-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TQ8HBNvbrLCFafkVbF5/0ZyavKj+QIkz398BT0P60ktKrt6uAb8diCv2LiPrJTls dUJLxwRTePTIufDW0tR4DQ== 0000883293-96-000008.txt : 19960702 0000883293-96-000008.hdr.sgml : 19960702 ACCESSION NUMBER: 0000883293-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALASSIS COMMUNICATIONS INC CENTRAL INDEX KEY: 0000883293 STANDARD INDUSTRIAL CLASSIFICATION: 7310 IRS NUMBER: 382760940 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10991 FILM NUMBER: 96567149 BUSINESS ADDRESS: STREET 1: 36111 SCHOOLCRAFT ROAD CITY: LIVONIA STATE: MI ZIP: 48150 BUSINESS PHONE: 3135913000 MAIL ADDRESS: STREET 1: 36111 SCHOOLCRAFT CITY: LIVONIA STATE: MI ZIP: 48150 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Period Ended March 31, 1996 Transition Report pursuant to Section 14 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 1-10991 VALASSIS COMMUNICATIONS, INC. (Exact Name of Registrant as specified in its charter) Delaware 38-2760940 (State or Other Jurisdiction of (IRS Employer Identification Number) Incorporation or Organization) 36111 Schoolcraft Livonia, Michigan 48150 Telephone Number: (313) 591-3000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and, (2) has been subject to such filing requirements for the past 90 days: Yes X No _______ As of April 30, 1996, there were 43,307,500 shares of the Registrant's Common Stock outstanding. 1 Part I - Financial Information Item 1. Financial Statements VALASSIS COMMUNICATIONS, INC. Condensed Consolidated Balance Sheets (dollars in thousands)
March 31, December 31, 1996 1995 (unaudited) (note) Assets Current assets: Cash and cash equivalents $ 35,457 $ 34,408 Accounts receivable (less allowance for doubtful accounts of $834 at March 31,1996 and $810 at December 31, 1995) 82,033 84,427 Inventories: Raw materials 19,290 13,840 Work in progress 6,714 14,267 Prepaid expenses and other 3,542 3,686 Deferred income taxes 4,330 4,330 Refundable income taxes 97 ------- ------- Total current assets 151,366 155,055 ------- ------- Property, plant and equipment, at cost: Land and buildings 19,627 19,617 Machinery and equipment 108,393 107,615 Office furniture and equipment 17,943 17,215 Automobiles 770 789 Leasehold improvements 1,443 1,443 ------- ------- 148,176 146,679 Less accumulated depreciation and amortization (113,653) (111,792) ------- ------- Net property, plant and equipment 34,523 34,887 ------- ------- Intangible assets: Goodwill 68,631 68,631 Other intangibles 88,524 88,524 ------- ------- 157,155 157,155 Less accumulated amortization (95,105) (93,038) ------- ------- Net intangible assets 62,050 64,117 ------- ------- Other assets (primarily debt issuance costs) 5,000 4,873 ------- ------- Total assets $252,939 $258,932 ======== ======== 2
VALASSIS COMMUNICATIONS, INC. Condensed Consolidated Balance Sheets, Continued (dollars in thousands, except per share data)
March 31, December 31, 1996 1995 (unaudited) (note) Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 74,885 $ 71,936 Accrued interest 8,752 6,425 Income taxes payable 6,915 Accrued expenses 14,844 21,204 Progress billings 34,886 49,209 ------- ------- Total current liabilities 140,282 148,774 ------- ------- Long-term debt 408,066 416,034 Deferred income taxes 3,029 3,029 Minority interest 329 369 Stockholders' deficit: Common stock of $.01 par value. Authorized 100,000,000 shares; issued and outstanding 43,305,000 shares at March 31, 1996 and 43,302,500 at December 31, 1995 433 433 Additional paid-in capital 39,617 39,590 Accumulated deficit (338,997) (349,457) Foreign currency translations 180 160 ------- ------- Net stockholders' deficit (298,767) (309,274) ------- ------- Total liabilities and stockholders' deficit $ 252,939 $ 258,932 ======== ======== NOTE: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes to condensed consolidated financial statements. 3
VALASSIS COMMUNICATIONS, INC. Condensed Consolidated Statements of Operations (dollars in thousands, except per share data) (unaudited)
Quarter Ended March 31, March 31, 1996 1995 Revenues: Net Sales $179,996 $156,614 Other 537 758 ------- ------- 180,533 157,372 ------- ------- Costs and expenses: Cost of products sold 134,290 115,226 Selling, general and administrative 16,496 14,661 Amortization of intangible assets 2,067 2,347 Interest 10,263 10,206 Minority interest (43) (266) ------- ------- 163,073 142,174 ------- ------- Earnings before income taxes 17,460 15,198 Income taxes 7,000 6,360 ------- ------- Net earnings $ 10,460 $ 8,838 ======== ======= Net earnings per common share $ .24 $ .20 ======== ======= Shares used in computing net earnings per share 43,304,333 43,301,250 ========== ========== See accompanying notes to condensed consolidated financial statements. 4
VALASSIS COMMUNICATIONS, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
Quarter Ended March 31, March 31, 1996 1995 Cash flows from operating activities: Net earnings $ 10,460 $ 8,838 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 4,018 4,702 Provision for losses on accounts receivable 150 150 Minority interest (40) (266) Changes in assets and liabilities which increase (decrease) cash flow: Accounts receivable 2,244 (11,919) Inventories 2,103 (367) Prepaid expenses and other 144 (439) Other assets (127) 97 Accounts payable 2,949 (6,035) Accrued expenses and interest (4,033) 2,796 Income taxes 7,012 6,429 Progress billings (14,323) 7,275 ------- ------- Total adjustments 97 2,423 ------- ------- Net cash provided by operating activities 10,557 11,261 ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (1,575) (912) Contribution to Valcheck by minority shareholder 198 Purchase of McIntyre & Dodd (Valassis of Canada) (6,575) Other 40 15 ------- ------- Net cash used in investing activities (1,535) (7,274) ------- ------- Cash flows from financing activities: Repayments of long-term debt (8,000) Proceeds from the issuance of common stock 27 24 ------- ----- Net cash provided by (used in) financing activities (7,973) 24 ------- ------- Net increase in cash 1,049 4,011 Cash at beginning of period 34,408 21,166 ------- ------- Cash at end of period $35,457 $25,177 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 7,936 $ 7,890 Cash paid during the period for income taxes $ (12) $ (69) Dividends declared but unpaid $ --- $ --- See accompanying notes to condensed consolidated financial statements. 5
VALASSIS COMMUNICATIONS, INC. Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the information presented. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of results to be expected for the fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. Contingencies The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position. 3. Significant Accounting Policies - Inventories Inventories are stated at the lower of cost or market (net realized value). Cost has been principally determined by the last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) method of determining cost had been used, inventories would have been $5,025,000 higher than reported at March 31, 1996 and $5,175,000 higher than reported at December 31, 1995. 4. Stock Compensation Plans The following stock compensation plans have been implemented in 1996, subject to shareholder approval at the upcoming annual meeting. Employee and Director Restricted Stock Award Plan The Employee and Director Restricted Stock Award Plan provides for the grant of restricted stock to executives in lieu of a cash raise, to non-employee, non-affiliated directors as a portion of their fee, and to participants in the Employee Stock Purchase Plan as described in the following paragraph. A total of 200,000 shares of restricted stock have been reserved for this plan. Pursuant to an employee agreement between the Company and its Chief Operating Officer, Alan F. Schultz, 7,500 shares of restricted stock will be issued to Mr. Schultz annually on each of December 31, 1996, 1997, 1998, and 1999, respectively, with each grant vesting ratably from date of grant over a three-year period. The expense related to the aggregate of such restricted stock will be recognized on the straight-line method over seven years. Such pre-tax expense was approximately $20,000 for the quarter ended March 31, 1996. In addition, several executives received one-time restricted stock grants totaling 36,500 shares. Such restricted stock vests ratably over a three-year period. The related expense will be recognized on the straight-line method over the vesting period and was approximately $55,000 in the quarter ended March 31, 1996. Also during 1996, one-half of the annual Director's fee of $40,000, to the four outside directors, will be paid in restricted stock from this plan. 6 VALASSIS COMMUNICATIONS, INC. Notes to Condensed Consolidated Financial Statements (Cont.) Employee Stock Purchase Plan All full-time employees are eligible to participate in VCI's Employee Stock Purchase Plan. The plan provides that participants may authorize VCI to withhold a portion of earnings to be used to purchase VCI's common stock at prevailing market prices. Under the plan, VCI contributes on behalf of each participant 15% of the participant's contributions. The Company's contribution is made in the form of restricted stock with a one-year transfer restriction and vesting. The value of the Company's stock contributed by the Company and expensed for the quarter ended March 31, 1996 totaled approximately $46,000. Executive Restricted Stock Plan The Executive Restricted Stock Plan provides for the grant of restricted stock, with one-year vesting, to certain executive officers. Currently, the Company's Chief Executive Officer, David A. Brandon, is the only executive eligible to receive restricted stock under this plan. The maximum number of restricted shares which may be issued under this plan is 250,000, provided that not more than 60% of such shares are awarded to any one participant. Pursuant to an employment agreement between the Company, CPH and Mr. Brandon, Mr. Brandon is eligible to receive 30,000 shares of restricted stock each year beginning with 1996 through 2000 if 70% or more of the year's performance target, set by the Compensation/Stock Option Committee,is met. The remaining 100,000 shares are undesignated as of March 31, 1996. Compensation expense will be recognized over the vesting period and will be dependent on the market value of stock at the end of each quarter. Pre-tax compensation expense related to this plan for the quarter ended March 31, 1996 was approximately $65,000. 401(k) Plan The Company has also amended its 401(k) Plan to include a 15% match, payable in VCI stock, on each participant's annual contributions to the Plan that are invested in VCI stock at the end of the year. No expense was provided for the quarter ended March 31, 1996 as the amount of annual contributions invested in VCI stock cannot be reasonably estimated at the present time, since contribution investment elections can be changed at any time during the year, and previously invested funds can be transferred at any time. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations For the quarter ended March 31, 1996, revenues increased by 14.7% to $180.5 million versus $157.4 million for the comparable period last year. FSI revenue increased by 16.5% to $145.2 million this quarter from $124.6 million during the same quarter last year. Although pricing of the Company's free-standing insert (FSI) was up significantly for the current period, revenue was negatively impacted by decreased volume due to a loss of market share, which resulted from the Company's emphasis on improved pricing. This weakness in market share is expected to extend at least into the second quarter. Valassis Impact Promotions (VIP) revenue increased 15.5% to $18.6 million versus $16.1 million a year ago. Management attributes the increase in VIP sales to expanded capacity provided by its new printing press, along with the continued development of new VIP formats. Run-of-Press (ROP) sales were $3.8 million versus $7.9 million for the same quarter last year. This decrease was partially the result of a single client whose contract expired during the first quarter of last year. In addition, the Company's new businesses, including Valassis Sampling, Valassis of Canada and Valassis France, accounted for $11.6 million in revenues during the first quarter. Gross profit margin decreased from 26.8% in the first quarter of 1995 to 25.6% in the first quarter of 1996. This decrease was due to the negative impact of increased paper costs, which offset increases in FSI pricing during the quarter. The Company has received a decrease in paper prices that will have a positive impact on earnings during the rest of 1996. Selling, general and administrative expenses increased 12.2% to $16.5 million from $14.7 million for the same period last year due primarily to the acquisition of Valassis of Canada which was not in the prior-year period. Management expects selling, general and administrative expenses to remain at current levels. Net earnings were $10.5 million versus $8.8 million for the same period last year. The increase in net earnings was primarily attributable to pricing increases in the FSI business. Financial Condition, Liquidity and Sources of Capital Cash flow from operating activities decreased from $11.3 million in the quarter ended March 31, 1995, to $10.6 million in the first quarter of 1996. This decrease is primarily due to increased payments for bonus and profit sharing plans. Management believes the Company will generate sufficient funds from operations and will have sufficient lines of credit available to meet currently anticipated liquidity needs, including interest and required principal payments on indebtedness. 8 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K a. Exhibits The following exhibits are included herein: (27) Financial Data Schedule b. Forms 8-K The Company did not file any reports on Form 8-K during the three months ended March 31, 1996. 9 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Valassis Communications, Inc. (Registrant) Dated: May 10, 1996 By:/s/Robert L. Recchia ----------------------- Robert L. Recchia V.P. of Finance - Chief Financial Officer
Signing on behalf of the Registrant and as principal financial officer. 10 EX-27 2 ARTICLE 5. FIN DATA SCHEDULE FOR 1ST QTR 10-Q
5 This schedule contains summary financial information extracted from the condensed consolidated balance sheet at March 31, 1996 (unaudited) and the condensed consolidated statement of income for the three months ended March 31, 1996 (unaudited) and is qualified in its entirety by reference to such said financial statements. 1000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 35457 0 82867 834 26004 151366 148176 113653 252939 140282 408066 0 0 433 (299200) 252939 179996 180533 134290 134290 18370 150 10263 17460 7000 10460 0 0 0 10460 .24 .24
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