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VCI > SEC Filings for VCI > Form 10-Q on 6-Nov-2012All Recent SEC Filings




Quarterly Report


Forward-Looking Statements
This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: price competition from our existing competitors; new competitors in any of our businesses; a shift in client preferences for different promotional materials, strategies or coupon delivery methods, including, without limitation, as a result of declines in newspaper circulation and/or increased competition from new media formats including digital; an unforeseen increase in paper or postal costs; changes which affect the businesses of our clients and lead to reduced sales promotion spending, including, without limitation, a decrease of marketing budgets which are generally discretionary in nature and easier to reduce in the short-term than other expenses; our substantial indebtedness, and ability to refinance such indebtedness, if necessary, and our ability to incur additional indebtedness, may affect our financial health; the financial condition, including bankruptcies, of our clients, suppliers, senior secured credit facility lenders or other counterparties; certain covenants in our debt documents could adversely restrict our financial and operating flexibility; fluctuations in the amount, timing, pages, weight and kinds of advertising pieces from period to period, due to a change in our clients' promotional needs, inventories and other factors, including, without limitation, high levels of coupon redemption rates; our failure to attract and retain qualified personnel may affect our business and results of operations; a rise in interest rates could increase our borrowing costs; possible governmental regulation or litigation affecting aspects of our business; clients experiencing financial difficulties, or otherwise being unable to meet their obligations as they become due, could affect our results of operations and financial condition; uncertainty in the application and interpretation of applicable state sales tax laws may expose us to additional sales tax liability; and general economic conditions, whether nationally, internationally, or in the market areas in which we conduct our business, including the adverse impact of the ongoing economic downturn on the marketing expenditures and activities of our clients and prospective clients as well as our vendors, with whom we rely on to provide us with quality materials at the right prices and in a timely manner. These and other risks and uncertainties related to our business are described in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, or the 2011 Form 10-K, and other filings by us with the United States Securities and Exchange Commission, or the SEC, and this Quarterly Report on Form 10-Q should be read in conjunction with these filings. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Table of Contents

Valassis is one of the nation's leading media and marketing services companies, offering unparalleled reach and scale to more than 15,000 advertisers. Our 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 our digital offerings, including and, consumers can find compelling national and local deals online.
Our products and services are positioned to help our clients reach their customers through mass-delivered or targeted programs. We provide our clients with blended media solutions, including shared mail, newspaper, in-store and digital delivery. We offer the only national shared mail distribution network in the industry. We utilize a proprietary patent pending targeting tool that provides our clients with multi-media recommendations and optimization. We are committed to providing innovative marketing solutions to maximize the efficiency and effectiveness of promotions for our clients and to deliver value to consumers how, when and where they want.
Our results for the nine months ended September 30, 2012 were adversely impacted by several factors which occurred during the second quarter of 2012. First, we elected to exit our newspaper polybag advertising and sampling and solo direct mail businesses. This decision was based on several factors, including:
declining demand from our consumer packaged goods ("CPG") client base, the primary users of both of these products; these products were expensive to execute and our highest-priced products for these clients; and, in the case of our sampling product, it faced secular declines based on its exclusive reliance on home-delivered newspaper distribution. Combined, these two products represented approximately $12.8 million in revenue for the second half of 2011 and $6.2 million for the six months ended June 30, 2012. Second, we executed a restructuring plan designed to right-size our organization to appropriate levels to support product demand. As the result of our decision to exit our newspaper polybag advertising and sampling and solo direct mail businesses and the activities to right-size our organization, we recognized charges of $17.3 million, or $10.7 million net of tax, during the nine months ended September 30, 2012, which included:
• Restructuring costs of $9.7 million ("Q2 Restructuring Activities"), which consisted of $5.3 million of severance and related costs and $0.7 million of acquisition costs, both of which were included in selling, general and administrative expenses in the unaudited, condensed consolidated statements of income, and $3.7 million of lease termination, severance, asset impairment and other costs associated with our decision to exit our solo direct mail business and our newspaper polybag advertising and sampling business, which were included in cost of sales in the unaudited, condensed consolidated statements of income; and

• Non-cash goodwill impairment charges of $7.6 million.

Our results for the three months ended September 30, 2012 benefited from cost reductions associated with the Q2 Restructuring Activities.
Finally, our results were adversely impacted by the continuation of reduced advertising spending by clients in the CPG vertical, which began in the third quarter of 2011, across many of our products (the "reduction in CPG programs"). In addition, during the nine months ended September 30, 2012, we increased our investment in our digital business with the acquisition of, an online display, video and mobile advertising platform.

Table of Contents

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