Valassis Communications, Inc (
Q3 2010 Earnings Call
October 28, 2010 11:00 a.m. ET
Alan Schultz - President & CEO
Robert Recchia - EVP & CFO
Chuck Cerankosky - Northcoast Research
Dan Salmon - BMO Capital Markets
James Boyle - Gilford Securities
Bill Warmington - Raymond James
Alexia Quadrani - JPMorgan
Mig Dobre - Robert W. Baird
Mark Argento - Graystone Capital
Timothy Dowd - MLB Capital Management
Faz Saheed - DA Capital Management
Previous Statements by VCI
» Valassis Communications, Inc. Q2 2010 Earnings Conference Call Transcript
» Valassis Communications, Inc. Q4 2009 Earnings Call Transcript
» Valassis Communications Q3 2009 Earnings Call Transcript
» Valassis Communications, Inc Q2 2009 Earnings Call Transcript
I'd like to remind you that discussions during this conference call will include forward-looking statements and the actual results could differ materially from those projected in the forward-looking statements.
The factors that could cause the results to materially differ from those expressed or implied by such forward-looking statements are discussed in the risk factors and other sections of the 2009 annual report on Form 10-K and in the report on Form 10-Q and Form 8-K filed with the SEC.
Also, discussions during this conference call will include certain financial measures that were not prepared in accordance with generally accepted accounting principals. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the earnings release furnished with the current report on From 8-K dated today, which is also available on Valassis' website at www.valassis.com on the home page of investor section.
I move the conference over to Alan Schultz, Chairman and CEO, please go ahead sir.
Thank you, good morning everyone, welcome to the call, joining me today is Bob Recchia, our Chief Financial Officer. We had the occasion to meet with most of you recently at our investor conference in New York on September 30
, where we had a five hour action packed agenda with updates on our business and plans for the future.
We were really pleased that so many of you were able to attend both in person and kind of following on by web cast. For those of you how were not able to join us at the investor conference, the conference presentation, materials, the web cast, recording and the transcripts are available in the investor section of our web site valassis.com under presentations and they will be available there for your review through September of next year and because of our respect investor conference, out of respect for your time, we're shortened our prepared remarks today for the call and of course as always Bob and I really looked forward to answering your questions.
Our Q3 results are really inline with our long term plan to deliver annual mid single digit revenue growth and double earnings per share growth. Compared to the proper year quarter Q3 revenue grew 5.2%, earnings per share was up 85.7% and adjusted EBITDA increased by nearly 25%.
Because of our current results and outlook we expect to meet or exceed our full year 2010 adjusted EBITDA guidance of $320 million in spite of increased appear cost in the second half of 2010. We did revise our full year 2010 diluted cash earnings per share guidance up from $3.14 to $3.20.
From a capital expenditure stand point our guidance remains at $25 million. As you know the last few years we really focused on adjusted EBITDA as our key operating performance metric. As a highly leveraged company it was the most reflected measure of our business results.
In 2010 we have been successful in dramatically reducing our debt leverage; in fact we anticipate year end net debt to adjusted EBITDA to be approximately 1.5:1. As a result we believe it is appropriate to shift our focus to a more traditional GAAP measure of earnings per share beginning in 2011.
We will continue to report both earnings per share and adjusted EBITDA for the reminder of 2010 but planned to shift to annual earnings per share guidance in 2011. We expect to announce full-year 2011 annual earnings per share guidance in mid December, after our Board of Directors has had an opportunity to approve a budget and set performance targets for 2011.
Our written earnings release, I think, does a great job of recapping our Q3 results but I would like to make a few additional comments regarding cash flow and revenue growth in our Shared Mail and Neighborhood Targeted segments. Regarding cash flow, we mentioned that our September 30th Investor Conference that we expected to finish the year with 220 to 250 million in cash depending on the impact from changes in working capital. We still believe this to be the case. We had nearly 209 million in cash as of September 30th, down from nearly 229 million at the end of June.
We made nearly 62 million in income tax payments in September and estimate that we will make an addition income tax payments in December of approximately $56 million. This is due in large part to the remaining estimated payments due on litigation settlement we received earlier this year. I would like to reiterate that even with these deferred tax payments, we expect to finish 2010 between 220 to 250 million in cash on the books. In terms of where we finish within that range, it will be somewhat dependent on changes in working capital.
Moving onto Shared Mail revenue, there were several factors that really influenced our 2.1% revenue growth in the Shared Mail segment this quarter. Growth was driven primarily through volume with 1.3 more pieces per package this quarter versus a year ago. These revenue results also respect a negative reflect, the negative impact of a reduction and the average pages per insert in the grocery vertical, a reduction in pricing and the final plan reduction of package distribution due to our optimization strategy for 2010.