Valassis Reports Net Earnings Increase, Revenue Decline
Given our current outlook and assuming no increased volatility in marketers' ad spend, we are increasing full-year 2009 adjusted EBITDA* guidance to be between $255 million and $265 million from $245 million. We expect to provide full-year 2010 guidance in December 2009.
"We are once again raising guidance as our employees' continued cost management and optimization efforts have exceeded our expectations," said Robert L. Recchia, Valassis Executive Vice President and Chief Financial Officer. "As we begin to see signs of revenue stabilizing, we believe that our cost structure positions us well for earnings growth as we enter 2010."
Business Segment Discussion
Shared Mail: Revenue for the third quarter of 2009 was $319.5 million, down 2.3% compared to the prior year quarter primarily resulting from a reduction in unprofitable packages. Segment profit for the quarter was $29.6 million, up 124.2% compared to the prior year quarter due to effective cost management, including package optimization efforts, newspaper alliances and SG&A reductions.
Neighborhood Targeted Products: Revenue for the third quarter of 2009 was $92.0 million, down 14.0% compared to the prior year quarter revenue of $107.0 million. Preprints revenue remained strong and was up for the quarter as a result of our cross-selling efforts. Run-of-Press revenue was down related to reduced client ad spend within the wireless and financial verticals. Revenue in Sampling was down due to its cyclical nature. Segment profit for the quarter was $3.9 million, down 22.0% compared to $5.0 million for the prior year quarter. The decline in segment profit for the quarter was due primarily to the decline in revenue.
Free-standing Inserts (FSI): Revenue for the third quarter of 2009 was $92.6 million, up 1.3% compared to the prior year quarter. This was due to an industry unit volume increase of approximately 3.4% as the FSI continues to be an important medium for marketers who need to reach deal-seeking consumers. Segment profit for the quarter was $2.3 million, compared to $0.2 million in the prior year quarter due to increased unit volume and reduced costs. Management noted that our profit improvement in the FSI segment is primarily due to our cost management efforts. At the same time, the FSI business remains dramatically depressed from historical levels due to the unfair tying, bundling and leveraging of in-store products into FSI negotiations by our competitor, News America, as the jury unanimously found in our recent lawsuit against News America.