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Valassis Posts Revenue Decline, Reduces It 2011 Outlook

October 27, 2011
LIVONIA, MI—Oct. 26, 2011—Valassis announced the following financial results for the third quarter ended Sept. 30, 2011:

• Revenues were $528.4 million, a decrease of 7.7 percent compared to $572.4 million for the prior year quarter due to the negative impact of the macroeconomic climate on client advertising budgets; the previously announced anticipated shortfall in Run-of-Press (ROP) revenue within the Neighborhood Targeted segment; and the negative impact of the increased costs of high coupon redemption on annual consumer promotion budgets. This has resulted in reduced consumer packaged goods (CPG) programs across our various business segments.

• Net earnings were $27.5 million, an increase of 1.9 percent from $27.0 million for the prior year quarter.

• Adjusted EBITDA was $69.8 million, a decrease of 12.5 percent compared to $79.8 million for the prior year quarter driven primarily by the decline in revenue.

“The combined effect of the economy and increasing coupon redemptions are prematurely exhausting annual consumer promotion budgets in the second half of 2011,” said Alan F. Schultz, Valassis chairman, president and CEO. “We believe marketers will expand their consumer promotion budgets in 2012 to accommodate the increasing redemptions as they have in the past. We are also counseling clients to proactively manage redemption costs by controlling the variables we know influence redemptions such as coupon face values, coupon durations and multiple purchase requirements.”

Some additional highlights include:

• Selling, General and Administrative (SG&A) Costs: Third-quarter 2011 SG&A costs were $80.5 million, which included $2.2 million in non-cash stock-based compensation expense. This represents a decrease of 12.3 percent compared to third quarter 2010 SG&A costs of $91.8 million, which included $8.6 million in non-cash stock-based compensation expense.

• Capital Expenditures: Capital expenditures were $6.5 million for the third quarter and $18.1 million year to date.

• Liquidity: Total cash was $91.0 million at Sept. 30, 2011, a decrease of $28.0 million from June 30, 2011 due to share repurchases of $50.0 million; offset, in part, by cash generated from operations of $32.2 million in the quarter.

• Stock Repurchases: During the quarter, we repurchased $50.0 million, or 2.1 million shares, of our common stock at an average price of $23.86 per share under the stock repurchase program. Year to date, we have repurchased $155.8 million, or 5.9 million shares of our common stock. We currently have 4.5 million shares authorized by our Board of Directors in our stock repurchase program. The stock repurchase program does not obligate us to acquire any particular amount of shares of common stock, and may be modified or suspended at any time at our discretion.

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