460,369	)		(18,996	)		—			—
Other assets		6,982			3,130			14			—			10,126
Total assets	$	1,659,813		$	1,424,485		$	43,991		$	(1,282,631	)	$	1,845,658
Liabilities and Stockholders’ Equity	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current liabilities:
Current portion, long-term debt	$	7,058		$	—		$	—		$	—		$	7,058
Accounts payable and intercompany payable		323,277			866,614			12,598			(872,887	)		329,602
Progress billings		26,353			11,751			14,897			—			53,001
Accrued expenses		51,035			41,300			7,277			—			99,612
Total current liabilities		407,723			919,665			34,772			(872,887	)		489,273
Long-term debt		699,169			—			—			—			699,169
Deferred income taxes		(4,044	)		86,804			(3,996	)		—			78,764
Other non-current liabilities		28,081			19,575			1,912			—			49,568
Total liabilities		1,130,929			1,026,044			32,688			(872,887	)		1,316,774
Stockholders’ equity		528,884			398,441			11,303			(409,744	)		528,884
Total liabilities and stockholders’ equity	$	1,659,813		$	1,424,485		$	43,991		$	(1,282,631	)	$	1,845,658

Condensed consolidating statement of income

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2011

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	200,589		$	444,629		$	20,281		$	(100,247	)	$	565,252
Cost and expenses:
Cost of sales		168,597			286,880			13,973			(51,410	)		418,040
Selling, general and administrative		21,461			104,561			3,646			(48,837	)		80,831
Amortization expense		5			3,150			—			—			3,155
Total costs and expenses		190,063			394,591			17,619			(100,247	)		502,026
Earnings from operations		10,526			50,038			2,662			—			63,226
Other expenses and income:
Interest expense		11,726			—			—			—			11,726
Interest income		(96	)		—			(26	)		—			(122	)
Intercompany interest		(3,157	)		2,995			162			—			—
Loss on extinguishment of debt		2,966			—			—			—			2,966
Other income, net		9			(1,481	)		36			—			(1,436	)
Total other expenses, net		11,448			1,514			172			—			13,134
Earnings (loss) before income taxes		(922	)		48,524			2,490			—			50,092
Income tax expense		241			18,844			755			—			19,840
Equity in net earnings of subsidiaries		31,415			1,735			—			(33,150	)		—
Net earnings	$	30,252		$	31,415		$	1,735		$	(33,150	)	$	30,252

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2010

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	210,345		$	375,691		$	19,016		$	(25,102	)	$	579,950
Cost and expenses:
Cost of sales		164,074			271,879			12,914			(25,102	)		423,765
Selling, general and administrative		36,274			52,619			3,770			—			92,663
Amortization expense		5			3,150			—			—			3,155
Total costs and expenses		200,353			327,648			16,684			(25,102	)		519,583
Earnings from operations		9,992			48,043			2,332			—			60,367
Other expenses and income:
Interest expense		17,837			—			—			—			17,837
Interest income		(230	)		1			(19	)		—			(248	)
Intercompany interest		(16,298	)		16,186			112			—			—
Loss on extinguishment of debt		23,873			—			—			—			23,873
Other income, net		280			(860	)		19			—			(561	)
Total other expenses (income), net		25,462			15,327			112			—			40,901
Earnings (loss) before income taxes		(15,470	)		32,716			2,220			—			19,466
Income tax (benefit) expense		(3,325	)		10,906			780			—			8,361
Equity in net earnings of subsidiaries		23,250			1,440			—			(24,690	)		—
Net earnings	$	11,105		$	23,250		$	1,440		$	(24,690	)	$	11,105

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2011

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	398,755		$	873,897		$	37,650		$	(198,071	)	$	1,112,231
Cost and expenses:
Cost of sales		334,934			564,712			26,292			(99,321	)		826,617
Selling, general and administrative		45,975			204,939			7,094			(98,750	)		159,258
Amortization expense		11			6,300			—			—			6,311
Total costs and expenses		380,920			775,951			33,386			(198,071	)		992,186
Earnings from operations		17,835			97,946			4,264			—			120,045
Other expenses and income:
Interest expense		21,501			—			—			—			21,501
Interest income		(214	)		—			(47	)		—			(261	)
Intercompany interest		(14,354	)		14,192			162			—			—
Loss on extinguishment of debt		16,318			—			—			—			16,318
Other income, net		(218	)		(2,270	)		176			—			(2,312	)
Total other expenses, net		23,033			11,922			291			—			35,246
Earnings (loss) before income taxes		(5,198	)		86,024			3,973			—			84,799
Income tax expense		566			31,308			1,262			—			33,136
Equity in net earnings of subsidiaries		57,427			2,711			—			(60,138	)		—
Net earnings	$	51,663		$	57,427		$	2,711		$	(60,138	)	$	51,663

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2010

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	404,373		$	737,009		$	36,956		$	(48,386	)	$	1,129,952
Cost and expenses:
Cost of sales		312,663			537,913			24,964			(48,386	)		827,154
Selling, general and administrative		72,194			104,290			7,137			—			183,621
Amortization expense		11			6,300			—			—			6,311
Total costs and expenses		384,868			648,503			32,101			(48,386	)		1,017,086
Gain from litigation settlement, net		490,085			—			—			—			490,085
Earnings from operations		509,590			88,506			4,855			—			602,951
Other expenses and income:
Interest expense		37,993			—			—			—			37,993
Interest income		(373	)		3			(24	)		—			(394	)
Intercompany interest		(33,544	)		33,432			112			—			—
Loss on extinguishment of debt		23,873			—			—			—			23,873
Other income, net		(813	)		(1,416	)		(122	)		—			(2,351	)
Total other expenses (income), net		27,136			32,019			(34	)		—			59,121
Earnings before income taxes		482,454			56,487			4,889			—			543,830
Income tax expense		188,743			20,178			1,276			—			210,197
Equity in net earnings of subsidiaries		39,922			3,613			—			(43,535	)		—
Net earnings	$	333,633		$	39,922		$	3,613		$	(43,535	)	$	333,633

Condensed consolidating statement of cash flows

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2011

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Total
Net cash provided by (used in) operating activities	$	134,756		$	(45,665	)	$	1,942		$	—	$	91,033
Cash flows from investing activities:
Additions to property, plant and equipment		(7,124	)		(4,428	)		(74	)		—		(11,626	)
Proceeds from sale of property, plant and equipment		20			—			—			—		20
Proceeds from sale of available-for-sale securities		1,494			—			—			—		1,494
Net cash used in investing activities		(5,610	)		(4,428	)		(74	)		—		(10,112	)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity		(47,547	)		47,547			—			—		—
Borrowings of long-term debt		610,000			—			—			—		610,000
Repayments of long-term debt		(706,169	)		—			—			—		(706,169	)
Debt issuance costs		(11,266	)		—			—			—		(11,266	)
Repurchases of common stock		(105,856	)		—			—			—		(105,856	)
Proceeds from issuance of common stock		4,672			—			—			—		4,672
Net cash provided (used in) by financing activities		(256,166	)		47,547			—			—		(208,619	)
Effect of exchange rate changes on cash and cash equivalents		—			—			725			—		725
Net increase (decrease) in cash and cash equivalents		(127,020	)		(2,546	)		2,593			—		(126,973	)
Cash and cash equivalents at beginning of period		211,933			8,026			25,976			—		245,935
Cash and cash equivalents at end of period	$	84,913		$	5,480		$	28,569		$	—	$	118,962

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2010

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Total
Net cash provided by operating activities	$	339,620		$	86,971		$	7,315		$	—	$	433,906
Cash flows from investing activities:
Additions to property, plant and equipment		(5,393	)		(2,861	)		(147	)		—		(8,401	)
Proceeds from sale of property, plant and equipment		36			—			—			—		36
Net cash used in investing activities		(5,357	)		(2,861	)		(147	)		—		(8,365	)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity		90,923			(90,923	)		—			—		—
Repayments of long-term debt		(301,312	)		—			—			—		(301,312	)
Repurchase of common stock		(54,623	)		—			—			—		(54,623	)
Proceeds from issuance of common stock		30,433			—			—			—		30,433
Net cash provided by (used in) financing activities		(234,579	)		(90,923	)		—			—		(325,502	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,177	)		—		(1,177	)
Net increase (decrease) in cash and cash equivalents		99,684			(6,813	)		5,991			—		98,862
Cash and cash equivalents at beginning of period		104,477			7,614			17,755			—		129,846
Cash and cash equivalents at end of period	$	204,161		$	801		$	23,746		$	—	$	228,708

XML



DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Additional Information Addition Information (Detail) (USD $)	3 Months Ended		6 Months Ended			1 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended			6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010	Feb. 28, 2009 Interest Rate Swap with Fixed Rate of Three Month LIBOR at 5.045%	Jun. 30, 2007 Interest Rate Swap with Fixed Rate of Three Month LIBOR at 5.045%	Feb. 28, 2009 Interest Rate Swap with Fixed Rate of Three Month LIBOR at 5.026%	Jun. 30, 2011 Interest Rate Swap with Three Month LIBOR at 2.005% Plus Applicable Margin	Dec. 31, 2009 Interest Rate Swap with Three Month LIBOR at 2.005% Plus Applicable Margin	Jun. 30, 2011 Interest Rate Swap with Three Month LIBOR at 2.005% Plus Applicable Margin	Dec. 17, 2009 Interest Rate Swap with Three Month LIBOR at 2.005% Plus Applicable Margin	Jun. 30, 2011 Interest Rate Swap Fixed Rate of 1 Point 8695 Percent July 2011 Through September 2013 Subsequent Event	Jun. 30, 2011 Interest Rate Swap Fixed Rate of 1 Point 8695 Percent September 2013 Through September 2014 Subsequent Event	Jun. 30, 2011 Interest Rate Swap Fixed Rate of 1 Point 8695 Percent September 2014 Through June 2015 Subsequent Event	Jun. 30, 2011 Interest Rate Swap Fixed Rate of 1 Point 8695 Percent Subsequent Event	Jun. 30, 2011 Currency, Mexican Pesos	Jun. 30, 2011 Currency, Polish Zloty
Derivative [Line Items]
Fixed and effective interest rate swap agreements			During the second quarter of 2007, we entered into two interest rate swap agreements with an aggregate notional principal amount of $480.0 million. These interest rate swaps effectively fixed three-month LIBOR at 5.045%, for a then-effective interest rate of 6.795%, including the applicable margin, for $480.0 million of our variable rate debt under our senior secured credit facility. In February 2009, we reduced the notional principal amount of the interest rate swaps by $32.8 million and paid termination fees of approximately $2.6 million. The termination fees, or deferred losses, related to the terminated portion of the swaps were amortized to interest expense over the original life of the interest rate swaps, through December 31, 2010. As a result of the reduced notional amount of the swaps, three-month LIBOR was effectively fixed at 5.026%, for a then-effective interest rate of 6.776%, including the applicable margin. We initially designated the swaps as hedging instruments and recorded changes in the fair value of these interest rate swaps as a component of accumulated other comprehensive income. We discontinued cash flow hedge accounting treatment for the interest rate swap agreements effective April 1, 2009. The deferred losses on the interest rate swaps previously charged to accumulated other comprehensive income were amortized to interest expense and subsequent changes in the fair value of the swaps were recognized in earnings as a component of interest expense until the swaps expired on December 31, 2010. On December 17, 2009, we entered into an interest rate swap agreement with an initial notional amount of $300.0 million to fix three-month LIBOR at 2.005%, for an effective rate of 4.255%, including the applicable margin, for $300.0 million of our variable rate debt under our prior senior secured credit facility. The effective date of this agreement was December 31, 2010. The notional amount of $300.0 million amortizes by $40.0 million at the end of every quarter until it reaches $100.0 million for the quarter ended June 30, 2012, the expiration date. The swap was designated as, and qualified as, a cash flow hedge through the termination of the prior senior secured credit facility on June 27, 2011. During the three and six months ended June 30, 2011, as a result of the termination of the prior senior secured credit facility, pre-tax losses of $2.6 million were reclassified from accumulated other comprehensive income to earnings as a component of interest expense. This interest rate swap remains in effect and subsequent changes in the fair value of this swap will be recognized in earnings as a component of interest expense until the swap expires. On July 6, 2011, we entered into an interest rate swap agreement with an initial notional amount of $186.3 million. The effective date of this agreement is June 30, 2012, the expiration date of our existing interest rate swap. Under the swap agreement, we are required to make quarterly payments at a fixed interest rate of 1.8695% per annum to the counterparty on an amortizing notional amount in exchange for receiving variable payments based on the three-month LIBOR interest rate for the same notional amount. After giving effect to the swap agreement, our effective interest rate for the notional amount, based on the current applicable margin under the new senior secured credit facility of 1.75% per annum, will be 3.6195% per annum. The initial notional amount of $186.3 million amortizes quarterly by (i) $2,812,500 from the effective date through the quarter ended September 30, 2013, (ii) $5,625,000 from September 30, 2013 through the quarter ended September 30, 2014, and (iii) $8,437,500 from September 30, 2014 until June 30, 2015, the expiration date of the agreement. The swap is designated as and qualifies as a cash flow hedge.
Notional amount of derivatives							$ 480,000,000					$ 300,000,000				$ 186,300,000
Effective date of swap agreement																Jun. 30, 2012
Fixed interest rate under swap agreement							5.045%	5.026%				2.005%				1.8695%
Effective Interest Rate of Variable Rate Debt							6.795%	6.776%				4.255%				3.6195%
Notional Amount of Interest Rate Swap terminated						32,800,000
Termination Fees of Interest Rate Swap						2,600,000
Amortization of Notional Amount										40,000,000			2,812,500	5,625,000	8,437,500
Interest rate swap, expiration date										Jun. 30, 2012
Minimum notional amount of interest rate swap at the date of expiration												100,000,000
Pre-tax losses reclassified from accumulated other comprehensive income to earnings	(3,700,000)	(4,400,000)	(5,000,000)	(8,900,000)					(2,600,000)		(2,600,000)
Subsequent Events Date																Jul. 06, 2011
Purchase commitment to be settled with foreign currency, dollar value																	10,700,000	300,000
Fair value of long term debt in excess of carrying value					10,600,000
Fair value of long term debt below of carrying value	$ 5,500,000		$ 5,500,000

XML



COMMITMENTS AND CONTINGENCIES - Additional Information (Detail) (USD $) In Millions	Jun. 30, 2011
Loss Contingencies [Line Items]
Estimated potential sales tax liability	$ 10.0

XML



REPURCHASES OF COMMON STOCK (Tables)

6 Months Ended

Jun. 30, 2011

REPURCHASES OF COMMON STOCK

The following table summarizes our repurchases of common stock during the three and six months ended June 30, 2011 and 2010:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Shares repurchased		2,144,067		1,619,600		3,766,852		1,619,600
Aggregate repurchase price	$	60,326,065	$	54,622,971	$	105,856,445	$	54,622,971
Average price paid per share	$	28.14	$	33.73	$	28.10	$	33.73

XML



GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

6 Months Ended

Jun. 30, 2011

GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

11. GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The following information is presented in accordance with Rule 3-10 of Regulation S-X. The operating and investing activities of the separate legal entities included in the consolidated financial statements are fully interdependent and integrated. Revenues and operating expenses of the separate legal entities include intercompany charges for management and other services. The 2021 Notes issued by Valassis (referred to for purposes of this note only as the “Parent Company”) are guaranteed by substantially all of the Parent Company’s existing and future domestic wholly-owned subsidiaries (collectively, the “Guarantor Subsidiaries”) on a senior unsecured basis. Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by the Parent Company and has guaranteed the 2021 Notes on a joint and several, full and unconditional basis. Non-wholly-owned subsidiaries, joint ventures, partnerships and foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) are not guarantors of these obligations. Substantially all of the Guarantor Subsidiaries also guarantee the Parent Company’s senior secured credit facility.

The following tables present the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010, the condensed consolidating statements of income for the three and six months ended June 30, 2011 and 2010, and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010. As a result of combining our general ledgers of record into an existing, single general ledger module within our enterprise resource planning system on July 1, 2010, the condensed consolidating statements of income for the three and six months ended June 30, 2011 below reflect certain revenues and costs and expenses between the Parent Company and the Guarantor Subsidiaries differently than the condensed consolidating statements of income for the three and six months ended June 30, 2010. Although it is not practicable to reclassify the amounts presented for the three and six months ended June 30, 2010 to reflect these changes in presentation, if such reclassifications could be made they would have no effect on any of the “Consolidated Total” amounts included below and would have no effect on the net income of the Parent Company or the Non-Guarantor Subsidiaries.

Condensed Consolidating Balance Sheet

June 30, 2011

(in thousands of U.S. dollars)

Assets	Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current assets:
Cash and cash equivalents	$	84,913		$	5,480	$	28,569		$	—		$	118,962
Accounts receivable, net		114,688			273,820		22,915			—			411,423
Inventories		30,941			8,275		3			—			39,219
Prepaid expenses and other (including intercompany)		1,008,120			1,047,338		1,712			(1,994,548	)		62,622
Total current assets		1,238,662			1,334,913		53,199			(1,994,548	)		632,226
Property, plant and equipment, net		26,154			134,415		1,830			—			162,399
Goodwill and other intangible assets, net		42,735			814,253		6,989			—			863,977
Investments		399,493			21,137		—			(417,566	)		3,064
Intercompany note receivable (payable)		(73,639	)		86,187		(12,548	)		—			—
Other assets		10,478			2,948		1,083			—			14,509
Total assets	$	1,643,883		$	2,393,853	$	50,553		$	(2,412,114	)	$	1,676,175
Liabilities and Stockholders’ Equity	Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current liabilities:
Current portion, long-term debt	$	15,000		$	—	$	—		$	—		$	15,000
Accounts payable and intercompany payable		464,676			1,840,636		9,429			(1,994,548	)		320,193
Progress billings		14,800			14,170		15,645			—			44,615
Accrued expenses		42,876			35,601		7,112			—			85,589
Total current liabilities		537,352			1,890,407		32,186			(1,994,548	)		465,397
Long-term debt		595,060			—		—			—			595,060
Deferred income taxes		(3,616	)		87,614		(3,995	)		—			80,003
Other non-current liabilities		25,202			18,377		2,251			—			45,830
Total liabilities		1,153,998			1,996,398		30,442			(1,994,548	)		1,186,290
Stockholders’ equity		489,885			397,455		20,111			(417,566	)		489,885
Total liabilities and stockholders’ equity	$	1,643,883		$	2,393,853	$	50,553		$	(2,412,114	)	$	1,676,175

Condensed Consolidating Balance Sheet

December 31, 2010

(in thousands of U.S. dollars)

Assets	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current assets:
Cash and cash equivalents	$	211,933		$	8,026		$	25,976		$	—		$	245,935
Accounts receivable, net		175,115			259,001			25,836			—			459,952
Inventories		33,305			8,679			3			—			41,987
Prepaid expenses and other (including intercompany)		278,489			630,972			2,083			(872,887	)		38,657
Total current assets		698,842			906,678			53,898			(872,887	)		786,531
Property, plant and equipment, net		31,475			142,006			2,086			—			175,567
Goodwill and other intangible assets, net		42,745			820,554			6,989			—			870,288
Investments		400,404			12,486			—			(409,744	)		3,146
Intercompany note receivable (payable)		479,365			(460,369	)		(18,996	)		—			—
Other assets		6,982			3,130			14			—			10,126
Total assets	$	1,659,813		$	1,424,485		$	43,991		$	(1,282,631	)	$	1,845,658
Liabilities and Stockholders’ Equity	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Current liabilities:
Current portion, long-term debt	$	7,058		$	—		$	—		$	—		$	7,058
Accounts payable and intercompany payable		323,277			866,614			12,598			(872,887	)		329,602
Progress billings		26,353			11,751			14,897			—			53,001
Accrued expenses		51,035			41,300			7,277			—			99,612
Total current liabilities		407,723			919,665			34,772			(872,887	)		489,273
Long-term debt		699,169			—			—			—			699,169
Deferred income taxes		(4,044	)		86,804			(3,996	)		—			78,764
Other non-current liabilities		28,081			19,575			1,912			—			49,568
Total liabilities		1,130,929			1,026,044			32,688			(872,887	)		1,316,774
Stockholders’ equity		528,884			398,441			11,303			(409,744	)		528,884
Total liabilities and stockholders’ equity	$	1,659,813		$	1,424,485		$	43,991		$	(1,282,631	)	$	1,845,658

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2011

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	200,589		$	444,629		$	20,281		$	(100,247	)	$	565,252
Cost and expenses:
Cost of sales		168,597			286,880			13,973			(51,410	)		418,040
Selling, general and administrative		21,461			104,561			3,646			(48,837	)		80,831
Amortization expense		5			3,150			—			—			3,155
Total costs and expenses		190,063			394,591			17,619			(100,247	)		502,026
Earnings from operations		10,526			50,038			2,662			—			63,226
Other expenses and income:
Interest expense		11,726			—			—			—			11,726
Interest income		(96	)		—			(26	)		—			(122	)
Intercompany interest		(3,157	)		2,995			162			—			—
Loss on extinguishment of debt		2,966			—			—			—			2,966
Other income, net		9			(1,481	)		36			—			(1,436	)
Total other expenses, net		11,448			1,514			172			—			13,134
Earnings (loss) before income taxes		(922	)		48,524			2,490			—			50,092
Income tax expense		241			18,844			755			—			19,840
Equity in net earnings of subsidiaries		31,415			1,735			—			(33,150	)		—
Net earnings	$	30,252		$	31,415		$	1,735		$	(33,150	)	$	30,252

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2010

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	210,345		$	375,691		$	19,016		$	(25,102	)	$	579,950
Cost and expenses:
Cost of sales		164,074			271,879			12,914			(25,102	)		423,765
Selling, general and administrative		36,274			52,619			3,770			—			92,663
Amortization expense		5			3,150			—			—			3,155
Total costs and expenses		200,353			327,648			16,684			(25,102	)		519,583
Earnings from operations		9,992			48,043			2,332			—			60,367
Other expenses and income:
Interest expense		17,837			—			—			—			17,837
Interest income		(230	)		1			(19	)		—			(248	)
Intercompany interest		(16,298	)		16,186			112			—			—
Loss on extinguishment of debt		23,873			—			—			—			23,873
Other income, net		280			(860	)		19			—			(561	)
Total other expenses (income), net		25,462			15,327			112			—			40,901
Earnings (loss) before income taxes		(15,470	)		32,716			2,220			—			19,466
Income tax (benefit) expense		(3,325	)		10,906			780			—			8,361
Equity in net earnings of subsidiaries		23,250			1,440			—			(24,690	)		—
Net earnings	$	11,105		$	23,250		$	1,440		$	(24,690	)	$	11,105

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2011

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	398,755		$	873,897		$	37,650		$	(198,071	)	$	1,112,231
Cost and expenses:
Cost of sales		334,934			564,712			26,292			(99,321	)		826,617
Selling, general and administrative		45,975			204,939			7,094			(98,750	)		159,258
Amortization expense		11			6,300			—			—			6,311
Total costs and expenses		380,920			775,951			33,386			(198,071	)		992,186
Earnings from operations		17,835			97,946			4,264			—			120,045
Other expenses and income:
Interest expense		21,501			—			—			—			21,501
Interest income		(214	)		—			(47	)		—			(261	)
Intercompany interest		(14,354	)		14,192			162			—			—
Loss on extinguishment of debt		16,318			—			—			—			16,318
Other income, net		(218	)		(2,270	)		176			—			(2,312	)
Total other expenses, net		23,033			11,922			291			—			35,246
Earnings (loss) before income taxes		(5,198	)		86,024			3,973			—			84,799
Income tax expense		566			31,308			1,262			—			33,136
Equity in net earnings of subsidiaries		57,427			2,711			—			(60,138	)		—
Net earnings	$	51,663		$	57,427		$	2,711		$	(60,138	)	$	51,663

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2010

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	404,373		$	737,009		$	36,956		$	(48,386	)	$	1,129,952
Cost and expenses:
Cost of sales		312,663			537,913			24,964			(48,386	)		827,154
Selling, general and administrative		72,194			104,290			7,137			—			183,621
Amortization expense		11			6,300			—			—			6,311
Total costs and expenses		384,868			648,503			32,101			(48,386	)		1,017,086
Gain from litigation settlement, net		490,085			—			—			—			490,085
Earnings from operations		509,590			88,506			4,855			—			602,951
Other expenses and income:
Interest expense		37,993			—			—			—			37,993
Interest income		(373	)		3			(24	)		—			(394	)
Intercompany interest		(33,544	)		33,432			112			—			—
Loss on extinguishment of debt		23,873			—			—			—			23,873
Other income, net		(813	)		(1,416	)		(122	)		—			(2,351	)
Total other expenses (income), net		27,136			32,019			(34	)		—			59,121
Earnings before income taxes		482,454			56,487			4,889			—			543,830
Income tax expense		188,743			20,178			1,276			—			210,197
Equity in net earnings of subsidiaries		39,922			3,613			—			(43,535	)		—
Net earnings	$	333,633		$	39,922		$	3,613		$	(43,535	)	$	333,633

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2011

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Total
Net cash provided by (used in) operating activities	$	134,756		$	(45,665	)	$	1,942		$	—	$	91,033
Cash flows from investing activities:
Additions to property, plant and equipment		(7,124	)		(4,428	)		(74	)		—		(11,626	)
Proceeds from sale of property, plant and equipment		20			—			—			—		20
Proceeds from sale of available-for-sale securities		1,494			—			—			—		1,494
Net cash used in investing activities		(5,610	)		(4,428	)		(74	)		—		(10,112	)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity		(47,547	)		47,547			—			—		—
Borrowings of long-term debt		610,000			—			—			—		610,000
Repayments of long-term debt		(706,169	)		—			—			—		(706,169	)
Debt issuance costs		(11,266	)		—			—			—		(11,266	)
Repurchases of common stock		(105,856	)		—			—			—		(105,856	)
Proceeds from issuance of common stock		4,672			—			—			—		4,672
Net cash provided (used in) by financing activities		(256,166	)		47,547			—			—		(208,619	)
Effect of exchange rate changes on cash and cash equivalents		—			—			725			—		725
Net increase (decrease) in cash and cash equivalents		(127,020	)		(2,546	)		2,593			—		(126,973	)
Cash and cash equivalents at beginning of period		211,933			8,026			25,976			—		245,935
Cash and cash equivalents at end of period	$	84,913		$	5,480		$	28,569		$	—	$	118,962

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2010

(in thousands of U.S. dollars)

	Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated Total
Net cash provided by operating activities	$	339,620		$	86,971		$	7,315		$	—	$	433,906
Cash flows from investing activities:
Additions to property, plant and equipment		(5,393	)		(2,861	)		(147	)		—		(8,401	)
Proceeds from sale of property, plant and equipment		36			—			—			—		36
Net cash used in investing activities		(5,357	)		(2,861	)		(147	)		—		(8,365	)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity		90,923			(90,923	)		—			—		—
Repayments of long-term debt		(301,312	)		—			—			—		(301,312	)
Repurchase of common stock		(54,623	)		—			—			—		(54,623	)
Proceeds from issuance of common stock		30,433			—			—			—		30,433
Net cash provided by (used in) financing activities		(234,579	)		(90,923	)		—			—		(325,502	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(1,177	)		—		(1,177	)
Net increase (decrease) in cash and cash equivalents		99,684			(6,813	)		5,991			—		98,862
Cash and cash equivalents at beginning of period		104,477			7,614			17,755			—		129,846
Cash and cash equivalents at end of period	$	204,161		$	801		$	23,746		$	—	$	228,708

XML



GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2011

GOODWILL AND OTHER INTANGIBLE ASSETS

2. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
Shared Mail	$	534,184	$	534,184
Neighborhood Targeted		5,325		5,325
Free-standing Inserts		22,357		22,357
International, Digital Media & Services		74,605		74,605
Goodwill	$	636,471	$	636,471

The components of other intangible assets, net included on the condensed consolidated balance sheets consisted of:

	June 30, 2011									December 31, 2010
(in thousands of U.S. dollars)	Gross Amount		Accum- ulated Amort- ization			Net Amount		Weighted Average Remaining Useful Life (in years)		Gross Amount		Accum- ulated Amort- ization			Net Amount		Weighted Average Remaining Useful Life (in years)
Amortizing intangible assets:
Mailing lists, non compete agreements and other	$	48,037	$	(8,881	)	$	39,156		14.5	$	48,037	$	(7,871	)	$	40,166		15.0
Customer relationships		140,000		(39,291	)		100,709		9.5		140,000		(33,990	)		106,010		10.0
Non-amortizing intangible assets:
Valassis name, tradenames, trademarks and other		87,641		—			87,641				87,641		—			87,641
Other intangible assets, net	$	275,678	$	(48,172	)	$	227,506			$	275,678	$	(41,861	)	$	233,817

XML



Required and Actual Financial Ratios Under Senior Secured Credit Facility (Detail) (Senior Secured Credit Facility)	Jun. 30, 2011 Point
Required Ratio | Maximum
Debt Disclosure [Line Items]
Maximum consolidated leverage ratio	3.50
Required Ratio | Minimum
Debt Disclosure [Line Items]
Minimum consolidated interest coverage ratio	3.00
Actual Ratio | Maximum
Debt Disclosure [Line Items]
Maximum consolidated leverage ratio	1.90
Actual Ratio | Minimum
Debt Disclosure [Line Items]
Minimum consolidated interest coverage ratio	7.25

XML



DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2011

DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

8. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

We are exposed to market risks arising from adverse changes in foreign exchange rates and interest rates. We manage these risks through a variety of strategies which include the use of derivatives. Certain derivatives are designated as cash flow hedges and qualify for hedge accounting treatment, while others do not qualify or have not been designated as hedges and are marked to market through earnings. The notional amounts of derivative financial instruments and related fair values measured on a recurring basis and included in the condensed consolidated balance sheets were as follows:

	Notional Amounts				Fair Value
(in millions of U.S. Dollars)	June 30, 2011		December 31, 2010		June 30, 2011			December 31, 2010			Balance Sheet Location
Derivatives designated as cash flow hedging instruments:
Interest rate swap contract		N/A	$	300.0		N/A		$	(4.6	)	Other non-current liabilities
Derivatives not receiving hedge accounting treatment:
Interest rate swap contract		220.0		N/A		(2.7	)		N/A		Other non-current liabilities
Foreign exchange contracts		11.0		11.4		0.7			0.7		Prepaid expenses and other
Total derivative financial instruments	$	231.0	$	311.4	$	(2.0	)	$	(3.9	)

The fair values of our interest rate swap contract and foreign exchange contracts are determined based on third-party valuation models and observable foreign exchange forward contract rates, respectively, both of which represent Level 2 fair value inputs.

The following tables summarize the impact of derivative financial instruments on the condensed consolidated financial statements for the indicated periods:

	Three Months Ended June 30,
	2011			2010			2011			2010			2011			2010
(in millions of U.S. Dollars)	Amount of Pre-tax Gain (Loss) Recognized in Earnings						Amount of Pre-tax 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 (a)	$	—		$	—		$	(0.2	)	$	(1.6	)	$	(3.7	)	$	—
Derivatives not receiving hedge accounting treatment:
Interest rate swap contracts (a)	$	(0.1	)	$	0.3		$	—		$	—		$	—		$	(4.4	)
Foreign exchange contracts (b)		(0.2	)		(0.6	)		—			—			—			—
	$	(0.3	)	$	(0.3	)	$	(0.2	)	$	(1.6	)	$	(3.7	)	$	(4.4	)
(a)    Recognized in Interest expense
(b)    Recognized in Cost of sales
	Six Months Ended June 30,
	2011			2010			2011			2010			2011			2010
(in millions of U.S. Dollars)	Amount of Pre-tax Gain (Loss) Recognized in Earnings						Amount of Pre-tax 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 (a)	$	—		$	—		$	(0.4	)	$	(3.8	)	$	(5.0	)	$	—
Derivatives not receiving hedge accounting treatment:
Interest rate swap contracts (a)	$	(0.1	)	$	3.2		$	—		$	—		$	—		$	(8.9	)
Foreign exchange contracts (b)		—			(0.1	)		—			—			—			—
	$	(0.1	)	$	3.1		$	(0.4	)	$	(3.8	)	$	(5.0	)	$	(8.9	)

(a) Recognized in Interest expense

(b) Recognized in Cost of sales

Interest Rate Swaps

During the second quarter of 2007, we entered into two interest rate swap agreements with an aggregate notional principal amount of $480.0 million. These interest rate swaps effectively fixed three-month LIBOR at 5.045%, for a then-effective interest rate of 6.795%, including the applicable margin, for $480.0 million of our variable rate debt under our senior secured credit facility. In February 2009, we reduced the notional principal amount of the interest rate swaps by $32.8 million and paid termination fees of approximately $2.6 million. The termination fees, or deferred losses, related to the terminated portion of the swaps were amortized to interest expense over the original life of the interest rate swaps, through December 31, 2010. As a result of the reduced notional amount of the swaps, three-month LIBOR was effectively fixed at 5.026%, for a then-effective interest rate of 6.776%, including the applicable margin. We initially designated the swaps as hedging instruments and recorded changes in the fair value of these interest rate swaps as a component of accumulated other comprehensive income. We discontinued cash flow hedge accounting treatment for the interest rate swap agreements effective April 1, 2009. The deferred losses on the interest rate swaps previously charged to accumulated other comprehensive income were amortized to interest expense and subsequent changes in the fair value of the swaps were recognized in earnings as a component of interest expense until the swaps expired on December 31, 2010.

On December 17, 2009, we entered into an interest rate swap agreement with an initial notional amount of $300.0 million to fix three-month LIBOR at 2.005%, for an effective rate of 4.255%, including the applicable margin, for $300.0 million of our variable rate debt under our prior senior secured credit facility. The effective date of this agreement was December 31, 2010. The notional amount of $300.0 million amortizes by $40.0 million at the end of every quarter until it reaches $100.0 million for the quarter ended June 30, 2012, the expiration date. The swap was designated as, and qualified as, a cash flow hedge through the termination of the prior senior secured credit facility on June 27, 2011. During the three and six months ended June 30, 2011, as a result of the termination of the prior senior secured credit facility, pre-tax losses of $2.6 million were reclassified from accumulated other comprehensive income to earnings as a component of interest expense. This interest rate swap remains in effect and subsequent changes in the fair value of this swap will be recognized in earnings as a component of interest expense until the swap expires.

On July 6, 2011, we entered into an interest rate swap agreement with an initial notional amount of $186.3 million. The effective date of this agreement is June 30, 2012, the expiration date of our existing interest rate swap. Under the swap agreement, we are required to make quarterly payments at a fixed interest rate of 1.8695% per annum to the counterparty on an amortizing notional amount in exchange for receiving variable payments based on the three-month LIBOR interest rate for the same notional amount. After giving effect to the swap agreement, our effective interest rate for the notional amount, based on the current applicable margin under the new senior secured credit facility of 1.75% per annum, will be 3.6195% per annum. The initial notional amount of $186.3 million amortizes quarterly by (i) $2,812,500 from the effective date through the quarter ended September 30, 2013, (ii) $5,625,000 from September 30, 2013 through the quarter ended September 30, 2014, and (iii) $8,437,500 from September 30, 2014 until June 30, 2015, the expiration date of the agreement. The swap is designated as and qualifies as a cash flow hedge.

Foreign Currency

Currencies to which we have exposure are the Mexican peso, Canadian dollar, British pound, Polish zloty and Euro. Currency restrictions are not expected to have a significant effect on our cash flows, liquidity, or capital resources. We purchase the Mexican peso and Polish zloty under two to twelve-month forward foreign exchange contracts to stabilize the cost of production. As of June 30, 2011, we had a commitment to purchase $10.7 million in Mexican pesos and $0.3 million in Polish zlotys over the next 12 months.

Long-Term Debt

The estimated fair market value of our long-term debt was $5.5 million below carrying value and $10.6 million above carrying value as of June 30, 2011 and December 31, 2010, respectively. Our 2021 Notes are traded in the market and are classified as a Level 1 measurement with the fair value determined based on the quoted active market prices. Borrowings under our new senior secured credit facility are classified as Level 3 measurements as these securities are not traded in an active market and are valued based on an implied price derived from industry averages and relative loan performance.

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents and accruals approximate fair value due to the near-term maturity of these instruments.

XML



BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2011

Inventories

Inventories are accounted for at the lower of cost, determined on a first in, first out (“FIFO”) basis, or market. Inventories included on the condensed consolidated balance sheets consisted of:

	June 30,		December 31,
(in thousands of U.S. dollars)	2011		2010
Raw materials	$	28,439	$	27,035
Work in progress		10,780		14,952
Inventories	$	39,219	$	41,987

Summary of Costs and Ranges of Useful Lives of the Major Classes of Property, Plant and Equipment and Total Accumulated Depreciation related to Property, Plant and Equipment, Net

The following table summarizes the costs and ranges of useful lives of the major classes of property, plant and equipment and the total accumulated depreciation related to Property, plant and equipment, net included on the condensed consolidated balance sheets:

		June 30,			December 31,
	Useful Lives	2011			2010
	(in years)	(in thousands of U.S. dollars)
Land, at cost	N/A	$	7,208		$	7,195
Buildings, at cost	10 - 30		37,733			37,657
Machinery and equipment, at cost	3 - 20		231,694			225,762
Office furniture and equipment, at cost	3 - 10		226,827			221,804
Leasehold improvements, at cost	5 - 10		28,126			28,174
			531,588			520,592
Less accumulated depreciation			(369,189	)		(345,025	)
Property, plant and equipment, net		$	162,399		$	175,567

XML



REPURCHASES OF COMMON STOCK

6 Months Ended

Jun. 30, 2011

REPURCHASES OF COMMON STOCK

9. REPURCHASES OF COMMON STOCK

The following table summarizes our repurchases of common stock during the three and six months ended June 30, 2011 and 2010:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Shares repurchased		2,144,067		1,619,600		3,766,852		1,619,600
Aggregate repurchase price	$	60,326,065	$	54,622,971	$	105,856,445	$	54,622,971
Average price paid per share	$	28.14	$	33.73	$	28.10	$	33.73

As of June 30, 2011, we had authorization to repurchase an additional 6,590,301 shares of our common stock under the share repurchase program approved by our Board of Directors.

XML



Components of Other Intangible Assets, Net (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2011 Year	Dec. 31, 2010 Year
Intangible Assets by Major Class [Line Items]
Gross Amount	$ 275,678	$ 275,678
Accumulated Amortization	(48,172)	(41,861)
Net Amount	227,506	233,817
Amortizable Intangible Assets | Mailing lists, non compete agreements and other
Intangible Assets by Major Class [Line Items]
Gross Amount	48,037	48,037
Accumulated Amortization	(8,881)	(7,871)
Net Amount	39,156	40,166
Weighted Average Remaining Useful Life	14.5	15.0
Amortizable Intangible Assets | Customer relationships
Intangible Assets by Major Class [Line Items]
Gross Amount	140,000	140,000
Accumulated Amortization	(39,291)	(33,990)
Net Amount	100,709	106,010
Weighted Average Remaining Useful Life	9.5	10.0
Non-amortizing intangible assets | Valassis name, tradenames, trademarks and other
Intangible Assets by Major Class [Line Items]
Gross Amount	87,641	87,641
Net Amount	$ 87,641	$ 87,641

XML



EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2011

EARNINGS PER SHARE

7. EARNINGS PER SHARE

Earnings per common share data were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2011			2010			2011			2010
Net earnings	$	30,252		$	11,105		$	51,663		$	333,633
Weighted-average common shares outstanding, basic		47,877			49,531			48,903			49,251
Shares issued on exercise of dilutive options		5,591			9,142			6,142			8,237
Shares purchased with assumed proceeds of options and unearned restricted shares		(3,305	)		(6,183	)		(3,799	)		(5,469	)
Shares contingently issuable		4			9			4			9
Weighted-average common shares outstanding, diluted		50,167			52,499			51,250			52,028
Net earnings per common share, diluted	$	0.60		$	0.21		$	1.01		$	6.41
Anti-dilutive options excluded from calculation of weighted- average common shares outstanding, diluted		3,285			1,472			2,915			2,729

XML



Condensed Consolidating Statement of Cash Flows (Detail) (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Schedule of Condensed Consolidating Statement of Cash Flows [Line Items]
Net cash provided by (used in) operating activities	$ 91,033,000	$ 433,906,000
Cash flows from investing activities:
Additions to property, plant and equipment	(11,626,000)	(8,401,000)
Proceeds from sale of property, plant and equipment	20,000	36,000
Proceeds from sale of available-for-sale securities	1,494,000
Net cash used in investing activities	(10,112,000)	(8,365,000)
Cash flows from financing activities:
Borrowings of long-term debt	610,000,000
Repayments of long-term debt	(706,169,000)	(301,312,000)
Debt issuance costs	(11,266,000)
Repurchases of common stock	(105,856,000)	(54,623,000)
Proceeds from issuance of common stock	4,672,000	30,433,000
Net cash provided (used in) by financing activities	(208,619,000)	(325,502,000)
Effect of exchange rate changes on cash and cash equivalents	725,000	(1,177,000)
Net increase (decrease) in cash and cash equivalents	(126,973,000)	98,862,000
Cash and cash equivalents at beginning of period	245,935,000	129,846,000
Cash and cash equivalents at end of period	118,962,000	228,708,000
Parent Company
Schedule of Condensed Consolidating Statement of Cash Flows [Line Items]
Net cash provided by (used in) operating activities	134,756,000	339,620,000
Cash flows from investing activities:
Additions to property, plant and equipment	(7,124,000)	(5,393,000)
Proceeds from sale of property, plant and equipment	20,000	36,000
Proceeds from sale of available-for-sale securities	1,494,000
Net cash used in investing activities	(5,610,000)	(5,357,000)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity	(47,547,000)	90,923,000
Borrowings of long-term debt	610,000,000
Repayments of long-term debt	(706,169,000)	(301,312,000)
Debt issuance costs	(11,266,000)
Repurchases of common stock	(105,856,000)	(54,623,000)
Proceeds from issuance of common stock	4,672,000	30,433,000
Net cash provided (used in) by financing activities	(256,166,000)	(234,579,000)
Net increase (decrease) in cash and cash equivalents	(127,020,000)	99,684,000
Cash and cash equivalents at beginning of period	211,933,000	104,477,000
Cash and cash equivalents at end of period	84,913,000	204,161,000
Guarantor Subsidiaries
Schedule of Condensed Consolidating Statement of Cash Flows [Line Items]
Net cash provided by (used in) operating activities	(45,665,000)	86,971,000
Cash flows from investing activities:
Additions to property, plant and equipment	(4,428,000)	(2,861,000)
Net cash used in investing activities	(4,428,000)	(2,861,000)
Cash flows from financing activities:
Cash provided by (used in) intercompany activity	47,547,000	(90,923,000)
Net cash provided (used in) by financing activities	47,547,000	(90,923,000)
Net increase (decrease) in cash and cash equivalents	(2,546,000)	(6,813,000)
Cash and cash equivalents at beginning of period	8,026,000	7,614,000
Cash and cash equivalents at end of period	5,480,000	801,000
Non-Guarantor Subsidiaries
Schedule of Condensed Consolidating Statement of Cash Flows [Line Items]
Net cash provided by (used in) operating activities	1,942,000	7,315,000
Cash flows from investing activities:
Additions to property, plant and equipment	(74,000)	(147,000)
Net cash used in investing activities	(74,000)	(147,000)
Cash flows from financing activities:
Effect of exchange rate changes on cash and cash equivalents	725,000	(1,177,000)
Net increase (decrease) in cash and cash equivalents	2,593,000	5,991,000
Cash and cash equivalents at beginning of period	25,976,000	17,755,000
Cash and cash equivalents at end of period	$ 28,569,000	$ 23,746,000

XML



Condensed Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net earnings	$ 51,663,000	$ 333,633,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	31,121,000	30,663,000
Amortization of debt issuance costs	1,181,000	1,607,000
Provision for losses on accounts receivable	1,589,000	2,695,000
Loss on extinguishment of debt	5,748,000	3,429,000
Loss on derivatives, net	2,345,000	10,106,000
Loss on sale of property, plant and equipment	36,000	58,000
Earnings on equity investments	(2,256,000)	(1,897,000)
Stock-based compensation expense	4,367,000	13,782,000
Deferred income taxes	2,159,000	7,976,000
Changes in assets and liabilities:
Accounts receivable, net	46,940,000	13,345,000
Inventories	2,768,000	7,198,000
Prepaid expenses and other	2,874,000	2,608,000
Other assets	1,140,000	(34,000)
Other non-current liabilities	(1,829,000)	7,228,000
Accounts payable	(9,409,000)	(35,050,000)
Progress billings	(8,386,000)	(7,395,000)
Accrued expenses	(41,018,000)	43,954,000
Total adjustments	39,370,000	100,273,000
Net cash provided by operating activities	91,033,000	433,906,000
Cash flows from investing activities:
Additions to property, plant and equipment	(11,626,000)	(8,401,000)
Proceeds from sale of property, plant and equipment	20,000	36,000
Proceeds from sale of available-for-sale securities	1,494,000
Net cash used in investing activities	(10,112,000)	(8,365,000)
Cash flows from financing activities:
Borrowings of long-term debt	610,000,000
Repayments of long-term debt	(706,169,000)	(301,312,000)
Debt issuance costs	(11,266,000)
Repurchases of common stock	(105,856,000)	(54,623,000)
Proceeds from issuance of common stock	4,672,000	30,433,000
Net cash provided (used in) by financing activities	(208,619,000)	(325,502,000)
Effect of exchange rate changes on cash and cash equivalents	725,000	(1,177,000)
Net increase (decrease) in cash and cash equivalents	(126,973,000)	98,862,000
Cash and cash equivalents at beginning of period	245,935,000	129,846,000
Cash and cash equivalents at end of period	118,962,000	228,708,000
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	17,011,000	45,193,000
Cash paid during the period for income taxes	58,042,000	127,050,000
Non-cash financing activities:
Stock issued under stock-based compensation plans	$ 2,684,000	$ 1,399,000

XML



LONG-TERM DEBT

6 Months Ended

Jun. 30, 2011

LONG-TERM DEBT

3. LONG-TERM DEBT

Long-term debt included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
New Senior Secured Revolving Credit Facility	$	50,000	$	—
Prior Senior Secured Revolving Credit Facility		—		—
Senior Secured Term Loan A		300,000		—
Senior Secured Convertible Notes due 2033, net of discount		60		58
8 1/4% Senior Notes due 2015		—		242,224
6 5/8% Senior Notes due 2021		260,000		—
Senior Secured Term Loan B		—		347,723
Senior Secured Delayed Draw Term Loan		—		116,222
Total debt		610,060		706,227
Current portion long-term debt		15,000		7,058
Long-term debt	$	595,060	$	699,169

Senior Secured Credit Facility

General

On June 27, 2011, we entered into a new 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 “new senior secured credit facility”). The new 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 new senior secured credit facility consists of:

• 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, 10% during the third year, 15% during the fourth year and 11.25% during the fifth year, 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 million, 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 (the “revolving line of credit”), of which $50.0 million was drawn at closing and remains outstanding as of June 30, 2011 (exclusive of outstanding letters of credit described below); and

• an incremental facility pursuant to which, prior to the maturity of the new 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 new 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.

We used the initial borrowing under the revolving line of credit, the proceeds from the Term Loan A and existing cash of $120.0 million to repay the $462.2 million outstanding under the Term Loan B and Delayed Draw Term Loan portions of our prior senior secured credit facility (reflecting all outstanding borrowings thereunder), to pay accrued interest with respect to such loans and to pay the fees and expenses related to the new senior secured credit facility. We recognized a pre-tax loss on extinguishment of debt of $3.0 million during the three and six months ended June 30, 2011, which represents the write-off of related capitalized debt issuance costs. In addition, as further discussed in Note 8, Derivative Financial Instruments and Fair Value Measurements, we recorded in interest expense a pre-tax loss of $2.6 million related to the discontinuation of hedge accounting on the related interest rate swap. We capitalized related debt issuance costs of approximately $6.2 million, which will be amortized over the term of the new senior secured credit facility.

All borrowings under our new 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 June 30, 2011, we had approximately $39.0 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 $11.0 million in standby letters of credit outstanding as of June 30, 2011).

Interest and Fees

Borrowings under our new 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 plus 0.5% or one-month LIBOR plus 1%) (the “Base Rate”) or at an Adjusted LIBO Rate (as defined in the credit agreement governing the new senior secured credit facility) (the “Eurodollar Rate”), 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 initially 0.75% per annum for Base Rate loans and 1.75% per annum for Eurodollar Rate loans. Beginning with the delivery of the financial statements and the compliance certificate for the quarter ending September 30, 2011, the margins applicable to the borrowings under our new 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. See Note 8, Derivative Financial Instruments and Fair Value Measurements, for discussion regarding our various interest rate swap agreements.

Guarantees and Security

Our new 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 new senior secured credit facility to the extent required by the indenture governing such notes.

Prepayments

The new 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 new 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 new senior secured credit facility contains affirmative and negative covenants, including, but not limited to:

• 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.

Our new senior secured credit facility also requires us to comply with:

• 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 new 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.

The following table shows the required and actual financial ratios under our new senior secured credit facility as of June 30, 2011:

	Required Ratio	Actual Ratio
Maximum consolidated leverage ratio	No greater than 3.50:1.00		1.90:1.00
Minimum consolidated interest coverage ratio	No less than 3.00:1.00		7.25:1.00

In addition, we are required to give notice to the administrative agent and the lenders under our new 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 new 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 new 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 new senior secured credit facility.

8 ¹/4% Senior Notes due 2015

On January 13, 2011, we commenced a cash tender offer and consent solicitation to purchase any and all of our outstanding 8 ¹/4% Senior Notes due 2015 (the “2015 Notes”) and to amend the indenture governing the 2015 Notes, which we refer to as the 2015 Indenture, to eliminate substantially all of the restrictive covenants and certain events of default. We used the net proceeds from the 2021 Notes (described below) to fund the purchase of the 2015 Notes, the related consent payments pursuant to the tender offer and consent solicitation, and the subsequent redemption of the 2015 Notes that were not tendered and remained outstanding after the expiration of the tender offer and consent solicitation. We recognized a pre-tax loss on extinguishment of debt of $13.3 million during the six months ended June 30, 2011, which represents the difference between the aggregate purchase price and the aggregate principal amount of the 2015 Notes purchased and the write-off of related capitalized debt issuance costs.

During the three and six months ended June 30, 2010, we purchased $297.8 million aggregate principal amount of the 2015 Notes pursuant to a cash tender offer and open market repurchases. We recognized a pre-tax loss on extinguishment of debt of $23.9 million during the three and six months ended June 30, 2010, which represents the difference between the aggregate purchase price and the aggregate principal amount of the 2015 Notes purchased and the proportionate write-off of related capitalized debt issuance costs.

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”). The net proceeds were used to fund the purchase of the outstanding 2015 Notes and the related consent payments in a concurrent tender offer and consent solicitation as described above and the redemption of the remaining outstanding 2015 Notes. We capitalized related debt issuance costs of approximately $5.1 million, which will be amortized over the term of the 2021 Notes.

Interest on the 2021 Notes is payable every six months on February 1 and August 1, commencing August 1, 2011. 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.

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:

Year	Percentage
2016		103.313	%
2017		102.208	%
2018		101.104	%
2019 and thereafter		100.000	%

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 prices 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.

Covenant Compliance

As of June 30, 2011, we were in compliance with all of our indenture and new senior secured credit facility covenants.

XML



Earnings Per Common Share Data (Detail) (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Earnings Per Share Disclosure [Line Items]
Net earnings	$ 30,252	$ 11,105	$ 51,663	$ 333,633
Weighted-average common shares outstanding, basic	47,877	49,531	48,903	49,251
Shares issued on exercise of dilutive options	5,591	9,142	6,142	8,237
Shares purchased with assumed proceeds of options and unearned restricted shares	(3,305)	(6,183)	(3,799)	(5,469)
Shares contingently issuable	4	9	4	9
Weighted-average common shares outstanding, diluted	50,167	52,499	51,250	52,028
Net earnings per common share, diluted	$ 0.60	$ 0.21	$ 1.01	$ 6.41
Anti-dilutive options excluded from calculation of weighted- average common shares outstanding, diluted	3,285	1,472	2,915	2,729

XML



Goodwill (Detail) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Goodwill [Line Items]
Goodwill	$ 636,471	$ 636,471
Shared Mail
Goodwill [Line Items]
Goodwill	534,184	534,184
Neighborhood Targeted
Goodwill [Line Items]
Goodwill	5,325	5,325
Free Standing Inserts (FSI)
Goodwill [Line Items]
Goodwill	22,357	22,357
International, Digital Media and Services
Goodwill [Line Items]
Goodwill	$ 74,605	$ 74,605

XML



Condensed Consolidating Statement of Income (Detail) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Revenues	$ 565,252	$ 579,950	$ 1,112,231	$ 1,129,952
Cost and expenses:
Cost of sales	418,040	423,765	826,617	827,154
Selling, general and administrative	80,831	92,663	159,258	183,621
Amortization expense	3,155	3,155	6,311	6,311
Total costs and expenses	502,026	519,583	992,186	1,017,086
Gain from litigation settlement, net (Note 6)				490,085
Earnings from operations	63,226	60,367	120,045	602,951
Other expenses and income:
Interest expense	11,726	17,837	21,501	37,993
Interest income	(122)	(248)	(261)	(394)
Loss on extinguishment of debt (Note 3)	2,966	23,873	16,318	23,873
Other income, net	(1,436)	(561)	(2,312)	(2,351)
Total other expenses (income), net	13,134	40,901	35,246	59,121
Earnings (loss) before income taxes	50,092	19,466	84,799	543,830
Income tax (benefit) expense	19,840	8,361	33,136	210,197
Net earnings	30,252	11,105	51,663	333,633
Parent Company
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Revenues	200,589	210,345	398,755	404,373
Cost and expenses:
Cost of sales	168,597	164,074	334,934	312,663
Selling, general and administrative	21,461	36,274	45,975	72,194
Amortization expense	5	5	11	11
Total costs and expenses	190,063	200,353	380,920	384,868
Gain from litigation settlement, net (Note 6)				490,085
Earnings from operations	10,526	9,992	17,835	509,590
Other expenses and income:
Interest expense	11,726	17,837	21,501	37,993
Interest income	(96)	(230)	(214)	(373)
Intercompany interest	(3,157)	(16,298)	(14,354)	(33,544)
Loss on extinguishment of debt (Note 3)	2,966	23,873	16,318	23,873
Other income, net	9	280	(218)	(813)
Total other expenses (income), net	11,448	25,462	23,033	27,136
Earnings (loss) before income taxes	(922)	(15,470)	(5,198)	482,454
Income tax (benefit) expense	241	(3,325)	566	188,743
Equity in net earnings of subsidiaries	31,415	23,250	57,427	39,922
Net earnings	30,252	11,105	51,663	333,633
Guarantor Subsidiaries
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Revenues	444,629	375,691	873,897	737,009
Cost and expenses:
Cost of sales	286,880	271,879	564,712	537,913
Selling, general and administrative	104,561	52,619	204,939	104,290
Amortization expense	3,150	3,150	6,300	6,300
Total costs and expenses	394,591	327,648	775,951	648,503
Earnings from operations	50,038	48,043	97,946	88,506
Other expenses and income:
Interest income		1		3
Intercompany interest	2,995	16,186	14,192	33,432
Other income, net	(1,481)	(860)	(2,270)	(1,416)
Total other expenses (income), net	1,514	15,327	11,922	32,019
Earnings (loss) before income taxes	48,524	32,716	86,024	56,487
Income tax (benefit) expense	18,844	10,906	31,308	20,178
Equity in net earnings of subsidiaries	1,735	1,440	2,711	3,613
Net earnings	31,415	23,250	57,427	39,922
Non-Guarantor Subsidiaries
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Revenues	20,281	19,016	37,650	36,956
Cost and expenses:
Cost of sales	13,973	12,914	26,292	24,964
Selling, general and administrative	3,646	3,770	7,094	7,137
Total costs and expenses	17,619	16,684	33,386	32,101
Earnings from operations	2,662	2,332	4,264	4,855
Other expenses and income:
Interest income	(26)	(19)	(47)	(24)
Intercompany interest	162	112	162	112
Other income, net	36	19	176	(122)
Total other expenses (income), net	172	112	291	(34)
Earnings (loss) before income taxes	2,490	2,220	3,973	4,889
Income tax (benefit) expense	755	780	1,262	1,276
Net earnings	1,735	1,440	2,711	3,613
Consolidating Adjustments
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Revenues	(100,247)	(25,102)	(198,071)	(48,386)
Cost and expenses:
Cost of sales	(51,410)	(25,102)	(99,321)	(48,386)
Selling, general and administrative	(48,837)		(98,750)
Total costs and expenses	(100,247)	(25,102)	(198,071)	(48,386)
Other expenses and income:
Equity in net earnings of subsidiaries	(33,150)	(24,690)	(60,138)	(43,535)
Net earnings	$ (33,150)	$ (24,690)	$ (60,138)	$ (43,535)

XML



ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2011

ACCRUED EXPENSES

4. ACCRUED EXPENSES

Accrued expenses included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
Accrued interest	$	7,352	$	6,710
Accrued compensation and benefits		40,803		57,781
Other accrued expenses		37,434		35,121
Accrued expenses	$	85,589	$	99,612

XML



Impact of Derivative Financial Instruments on Condensed Consolidated Financial Statements (Detail) (USD $) In Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pre-tax Gain (Loss) Recognized in Earnings	$ (0.3)		$ (0.3)		$ (0.1)		$ 3.1
Amount of Pre-tax (Loss) Recognized in OCI	(0.2)		(1.6)		(0.4)		(3.8)
Amount of Pre-tax Loss Reclassified from AOCI into Earnings	(3.7)		(4.4)		(5.0)		(8.9)
Derivatives Designated As Cash Flow Hedges | Interest rate swap contract
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pre-tax (Loss) Recognized in OCI	(0.2)	[1]	(1.6)	[1]	(0.4)	[1]	(3.8)	[1]
Amount of Pre-tax Loss Reclassified from AOCI into Earnings	(3.7)	[1]			(5.0)	[1]
Derivatives Not Designated As Cash Flow Hedges | Interest rate swap contract
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pre-tax Gain (Loss) Recognized in Earnings	(0.1)	[1]	0.3	[1]	(0.1)	[1]	3.2	[1]
Amount of Pre-tax Loss Reclassified from AOCI into Earnings			(4.4)	[1]			(8.9)	[1]
Derivatives Not Designated As Cash Flow Hedges | Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pre-tax Gain (Loss) Recognized in Earnings	$ (0.2)	[2]	$ (0.6)	[2]			$ (0.1)	[2]

[1] Recognized in Interest expense

[2] Recognized in Cost of sales

XML



BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for Doubtful Accounts	$ 7.3	$ 12.1

XML



Long-Term Debt (Detail) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Debt Instrument [Line Items]
Total debt	$ 610,060	$ 706,227
Current portion long-term debt	15,000	7,058
Long-term debt	595,060	699,169
New Senior Secured Revolving Credit Facility
Debt Instrument [Line Items]
Total debt	50,000
Senior Secured Term Loan A
Debt Instrument [Line Items]
Total debt	300,000
Senior Secured Convertible Notes due 2033, net of discount
Debt Instrument [Line Items]
Total debt	60	58
8 1/4% Senior Notes due 2015
Debt Instrument [Line Items]
Total debt		242,224
6 5/8% Senior Notes due 2021
Debt Instrument [Line Items]
Total debt	260,000
Senior Secured Term Loan B
Debt Instrument [Line Items]
Total debt		347,723
Senior Secured Delayed Draw Term Loan
Debt Instrument [Line Items]
Total debt		$ 116,222

XML



Notional Amounts of Derivative Financial Instruments and Related Fair Values Measured on Recurring Basis (Detail) (Fair Value, Measurements, Recurring, USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Derivatives, Fair Value [Line Items]
Total derivative financial instruments, notional amounts	$ 231.0	$ 311.4
Total derivative financial instruments, fair value (net)	(2.0)	(3.9)
Derivatives Designated As Cash Flow Hedges | Interest rate swap contract | Other Noncurrent Liabilities
Derivatives, Fair Value [Line Items]
Notional Amounts of Derivative Instruments, Liability		300.0
Fair value of Derivative Instruments, Liability		(4.6)
Derivatives Not Designated As Cash Flow Hedges | Interest rate swap contract | Other Noncurrent Liabilities
Derivatives, Fair Value [Line Items]
Notional Amounts of Derivative Instruments, Liability	220.0
Fair value of Derivative Instruments, Liability	(2.7)
Derivatives Not Designated As Cash Flow Hedges | Foreign exchange contracts | Prepaid Expenses and Other
Derivatives, Fair Value [Line Items]
Notional Amounts of Derivative Instruments, Asset	11.0	11.4
Fair value of Derivative Instruments, Asset	$ 0.7	$ 0.7

XML



Summary of Costs and Ranges of Useful Lives of the Major Classes of Property, Plant and Equipment and Total Accumulated Depreciation related to Property, Plant and Equipment, Net (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011 Year	Dec. 31, 2010
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 531,588	$ 520,592
Less accumulated depreciation	(369,189)	(345,025)
Property, plant and equipment, net	162,399	175,567
Buildings, at cost
Property, Plant and Equipment [Line Items]
Property, plant and equipment	37,733	37,657
Property, plant and equipment, Minimum useful lives	10
Property, plant and equipment, Maximum useful lives	30
Machinery and equipment, at cost
Property, Plant and Equipment [Line Items]
Property, plant and equipment	231,694	225,762
Property, plant and equipment, Minimum useful lives	3
Property, plant and equipment, Maximum useful lives	20
Office furniture and equipment, at cost
Property, Plant and Equipment [Line Items]
Property, plant and equipment	226,827	221,804
Property, plant and equipment, Minimum useful lives	3
Property, plant and equipment, Maximum useful lives	10
Leasehold improvements, at cost
Property, Plant and Equipment [Line Items]
Property, plant and equipment	28,126	28,174
Property, plant and equipment, Minimum useful lives	5
Property, plant and equipment, Maximum useful lives	10
Land, at cost
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 7,208	$ 7,195

XML



BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2011

Accounts Receivable

Accounts Receivable

The allowance for doubtful accounts was $7.3 million and $12.1 million as of June 30, 2011 and December 31, 2010, respectively.

Income Taxes

Income Taxes

We are required to adjust our effective tax rate each quarter to be consistent with our estimated annual effective tax rate. We are also required to record the tax impact of certain unusual or infrequently occurring items, including the effects of changes in tax laws or rates, in the interim period in which they occur. The effective tax rate during a particular quarter may be higher or lower as a result of the timing of actual earnings versus annual projections.

Inventories

Inventories

Inventories are accounted for at the lower of cost, determined on a first in, first out (“FIFO”) basis, or market.

Property, Plant and Equipment

Property, Plant and Equipment

The following table summarizes the costs and ranges of useful lives of the major classes of property, plant and equipment and the total accumulated depreciation related to Property, plant and equipment, net included on the condensed consolidated balance sheets:

		June 30,			December 31,
	Useful Lives	2011			2010
	(in years)	(in thousands of U.S. dollars)
Land, at cost	N/A	$	7,208		$	7,195
Buildings, at cost	10 - 30		37,733			37,657
Machinery and equipment, at cost	3 - 20		231,694			225,762
Office furniture and equipment, at cost	3 - 10		226,827			221,804
Leasehold improvements, at cost	5 - 10		28,126			28,174
			531,588			520,592
Less accumulated depreciation			(369,189	)		(345,025	)
Property, plant and equipment, net		$	162,399		$	175,567

New Accounting Pronouncements

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which eliminates the option to present the components of other comprehensive income as a part of the statement of stockholders’ equity. Instead, ASU 2011-05 requires all non-owner transactions that affect an entity’s equity be presented either in a single continuous statement of comprehensive income or in two separate, but consecutive, statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present the components of other comprehensive income, total other comprehensive income and the total of comprehensive income. We have adopted the provisions of ASU 2011-05 and retrospectively applied herein the two-statement approach described above.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The adoption of ASU 2009-13, applied prospectively for revenue arrangements entered into or materially modified beginning on or after January 1, 2011, did not have a material impact on our financial position or results of operations.

XML



COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2011

COMMITMENTS AND CONTINGENCIES

5. COMMITMENTS AND CONTINGENCIES

The application and interpretation of applicable state sales tax laws to certain of our products is uncertain. Accordingly, we may be exposed to additional sales tax liability to the extent various state jurisdictions determine that certain of our products are subject to such jurisdictions’ sales tax. As of June 30, 2011, we have recorded a liability of $10.0 million, reflecting our best estimate of our potential sales tax liability.

In addition to the above matter, we are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on our financial position, results of operations or liquidity.

XML



LONG-TERM DEBT (Tables)

6 Months Ended

Jun. 30, 2011

Long-Term Debt

Long-term debt included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
New Senior Secured Revolving Credit Facility	$	50,000	$	—
Prior Senior Secured Revolving Credit Facility		—		—
Senior Secured Term Loan A		300,000		—
Senior Secured Convertible Notes due 2033, net of discount		60		58
8 1/4% Senior Notes due 2015		—		242,224
6 5/8% Senior Notes due 2021		260,000		—
Senior Secured Term Loan B		—		347,723
Senior Secured Delayed Draw Term Loan		—		116,222
Total debt		610,060		706,227
Current portion long-term debt		15,000		7,058
Long-term debt	$	595,060	$	699,169

Senior Secured Credit Facility

Required and Actual Financial Ratios Under Senior Secured Credit Facility

The following table shows the required and actual financial ratios under our new senior secured credit facility as of June 30, 2011:

	Required Ratio	Actual Ratio
Maximum consolidated leverage ratio	No greater than 3.50:1.00		1.90:1.00
Minimum consolidated interest coverage ratio	No less than 3.00:1.00		7.25:1.00

6 5/8% Senior Notes due 2021

Redemption Prices (Expressed as Percentages of the Principal Amount Thereof)

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:

Year	Percentage
2016		103.313	%
2017		102.208	%
2018		101.104	%
2019 and thereafter		100.000	%

XML



GAIN FROM LITIGATION SETTLEMENT - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2010
Component of Operating Other Cost and Expense [Line Items]
Payment received as per Settlement Agreement	$ 500,000,000
Gain from litigation settlement, net (Note 6)	490,085,000
Lawsuit settlement, related payment	9,900,000
Special Bonus Payment to Employees
Component of Operating Other Cost and Expense [Line Items]
Lawsuit settlement, related payment	$ 8,100,000

XML



Inventories (Detail) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Schedule of Inventory [Line Items]
Raw materials	$ 28,439	$ 27,035
Work in progress	10,780	14,952
Inventories	$ 39,219	$ 41,987

XML



Statement of Other Comprehensive Income (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net earnings	$ 30,252	$ 11,105	$ 51,663	$ 333,633
Other comprehensive income, net of tax:
Unrealized changes in fair value of cash flow hedges and available-for-sale securities	(83)	(1,043)	(370)	(2,370)
Realized losses on cash flow hedges reclassified from AOCI into earnings	2,261		3,040
Amortization of realized losses and unrealized changes in fair value of discontinued cash flow hedges		2,763		5,538
Foreign currency translation adjustment	(58)	(1,060)	807	(1,416)
Total other comprehensive income	2,120	660	3,477	1,752
Comprehensive income	$ 32,372	$ 11,765	$ 55,140	$ 335,385

XML



ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2011

Accrued Expenses

Accrued expenses included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
Accrued interest	$	7,352	$	6,710
Accrued compensation and benefits		40,803		57,781
Other accrued expenses		37,434		35,121
Accrued expenses	$	85,589	$	99,612

XML



Repurchase of Common Stock (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Equity, Class of Treasury Stock [Line Items]
Shares repurchased	2,144,067	1,619,600	3,766,852	1,619,600
Aggregate repurchase price	$ 60,326,065	$ 54,622,971	$ 105,856,000	$ 54,623,000
Average price paid per share	$ 28.14	$ 33.73	$ 28.10	$ 33.73

XML



DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2011

Notional Amounts of Derivative Financial Instruments and Related Fair Values Measured on Recurring Basis

The notional amounts of derivative financial instruments and related fair values measured on a recurring basis and included in the condensed consolidated balance sheets were as follows:

	Notional Amounts				Fair Value
(in millions of U.S. Dollars)	June 30, 2011		December 31, 2010		June 30, 2011			December 31, 2010			Balance Sheet Location
Derivatives designated as cash flow hedging instruments:
Interest rate swap contract		N/A	$	300.0		N/A		$	(4.6	)	Other non-current liabilities
Derivatives not receiving hedge accounting treatment:
Interest rate swap contract		220.0		N/A		(2.7	)		N/A		Other non-current liabilities
Foreign exchange contracts		11.0		11.4		0.7			0.7		Prepaid expenses and other
Total derivative financial instruments	$	231.0	$	311.4	$	(2.0	)	$	(3.9	)

Impact of Derivative Financial Instruments on Condensed Consolidated Financial Statements

The following tables summarize the impact of derivative financial instruments on the condensed consolidated financial statements for the indicated periods:

	Three Months Ended June 30,
	2011			2010			2011			2010			2011			2010
(in millions of U.S. Dollars)	Amount of Pre-tax Gain (Loss) Recognized in Earnings						Amount of Pre-tax 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 (a)	$	—		$	—		$	(0.2	)	$	(1.6	)	$	(3.7	)	$	—
Derivatives not receiving hedge accounting treatment:
Interest rate swap contracts (a)	$	(0.1	)	$	0.3		$	—		$	—		$	—		$	(4.4	)
Foreign exchange contracts (b)		(0.2	)		(0.6	)		—			—			—			—
	$	(0.3	)	$	(0.3	)	$	(0.2	)	$	(1.6	)	$	(3.7	)	$	(4.4	)
(a)    Recognized in Interest expense
(b)    Recognized in Cost of sales
	Six Months Ended June 30,
	2011			2010			2011			2010			2011			2010
(in millions of U.S. Dollars)	Amount of Pre-tax Gain (Loss) Recognized in Earnings						Amount of Pre-tax 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 (a)	$	—		$	—		$	(0.4	)	$	(3.8	)	$	(5.0	)	$	—
Derivatives not receiving hedge accounting treatment:
Interest rate swap contracts (a)	$	(0.1	)	$	3.2		$	—		$	—		$	—		$	(8.9	)
Foreign exchange contracts (b)		—			(0.1	)		—			—			—			—
	$	(0.1	)	$	3.1		$	(0.4	)	$	(3.8	)	$	(5.0	)	$	(8.9	)

(a) Recognized in Interest expense

(b) Recognized in Cost of sales

XML



BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2011

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP principles for complete financial statements. In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the information presented. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of results to be expected for the fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Valassis Communications, Inc. (“Valassis,” “we,” and “our”) Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”).

Significant Accounting Policies

Accounts Receivable

The allowance for doubtful accounts was $7.3 million and $12.1 million as of June 30, 2011 and December 31, 2010, respectively.

Income Taxes

We are required to adjust our effective tax rate each quarter to be consistent with our estimated annual effective tax rate. We are also required to record the tax impact of certain unusual or infrequently occurring items, including the effects of changes in tax laws or rates, in the interim period in which they occur. The effective tax rate during a particular quarter may be higher or lower as a result of the timing of actual earnings versus annual projections.

Inventories

Inventories are accounted for at the lower of cost, determined on a first in, first out (“FIFO”) basis, or market. Inventories included on the condensed consolidated balance sheets consisted of:

	June 30,		December 31,
(in thousands of U.S. dollars)	2011		2010
Raw materials	$	28,439	$	27,035
Work in progress		10,780		14,952
Inventories	$	39,219	$	41,987

Property, Plant and Equipment

The following table summarizes the costs and ranges of useful lives of the major classes of property, plant and equipment and the total accumulated depreciation related to Property, plant and equipment, net included on the condensed consolidated balance sheets:

		June 30,			December 31,
	Useful Lives	2011			2010
	(in years)	(in thousands of U.S. dollars)
Land, at cost	N/A	$	7,208		$	7,195
Buildings, at cost	10 - 30		37,733			37,657
Machinery and equipment, at cost	3 - 20		231,694			225,762
Office furniture and equipment, at cost	3 - 10		226,827			221,804
Leasehold improvements, at cost	5 - 10		28,126			28,174
			531,588			520,592
Less accumulated depreciation			(369,189	)		(345,025	)
Property, plant and equipment, net		$	162,399		$	175,567

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which eliminates the option to present the components of other comprehensive income as a part of the statement of stockholders’ equity. Instead, ASU 2011-05 requires all non-owner transactions that affect an entity’s equity be presented either in a single continuous statement of comprehensive income or in two separate, but consecutive, statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present the components of other comprehensive income, total other comprehensive income and the total of comprehensive income. We have adopted the provisions of ASU 2011-05 and retrospectively applied herein the two-statement approach described above.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The adoption of ASU 2009-13, applied prospectively for revenue arrangements entered into or materially modified beginning on or after January 1, 2011, did not have a material impact on our financial position or results of operations.

XML



SEGMENT REPORTING

6 Months Ended

Jun. 30, 2011

SEGMENT REPORTING

10. SEGMENT REPORTING

Our segments meeting the quantitative thresholds to be considered reportable are Shared Mail, Neighborhood Targeted and Free-standing Inserts (“FSI”). All other lines of business fall below a materiality threshold and are, therefore, combined together in an “other” segment named International, Digital Media & Services. These business lines include NCH Marketing Services, Inc., direct mail, software analytics, security services, digital and in-store. Our reportable segments are strategic business units that offer different products and services and are subject to regular review by our chief operating decision-maker. They are managed separately because each business requires different executional strategies and caters to different client marketing needs.

The accounting policies of the segments are the same as those described in the 2010 Form 10-K and Note 1, Basis of Presentation and Significant Accounting Policies. We evaluate reportable segment performance based on segment profit, which we define as earnings from operations excluding unusual or infrequently occurring items. A reconciliation of total segment profit to earnings from operations is provided below. Assets are not allocated in all cases to reportable segments and are not used to assess the performance of a segment.

The following table sets forth, by segment, revenues, depreciation/amortization and segment profit for the indicated periods:

	Three Months Ended June 30,
(in millions of U.S. dollars)	Shared Mail		Neighborhood Targeted		FSI		International, Digital Media & Services		Total
2011
Revenues from external customers	$	337.2	$	88.8	$	89.2	$	50.0	$	565.2
Intersegment revenues	$	4.1	$	12.9	$	9.8	$	0.1	$	26.9
Depreciation/amortization	$	9.5	$	1.0	$	3.0	$	1.9	$	15.4
Segment profit	$	47.7	$	0.8	$	8.3	$	6.4	$	63.2
2010
Revenues from external customers	$	326.3	$	116.3	$	94.6	$	42.8	$	580.0
Intersegment revenues	$	3.9	$	6.8	$	9.3	$	—	$	20.0
Depreciation/amortization	$	10.2	$	1.0	$	3.1	$	0.8	$	15.1
Segment profit	$	40.6	$	5.3	$	11.4	$	3.1	$	60.4
	Six Months Ended June 30,
(in millions of U.S. dollars)	Shared Mail		Neighborhood Targeted		FSI		International, Digital Media & Services		Total
2011
Revenues from external customers	$	659.8	$	178.9	$	178.4	$	95.1	$	1,112.2
Intersegment revenues	$	8.6	$	22.2	$	19.6	$	0.2	$	50.6
Depreciation/amortization	$	19.5	$	2.0	$	6.0	$	3.6	$	31.1
Segment profit	$	89.8	$	2.7	$	15.7	$	11.8	$	120.0
2010
Revenues from external customers	$	639.2	$	216.1	$	192.1	$	82.6	$	1,130.0
Intersegment revenues	$	7.4	$	12.4	$	18.9	$	—	$	38.7
Depreciation/amortization	$	20.9	$	2.0	$	6.2	$	1.6	$	30.7
Segment profit	$	72.2	$	12.4	$	19.7	$	8.6	$	112.9

The following table provides reconciliations of total segment profit to earnings from operations for the indicated periods:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions of U.S. dollars)	2011		2010		2011		2010
Total segment profit	$	63.2	$	60.4	$	120.0	$	112.9
Unallocated amounts:
Gain from litigation settlement		—		—		—		490.1
Earnings from operations	$	63.2	$	60.4	$	120.0	$	603.0

Domestic and foreign revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions of U.S. dollars)	2011		2010		2011		2010
United States	$	550.3	$	566.2	$	1,085.2	$	1,102.9
Foreign		14.9		13.8		27.0		27.1
Revenues	$	565.2	$	580.0	$	1,112.2	$	1,130.0

Domestic and foreign long-lived assets (property, plant and equipment, net) were as follows:

(in millions of U.S. dollars)	June 30, 2011		December 31, 2010
United States	$	153.9	$	166.8
Foreign		8.5		8.8
Property, plant and equipment, net	$	162.4	$	175.6

XML



Long-Term Debt - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Debt Outstanding [Line Items]
Total debt	$ 610,060,000		$ 610,060,000		$ 706,227,000
Borrowings of long-term debt			610,000,000
Repayments of long-term debt			706,169,000	301,312,000
Pre-tax loss on extinguishment of debt	(2,966,000)	(23,873,000)	(16,318,000)	(23,873,000)
New Senior Secured Credit Facility | Term Loan A
Debt Outstanding [Line Items]
Total debt	300,000,000		300,000,000
Debt repayment, terms			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, 10% during the third year, 15% during the fourth year and 11.25% during the fifth year, with the remaining 53.75% due at maturity (the “Term Loan A”);
New Senior Secured Credit Facility | New Senior Secured Revolving Credit Facility
Debt Outstanding [Line Items]
Line of credit, aggregate principal amount	100,000,000		100,000,000
Line of credit, outstanding amount	50,000,000		50,000,000
New Senior Secured Credit Facility | New Senior Secured Revolving Credit Facility | Foreign Denominated
Debt Outstanding [Line Items]
Line of credit, aggregate principal amount	15,000,000		15,000,000
New Senior Secured Credit Facility | New Senior Secured Revolving Credit Facility | Letter of Credit
Debt Outstanding [Line Items]
Line of credit, aggregate principal amount	50,000,000		50,000,000
New Senior Secured Credit Facility | New Senior Secured Revolving Credit Facility | Revolving Line of Credit
Debt Outstanding [Line Items]
Line of credit, aggregate principal amount	20,000,000		20,000,000
New Senior Secured Credit Facility | Incremental Credit Facility
Debt Outstanding [Line Items]
line of credit, incremental facility	150,000,000		150,000,000
Prior Senior Secured Credit Facility
Debt Outstanding [Line Items]
Cash used to repay outstanding debt			120,000,000
Repayments of long-term debt			462,200,000
Pre-tax loss on extinguishment of debt	3,000,000		3,000,000
Pre-tax loss of termination of hedge on related interest rate swap			2,600,000
Capitalized debt issuance costs			6,200,000
Senior Secured Credit Facility
Debt Outstanding [Line Items]
Credit facility,interest rate description			Borrowings under our new 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 plus 0.5% or one-month LIBOR plus 1%) (the “Base Rate”) or at an Adjusted LIBO Rate (as defined in the credit agreement governing the new senior secured credit facility) (the “Eurodollar Rate”), 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 initially 0.75% per annum for Base Rate loans and 1.75% per annum for Eurodollar Rate loans. Beginning with the delivery of the financial statements and the compliance certificate for the quarter ending September 30, 2011, the margins applicable to the borrowings under our new 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.
Debt, prepayment terms			The new 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 new 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.
Debt covenants			Our new senior secured credit facility also requires us to comply with: • 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 new 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.
Guarantee to senior secured credit facility			Our new 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.
Percentage of capital stock of foreign subsidiaries pledged as a guarantee	65.00%		65.00%
Senior Secured Credit Facility | Revolving Credit Facility
Debt Outstanding [Line Items]
Line of credit available	39,000,000		39,000,000
Standby letters of credit outstanding	11,000,000		11,000,000
Senior Secured Convertible Notes due 2033, net of discount
Debt Outstanding [Line Items]
Total debt	60,000		60,000		58,000
Guarantee to senior secured credit facility			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 new senior secured credit facility to the extent required by the indenture governing such notes.
8 1/4% Senior Notes due 2015
Debt Outstanding [Line Items]
Total debt					242,224,000
Repayments of long-term debt		297,800,000		297,800,000
Pre-tax loss on extinguishment of debt		23,900,000	13,300,000	23,900,000
6 5/8% Senior Notes due 2021
Debt Outstanding [Line Items]
Total debt	260,000,000		260,000,000
Borrowings of long-term debt			260,000,000
Capitalized debt issuance costs			$ 5,100,000
Debt Instrument, issuance date			2011-01-28
Debt Instrument redemption, description			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. 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 prices 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.
Debt Instrument Cash Redemption Price	101.00%		101.00%
6 5/8% Senior Notes due 2021 | Senior Notes Redeemable Prior To February 1st, 2016
Debt Outstanding [Line Items]
Debt Instrument Redemption Price	100.00%		100.00%
6 5/8% Senior Notes due 2021 | Senior Notes Redeemable Prior To February 1st, 2014 With Equity Offering Proceeds
Debt Outstanding [Line Items]
Debt Instrument Redemption Price	35.00%		35.00%

XML



GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2011

Goodwill

Goodwill included on the condensed consolidated balance sheets consisted of:

(in thousands of U.S. dollars)	June 30, 2011		December 31, 2010
Shared Mail	$	534,184	$	534,184
Neighborhood Targeted		5,325		5,325
Free-standing Inserts		22,357		22,357
International, Digital Media & Services		74,605		74,605
Goodwill	$	636,471	$	636,471

Components of Other Intangible Assets, Net

The components of other intangible assets, net included on the condensed consolidated balance sheets consisted of:

	June 30, 2011									December 31, 2010
(in thousands of U.S. dollars)	Gross Amount		Accum- ulated Amort- ization			Net Amount		Weighted Average Remaining Useful Life (in years)		Gross Amount		Accum- ulated Amort- ization			Net Amount		Weighted Average Remaining Useful Life (in years)
Amortizing intangible assets:
Mailing lists, non compete agreements and other	$	48,037	$	(8,881	)	$	39,156		14.5	$	48,037	$	(7,871	)	$	40,166		15.0
Customer relationships		140,000		(39,291	)		100,709		9.5		140,000		(33,990	)		106,010		10.0
Non-amortizing intangible assets:
Valassis name, tradenames, trademarks and other		87,641		—			87,641				87,641		—			87,641
Other intangible assets, net	$	275,678	$	(48,172	)	$	227,506			$	275,678	$	(41,861	)	$	233,817

XML



Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 118,962	$ 245,935
Accounts receivable, net (Note 1)	411,423	459,952
Inventories (Note 1)	39,219	41,987
Prepaid expenses and other	62,622	38,657
Total current assets	632,226	786,531
Property, plant and equipment, net (Note 1)	162,399	175,567
Goodwill (Note 2)	636,471	636,471
Other intangible assets, net (Note 2)	227,506	233,817
Other assets	17,573	13,272
Total assets	1,676,175	1,845,658
Current liabilities:
Current portion long-term debt (Note 3)	15,000	7,058
Accounts payable	320,193	329,602
Progress billings	44,615	53,001
Accrued expenses (Note 4)	85,589	99,612
Total current liabilities	465,397	489,273
Long-term debt (Note 3)	595,060	699,169
Deferred income taxes	80,003	78,764
Other non-current liabilities	45,830	49,568
Total liabilities	1,186,290	1,316,774
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock ($0.01 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2011 and December 31, 2010)
Common stock ($0.01 par value; 100,000,000 shares authorized; 65,371,689 and 65,283,749 shares issued at June 30, 2011 and December 31, 2010, respectively; 47,079,040 and 50,361,749 shares outstanding at June 30, 2011 and December 31, 2010, respectively)	654	653
Additional paid-in capital	123,898	124,988
Retained earnings	959,799	908,136
Accumulated other comprehensive earnings	6,776	3,299
Treasury stock, at cost (18,292,649 and 14,922,000 shares at June 30, 2011 and December 31, 2010, respectively)	(601,242)	(508,192)
Total stockholders' equity	489,885	528,884
Total liabilities and stockholders' equity	$ 1,676,175	$ 1,845,658

XML



Redemption Prices (Expressed as Percentages of the Principal Amount Thereof) (Detail) (6 5/8% Senior Notes due 2021)	Jun. 30, 2011
2016
Debt Instrument [Line Items]
Debt Instrument Redemption Price	103.313%
2017
Debt Instrument [Line Items]
Debt Instrument Redemption Price	102.208%
2018
Debt Instrument [Line Items]
Debt Instrument Redemption Price	101.104%
2019 and Thereafter
Debt Instrument [Line Items]
Debt Instrument Redemption Price	100.00%

XML



Domestic and Foreign Long-Lived Assets (Property, Plant and Equipment, Net) (Detail) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Revenues from External Customers and Long-Lived Assets [Line Items]
Property, plant and equipment, net (Note 1)	$ 162,399	$ 175,567
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Property, plant and equipment, net (Note 1)	153,900	166,800
Foreign
Revenues from External Customers and Long-Lived Assets [Line Items]
Property, plant and equipment, net (Note 1)	$ 8,500	$ 8,800

XML



Repurchase of Common Stock - Additional Information (Detail)	Jun. 30, 2011
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock, additional authorized shares	6,590,301

XML



Revenues, Depreciation/Amortization and Segment Profit by Segment (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Segment Reporting Information [Line Items]
Revenues from external customers	$ 565,252,000	$ 579,950,000	$ 1,112,231,000	$ 1,129,952,000
Intersegment revenues	26,900,000	20,000,000	50,600,000	38,700,000
Depreciation/amortization	15,400,000	15,100,000	31,121,000	30,663,000
Segment profit	63,200,000	60,400,000	120,000,000	112,900,000
Shared Mail
Segment Reporting Information [Line Items]
Revenues from external customers	337,200,000	326,300,000	659,800,000	639,200,000
Intersegment revenues	4,100,000	3,900,000	8,600,000	7,400,000
Depreciation/amortization	9,500,000	10,200,000	19,500,000	20,900,000
Segment profit	47,700,000	40,600,000	89,800,000	72,200,000
Neighborhood Targeted
Segment Reporting Information [Line Items]
Revenues from external customers	88,800,000	116,300,000	178,900,000	216,100,000
Intersegment revenues	12,900,000	6,800,000	22,200,000	12,400,000
Depreciation/amortization	1,000,000	1,000,000	2,000,000	2,000,000
Segment profit	800,000	5,300,000	2,700,000	12,400,000
Free Standing Inserts (FSI)
Segment Reporting Information [Line Items]
Revenues from external customers	89,200,000	94,600,000	178,400,000	192,100,000
Intersegment revenues	9,800,000	9,300,000	19,600,000	18,900,000
Depreciation/amortization	3,000,000	3,100,000	6,000,000	6,200,000
Segment profit	8,300,000	11,400,000	15,700,000	19,700,000
International, Digital Media and Services
Segment Reporting Information [Line Items]
Revenues from external customers	50,000,000	42,800,000	95,100,000	82,600,000
Intersegment revenues	100,000		200,000
Depreciation/amortization	1,900,000	800,000	3,600,000	1,600,000
Segment profit	$ 6,400,000	$ 3,100,000	$ 11,800,000	$ 8,600,000

XML



Accrued Expenses (Detail) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Equity, Class of Treasury Stock [Line Items]
Accrued interest	$ 7,352	$ 6,710
Accrued compensation and benefits	40,803	57,781
Other accrued expenses	37,434	35,121
Accrued expenses	$ 85,589	$ 99,612