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Valassis Reports Net Earnings Increase, Revenue Decline

October 29, 2009
LIVONIA, MI—Oct. 29, 2009—Valassis (NYSE: VCI) today announced financial results for the third quarter ended Sept. 30, 2009. It reported quarterly revenue of $544.1 million, a decrease of 3.5% from $563.7 million for the prior year quarter. The quarterly revenue decline would have been 2.8% excluding revenue of $3.8 million from divested and discontinued businesses in the prior year quarter.

Third-quarter net earnings was $13.8 million compared to a loss of $5.2 million for the prior year quarter. Earnings per share (EPS) for the quarter was $0.28 compared to a loss of $0.11 for the prior year quarter. Net earnings for the quarter includes non-cash interest expense of $2.8 million ($1.7 million net of taxes), or $0.04 per share, related to the fair value of the interest rate swap contracts. For the third quarter of 2009, adjusted EBITDA* was $63.9 million, an increase of 82.0% compared to $35.1 million for the prior year quarter.

"We continue to outperform most media companies and are beginning to see signs of revenue stability," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "Evidenced by a growing body of research, there is a permanent change in the mindset of today's shopper. We believe this deal-seeking lifestyle is a long-term phenomenon which favors our value-oriented media."

Some additional highlights include:

Cost Management: Our cost management plan continues to be on track for 2009. Third-quarter 2009 selling, general and administrative (SG&A) costs were $90.7 million, which includes $2.5 million (an $0.8 million increase) in legal costs related to the News America lawsuits and a $3.9 million increase in incentive-based compensation, including option expense, compared to prior year quarter SG&A costs of $93.9 million.

Capital Expenditures: Capital expenditures for the third quarter of 2009 were $4.9 million, and we expect full-year 2009 expenditures of approximately $20 million.

Liquidity: Third-quarter 2009 cash flows from operating activities was $14.0 million with a decrease in debt of $40.9 million. Year to date, we have paid down $150.1 million in debt. As of Sept. 30, 2009, our net debt position was $941.6 million. During the quarter, we completed four "modified Dutch" auctions in which we repurchased and retired $39.3 million of our outstanding term loan B and delayed draw term loans under our senior secured credit facility at an average discount of 2.6% to par resulting in an after-tax net gain of $0.4 million.

Interest Expense: Cash interest expense for the quarter was $19.3 million compared to $23.0 million for the prior year quarter, a decrease of 16.1%. Total interest expense for the third quarter decreased by $0.8 million from the prior year quarter and includes $2.8 million of non-cash interest expense related to the fair value of the interest rate swap contracts.
 

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