Business News

Valassis Announces Expectations for Strong First Quarter 2008 Results

Thursday 17. April 2008 - Completes Financing for Anticipated Repurchase of Senior Secured Convertible Notes due 2033

Valassis (NYSE:VCI) today announced that Management expects adjusted EBITDA* for the first quarter of 2008 to be within the range of $60 million to $65 million on revenue growth to nearly $600 million during such period. This represents an increase in adjusted EBITDA* of 39.5% to 51.2% from pro forma adjusted EBITDA* for the first quarter of 2007 of $43 million (which represents an agreed upon amount with the lenders under the Company’s senior secured credit facility). Pro forma revenue for the first quarter of 2007 was $584.8 million and GAAP reported revenue for such period (which excludes revenue for ADVO, Inc. for the period of Jan. 1, 2007 through March 1, 2007) was $361.3 million. The Company will release its regularly scheduled first-quarter earnings results on May 1, 2008.

On April 15, 2008, the Company successfully closed on the delayed draw term loan portion of its senior secured credit facility in an aggregate principal amount of approximately $160 million. As previously disclosed, the proceeds of the delayed draw term loan will primarily be used in connection with the anticipated exercise of put rights by the holders of Valassis’ Senior Secured Convertible Notes due 2033 (the “2033 Notes”) on May 22, 2008. The Company noted that incremental net interest expense associated with the early close of the delayed draw term loan is estimated to be approximately $500,000.

“In order to alleviate concerns about recent financial market conditions, we felt it prudent to release certain preliminary results for the first quarter of 2008 and to close on the delayed draw term loan early. This further solidifies our strong liquidity position and ensures that the money is readily available if the holders of the 2033 Notes elect to put the Notes to the Company,” said Alan F. Schultz, Valassis Chairman, President and CEO. Schultz also noted that proceeds from the term loan will be invested in cash and cash equivalents, which may include U.S. Treasuries, through the put date of May 22, 2008.

Management noted its strong cash position of approximately $94 million (prior to the addition of the delayed draw term loan in the aggregate principal amount of approximately $160 million) as of March 31, 2008. The Company also has $108.8 million available under its untapped revolving portion of its senior secured credit facility (after giving effect to $11.2 million of outstanding letters of credit).

Non-GAAP Financial Measures

* We define adjusted EBITDA as earnings before net interest and other expenses, income taxes, depreciation, amortization, stock-based compensation expense associated with SFAS No. 123R and amortization of a client contract incentive. Adjusted EBITDA is a non-GAAP financial measure commonly used by financial analysts, investors, rating agencies and other interested parties in evaluating companies, including marketing services companies. Accordingly, management believes that adjusted EBITDA may be useful in assessing our operating performance and our ability to meet our debt service requirements. In addition, adjusted EBITDA is used by management to measure and analyze our operating performance and, along with other data, as our internal measure for setting annual operating budgets, assessing financial performance of business segments and as a performance criteria for incentive compensation. However, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, operating income, cash flow or other income or cash flow data prepared in accordance with GAAP. Some of these limitations are:

– adjusted EBITDA does not reflect our cash expenditures for capital
equipment or other contractual commitments;
– although depreciation and amortization are non-cash charges, the assets
being depreciated or amortized may have to be replaced in the future,
and adjusted EBITDA does not reflect cash capital expenditure
requirements for such replacements;
– adjusted EBITDA does not reflect changes in, or cash requirements for,
our working capital needs;
– adjusted EBITDA does not reflect the significant interest expense or
the cash requirements necessary to service interest or principal
payments on our indebtedness;
– adjusted EBITDA does not reflect income tax expense or the cash
necessary to pay income taxes;
– adjusted EBITDA does not reflect the impact of earnings or charges
resulting from matters we consider not to be indicative of our ongoing
operations;
– other companies, including companies in our industry, may calculate
these measures differently and as the number of differences in the way
two different companies calculate these measures increases, the degree
of their usefulness as a comparative measure correspondingly decreases.




Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or reduce indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures only supplementally. Further important information regarding operating results and reconciliations of these non-GAAP financial measures to the most comparable GAAP measures can be found below.

First Quarter 2008: Projected Adjusted EBITDA Reconciliation:

Plan Low End High End
($ in millions) ($ in millions)

Net Earnings $10.4 $13.6
Add back:
Interest and other, net 22.0 22.0
Income taxes 6.1 7.9
Depreciation and amortization 18.3 18.3
EBITDA $56.8 $61.8

Add back:
FAS123r expense 2.0 2.0
Contract incentive amortization 1.2 1.2
Adjusted EBITDA $60.0 $65.0
EPS, diluted $0.22 $0.28