Valassis Q3 net earnings up 33.5% year-over-year to US$36.7M primarily due to previously announced cost reductions, favorable income tax adjustment resulting from expiration of certain tax reserves; revenues down 0.9% to US$523.8M

LIVONIA, Michigan , October 25, 2012 (press release) – Valassis (NYSE: VCI) today announced financial results for the third quarter ended Sept. 30, 2012. Third-quarter 2012 revenues were $523.8 million compared to $528.4 million in the prior year quarter. Third-quarter 2012 net earnings were $36.7 million, an increase of 33.5% from $27.5 million in the prior year quarter. This increase was primarily the result of the previously announced cost reductions and a favorable income tax adjustment resulting from the expiration of certain tax reserves. Third-quarter 2012 diluted earnings per share (EPS) was $0.90, an increase of 55.2% from $0.58 in the prior year quarter due to improved earnings coupled with a lower share base as a result of share repurchases. Third-quarter 2012 adjusted EBITDA* was $75.2 million, an increase of 7.7% from $69.8 million in the prior year quarter.

"This quarter, we delivered strong growth in EPS and adjusted EBITDA*," said Rob Mason, President and Chief Executive Officer. "Notable gains in our Free-standing Insert business, ongoing operational improvements within Shared Mail, and continued cost containment efforts were key drivers that contributed to our results."

Some additional highlights include:

Selling, General and Administrative (SG&A) Costs: Third-quarter 2012 SG&A costs were $73.4 million compared to prior year quarter costs of $80.5 million. This 8.8% decrease was primarily due to restructuring and other cost reduction measures that took place at the end of the second quarter.
Capital Expenditures: Capital expenditures were $4.0 million for the third quarter of 2012 and $15.8 million year to date.
Stock Repurchases: During third quarter 2012, we repurchased $21.2 million, or 0.8 million shares, of our common stock at an average price of $25.34 per share. Year to date, we have repurchased $87.1 million, or 4.1 million shares of our common stock at an average price of $21.08 per share under our stock repurchase program.
Liquidity:
We reduced total debt by $3.8 million during third-quarter 2012, and we ended the quarter with net debt (total debt less cash) of $501.0 million.
At Sept. 30, 2012, we had $90.3 million in cash.
Outlook
Based on our plan and current outlook, we are updating our full-year 2012 guidance as follows:

diluted EPS of $2.98 (previously $2.86) which reflects a favorable income tax adjustment of $0.12;
excluding one-time charges, adjusted diluted EPS* of $3.23 (previously $3.11) which reflects a favorable income tax adjustment of $0.12; and
capital expenditures to be between $20 million and $22 million (previously approximately $26 million).
The company has decided to no longer use diluted cash EPS as a financial performance measure.


Business Segment Discussion

Shared Mail: Revenues for the third quarter of 2012 were $331.4 million, an increase of 0.3% compared to the prior year quarter. Segment profit for the quarter was $52.3 million, an increase of 13.2% compared to the prior year quarter. The improvement in segment profit was due to an increase in pieces per package and effective cost management, including package optimization efforts and SG&A reductions.

Neighborhood Targeted: Revenues for the third quarter of 2012 were $75.8 million, a decrease of 1.4% compared to the prior year quarter. Segment loss for the quarter was $1.1 million compared to segment profit in the prior year quarter of $0.4 million due to continued margin pressure.

Free-standing Inserts (FSI): Revenues for the third quarter of 2012 were $72.2 million, a decrease of 1.8% compared to the prior year quarter. Segment profit for the quarter was $7.6 million, compared to a segment loss of $0.8 million in the prior year quarter. Segment results for the quarter were positively impacted primarily by an increase in average pages per book, which offset the absence of approximately $14 million in custom co-op revenue.

International, Digital Media & Services (IDMS): Revenues for the third quarter of 2012 were $44.4 million, a decrease of 6.5% compared to the prior year quarter. Segment revenues were negatively impacted primarily by the reduced consumer packaged goods spend affecting in-store as well as a decrease in coupon redemption volume impacting NCH, our coupon clearing business. The revenue decreases in these businesses offset the growth in our digital business. Segment profit for the quarter was $0.1 million compared to $3.2 million in the prior year quarter, primarily due to the continued investment in our digital business.

About Valassis
Valassis is one of the nation's leading media and marketing services companies, offering unparalleled reach and scale to more than 15,000 advertisers. Its 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 its digital offerings, including redplum.com and save.com, consumers can find compelling national and local deals. Headquartered in Livonia, Michigan with approximately 7,000 associates in 28 states and eight countries, Valassis is widely recognized for its associate and corporate citizenship programs, including its America's Looking for Its Missing Children® program. Valassis companies include Valassis Direct Mail, Inc., Valassis Canada, Promotion Watch, Valassis Relationship Marketing Systems, LLC, NCH Marketing Services, Inc. and Brand.net. For more information, visit www.valassis.com, www.redplum.com and www.save.com. To learn about advertising opportunities with RedPlum, please call 1-800-437-0479.

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