EX-99.1 3 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

VALASSIS REPORTS 20% REVENUE GROWTH IN THE SECOND QUARTER

Increase Driven by Organic Growth and Acquisition of NCH

 

Livonia, MI, July 24, 2003: Valassis, (NYSE: VCI), the leading company in marketing services and Connective Media™, announced results for the second quarter ended June 30, 2003. The company reported quarterly revenues of $243.1 million, up 20% from the second quarter of 2002. Second-quarter net earnings were $27.5 million, or $0.53 in earnings per share (EPS), including a refinancing charge incurred in May of $2.5 million net of tax related to the partial buy-back of the convertible debt issued in 2001. Without this charge, EPS was $0.57 and within the previously published quarterly EPS range of $0.55 to $0.61.

 

“Our revenue growth is a direct result of the steps we have taken to expand our product portfolio and customer base,” said Alan F. Schultz, Chairman, President and CEO. “We are committed to restoring our co-op free-standing insert (FSI) market share to a historical level, and we still face intense competitive pricing pressure in this area of our business.”

 

Valassis will hold an investor call today to discuss the second-quarter results at 11:00 a.m. (EDT). The call-in number is (800) 218-0530. The call will also simulcast on the company’s website, at www.valassis.com, and be replayed through August 7th, at (800) 405-2236, pass code 515289. This press release and the webcast will be archived on the company’s website under “Investor”.

 

 

FINANCIAL HIGHLIGHTS (in millions, except per share data)

 

     Three Months Ended
     Six Months Ended
  
    

June 30,

2003

   

June 30,

2002

    % Change
    

June 30,

2003

   

June 30,

2002

    % Change
  

Total Revenues

    $ 243.1    $ 202.6    20.0 %   $ 448.2    $ 406.3    10.3 %

Earnings Prior to Refinance Charge

    $ 30.0    $ 33.8    -11.2 %   $ 56.0    $ 66.4    -15.7 %

Refinance Charge, net of tax

    $ 2.5    $ 0.0          $ 2.5    $ 0.0       

Net Earnings

    $ 27.5    $ 33.8    -18.6 %   $ 53.5    $ 66.4    -19.4 %

EPS, diluted

    $ 0.53    $ 0.62    -14.5 %   $ 1.03    $ 1.22    -15.6 %

EPS, Prior to Refinance Charge, diluted

    $ 0.57    $ 0.62    -8.1 %   $ 1.07    $ 1.22    -12.3 %

 

Mass Marketing Products – Products that provide mass reach at low cost: Free-standing insert (FSI) revenue was down 7.5% for the second quarter to $129.3 million, due to the reduction in market share and price. Management noted that unit growth in the co-op FSI industry continued to be strong. Run of press (ROP) revenue, generated from the brokering of advertising space on behalf of newspapers, was up 100% for the quarter to $15.4 million, due to the company’s increased sales focus and strategy to grow the customer base.

 

Cluster Targeted Products – Products targeted around geographic and demographic clusters: Cluster targeted product revenues were up 42.3%, versus the second quarter of 2002, to $64.3 million. “Our strategy to develop customers in new sectors such as specialty retail has contributed to the growth of our solo insert and polybag sampling and advertising businesses,” said MaryAnn Rivers, Vice President of U.S. Sales and Marketing for Valassis. “This broader customer base will position us for enhanced growth as we provide these customers with integrated solutions.”

 

1 to 1 Products – Products and services that pinpoint individuals to build loyalty to a brand: The 1 to 1 product group is comprised of PreVision Marketing, Valassis Relationship Marketing Systems (VRMS) and direct mail. 1 to 1 revenues increased to $9.1 million, a 21.3% increase over the second quarter of 2002. This increase is attributed to the consolidation of VRMS starting in July of 2002. VRMS continues to make progress and the company is now the exclusive provider of co-op frequent shopper database direct mail programs. During the second quarter, the company increased its ownership of PreVision to 100%.

 

VCI 2Q03 Earnings

Page 2

 

International & Services – Marketing services and products available internationally: International & Services is comprised of NCH Marketing Services, Inc. (NCH), Valassis Canada, and Promotion Watch. International & Services revenues were $25.0 million for the second quarter, up from $2.4 million for the first quarter of 2002, due primarily to the acquisition of NCH. NCH continues to perform well, meeting or exceeding all expectations set at the time of acquisition.

 

 

Costs and Expenses

FSI costs were relatively flat for the second quarter on a CPM basis. Interest expense remained stable at $3.3 million for the quarter. SG&A expenses were up 39% to $31 million, due primarily to the consolidation of NCH and VRMS.

 

 

Debt Reduction/Share Repurchase

During the second quarter, the company issued $160 million in 30-year convertible senior notes. The majority of the proceeds from this offering were used to repurchase $111 million of the convertible bonds issued in 2001. The company’s debt position, net of cash, was $163.5 million at quarter-end. While the company is still authorized to repurchase shares up to 75% of the company’s free cash flow, Valassis did not repurchase any shares during the second quarter. The company ended the quarter with $147.4 million in cash.

 

“While we are still committed long-term to our share repurchase strategy, we chose not to repurchase shares this quarter in order to strengthen the balance sheet. We believe a strong balance sheet is one of the ways to accelerate our return to a normalized co-op FSI pricing environment,” said Robert L. Recchia, Executive Vice President and Chief Financial Officer.

 

 

Outlook

2003 guidance remains as previously announced. Management provided previous guidance that EPS is expected to be down 5% to 15% for 2003, with resulting free cash flow of $105 to $115 million. Management provided the following quarterly projections in its Fourth Quarter 2002 release on February 20, 2003:

 

Quarter

   

Projected EPS Range

   

Actual Results

1

    $0.48 – 0.54    $0.50  

2

    $0.55 – 0.61    $0.53*

3

    $0.50 – 0.56     

4

    $0.54 – 0.60     

 

* Second-quarter net earnings were $0.53 in earnings per share (EPS), including a refinancing charge incurred in May of $2.5 million net of tax related to the partial buy-back of the convertible debt issued in 2001. Without this charge, EPS was $0.57 and within the previously published quarterly EPS range.

 

 

About Valassis

Valassis offers a wide range of marketing services to consumer packaged goods manufacturers, retailers, technology companies and other customers with operations in the United States, Europe, Mexico and Canada. Valassis’ Connective Media™ portfolio includes: newspaper advertising & inserts, sampling, direct mail, 1 to 1 marketing programs, coupon clearing and consulting, and analytic services. Valassis has been listed as one of Fortune magazine’s “Best Companies to Work for in America” for six consecutive years. Valassis subsidiaries and investments include Valassis Canada, PreVision Marketing®, LLC, Coupons, Inc., Promotion Watch, Valassis Relationship Marketing Systems, LLC and NCH Marketing Services, Inc. For additional information, visit the company website at http://www.valassis.com.

 

Certain statements found in this document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: price competition from the Company’s existing competitors; new competitors in any of the Company’s businesses; a shift in customer preference for different promotional materials, strategies or coupon delivery methods; an unforeseen increase in the Company’s paper costs; economic disruptions caused by terrorist activity, armed conflict or changes in general economic conditions; or changes which affect the businesses of our customers and lead to reduced sales promotion spending. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Tables to follow…

 

VCI 2Q03 Earnings

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VALASSIS COMMUNICATIONS, INC.

Consolidated Balance Sheets

(in thousands)

 

     June 30,
2003
     Dec. 31,
2002
  

Assets

                 

Current assets:

                 

Cash and cash equivalents

    $ 147,399     $ 97,156  

Accounts receivable

      179,286       114,248  

Inventories

      16,289       21,049  

Deferred income taxes

      5,110       2,223  

Other

      16,787       7,300  
    
 

Total current assets

      364,871       241,976  

Property, plant and equipment, at cost

      215,618       188,622  

Less accumulated depreciation

      (129,144 )     (121,883 )
    
 

Net property, plant and equipment

      86,474       66,739  

Intangible assets

      205,293       136,319  

Less accumulated amortization

      (73,724 )     (73,619 )
    
 

Net intangible assets

      131,569       62,700  

Equity investments and advances to investees

      3,781       3,781  

Deferred income taxes

      8,931       8,062  

Other assets

      4,773       2,821  
    
 

Total assets

    $ 600,399     $ 386,079  
    
 

 

More tables to follow . . .

VCI 2Q03 Earnings

Page 4

 

 

VALASSIS COMMUNICATIONS, INC.

Consolidated Balance Sheets, Continued

(in thousands)

 

    

June 30,

2003

    

Dec. 31,

2002

  
Liabilities and Stockholders’ Equity (Deficit)                 

Current liabilities:

                 

Accounts payable and accruals

    $ 229,294     $ 128,073  

Progress billings

      28,988       33,721  

Income taxes payable

      634       —    
    
 

Total current liabilities

      258,916       161,794  

Long-term debt

      310,880       257,280  

Other liabilities

      8,011       292  

Stockholders’ equity (deficit):

                 

Common stock

      631       630  

Additional paid-in capital

      34,735       33,869  

Retained earnings

      340,604       287,076  

Treasury stock

      (353,700 )     (354,355 )

Accumulated other comprehensive gain (loss)

      322       (507 )
    
 

Total stockholders’ equity (deficit)

      22,592       (33,287 )
    
 

Total liabilities and stockholders’ equity (deficit)

    $ 600,399     $ 386,079  
    
 

 

More tables to follow . . .

 

VCI 2Q03 Earnings

Page 5

 

 

VALASSIS COMMUNICATIONS, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

 

    

Quarter Ended

June 30,

2003

    

Quarter Ended

June 30,

2002

    

%

Change

  

Revenue

    $ 243,111     $ 202,569     +20.0 %

Costs and expenses:

                       

Costs of products sold

      161,847       124,587     +29.9 %

Selling, general and administrative

      31,063       22,341     +39.0 %

Refinancing charge

      3,868       —          

Loss on investments

      —         678     -100.0 %
    
 
 

Total costs and expenses

      196,778       147,606     +33.3 %

Earnings from operations

      46,333       54,963     -15.7 %

Other expenses and income:

                       

Interest expense

      3,252       3,347     -2.8 %

Other (income) and expenses *

      (266 )     (766 )   -65.3 %
    
 
 

Total other expenses and income

      2,986       2,581     +15.7 %

Earnings before income taxes

      43,347       52,382     -17.2 %

Income taxes

      15,841       18,600     -14.8 %
    
 
 

Net earnings

    $ 27,506     $ 33,782     -18.6 %
    
 
 

Net earnings per common share, diluted

    $ 0.53     $ 0.62     -14.5 %

Weighted average shares outstanding, diluted

      52,258       54,062     -3.3 %

Supplementary Data

                       

Amortization

    $ 51     $ 52        

Depreciation

      3,853       2,489        

Capital expenditures

      2,698       1,580        

 

* Other income and expenses has been reclassified from total revenues as previously presented

 

More tables to follow...

 

VCI 2Q03 Earnings

Page 6

 

 

VALASSIS COMMUNICATIONS, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

 

    

Six Months Ended

June 30,

2003

    

Six Months Ended

June 30,

2002

    

%

Change

  

Revenue

    $ 448,156     $ 406,341     +10.3 %

Costs and expenses:

                       

Costs of products sold

      296,348       251,403     +17.9 %

Selling, general and administrative

      58,318       44,571     +30.8 %

Refinancing charge

      3,868       —          

Loss on investments

      —         1,709     -100.0 %
    
 
 

Total costs and expenses

      358,534       297,683     +20.4 %

Earnings from operations

      89,622       108,658     -17.5 %

Other expenses and income:

                       

Interest expense

      6,593       6,569     +0.4 %

Other (income) and expenses *

      (1,168 )     (1,769 )   -34.0 %
    
 
 

Total other expenses and income

      5,425       4,800     +13.0 %

Earnings before income taxes

      84,197       103,858     -18.9 %

Income taxes

      30,666       37,500     -18.2 %
    
 
 

Net earnings

    $ 53,531     $ 66,358     -19.3 %
    
 
 

Net earnings per common share, diluted

    $ 1.03     $ 1.22     -15.6 %

Weighted average shares outstanding, diluted

      52,224       54,317     -3.9 %

Supplementary Data

                       

Amortization

    $ 105     $ 105        

Depreciation

      7,505       5,033        

Capital expenditures

      9,947       11,068        

 

* Other income and expenses has been reclassified from total revenues as previously presented