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October 26, 2004

October 26, 2004. Safe Harbor Statement.

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October 26, 2004

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  1. October 26, 2004

  2. Safe Harbor Statement Certain statements found in this documentconstitute “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 the actual results, performance or achievements of the Company 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 the Company's existing competitors; new competitors in any of the Company’s businesses; a shift in customer preference for different promotional materials, strategies or coupon delivery methods; an unforeseen increase in the Company’s paper costs; economic disruptions caused by terrorist activity, armed conflict or changes in general economic conditions; or changes which affect the businesses of our customers and lead to reduced sales promotion spending. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Valassis — Connecting People to Brands™

  3. Agenda • Overview • Favorable Macro Trends • Mass Products • Cluster Targeted Products • 1 to 1 Products • International & Services • Financial Summary and Guidance • Summary Valassis — Connecting People to Brands™

  4. Overview: What Do We Do? • We specialize in home-delivered promotion and advertising media • Our unique differences include: • a call to action • a responsive environment “Connecting People to Brands™” Valassis — Connecting People to Brands™

  5. Co-op newspaper inserts (Free-standing Inserts) • On-page newspaper advertising (ROP) • Coupon clearing (NCH Marketing Services) • European operations (NCH) • Sweepstakes/ security consulting (Promotion Watch) • Valassis Canada • Newspaper-deliveredproduct sampling • Newspaper polybag advertising • Preprinted inserts • Direct-to-doorsampling/advertising • Direct mail sampling/advertising • Customized frequentshopper direct mail • Customer relationship management software • Internet-deliveredpromotions Overview: Valassis Product Portfolio Mass (Markets) 1 to 1 (Households) Cluster Targeted (Neighborhoods) International & Services Integrated Solutions Connecting People to Brands™ Valassis — Connecting People to Brands™

  6. Overview: Share of Revenue First 9 Months - 2004 2003* *NCH Marketing Services, Inc. was acquired February 13, 2003 Valassis — Connecting People to Brands™

  7. Overview: Customer Base Our customer base is strong, diverse and continues to grow. Consumer Packaged Goods 50% % of Revenue by Customer Segment for 2003 *Also includes Drug, Wholesale & Mass Merchants Valassis — Connecting People to Brands™

  8. Overview: Customers Valassis does business with 80% of Advertising Age’s list of the 100 Leading National Advertisers. Valassis — Connecting People to Brands™

  9. Favorable Macro Trends • Economic recovery drives new product development and increased marketing budgets • Push for ROI justification on marketing spending; our products perform exceptionally well • Broadcast fragmentation continues to be a challenge; marketers are looking for more effective alternatives to reach the masses Dollars shifting to home-delivered promotional media Valassis — Connecting People to Brands™

  10. Favorable Macro Trends • Consumer evasiveness toward unwanted ad messages • “Do Not Call” registry and commercial blocking technology • Cable and satellite radio • Private label brands increase power; national brands need to compete for price-sensitive consumers • Coupons driving strong results among high-profile CPG companies; competition will follow Valassis — Connecting People to Brands™

  11. Mass Products Products which provide mass market reach at a low cost • Co-op Free-standing Inserts (FSIs) • Run of Press (ROP) Valassis — Connecting People to Brands™

  12. Mass: Free-standing Inserts (FSIs) • Mass reach at a low cost (nearly 60 million households) • 86% of all CPG coupons distributed • Strong FSI industry unit (page) growth • Historical gross margins in the 40% range • High barriers to entry • Significant operating leverage related to media costs • Long-term contracts • Low-cost producer Valassis — Connecting People to Brands™

  13. Mass: Free-standing Inserts (FSIs) • Two-player industry • Building upon low-risk price improvement initiative; management cautiously optimistic • 2004 market share: approx. 46% Valassis — Connecting People to Brands™

  14. Mass: Free-standing Inserts (FSIs) 9 Month 2004 revenue: $376.7 million, down 1% Valassis — Connecting People to Brands™

  15. Mass: Run of Press (ROP) Brokering of advertising space on behalf of newspapers • Continued expansion of customer base • 9 month 2004 revenue: $70.2 million, up 67.5% • 2004 guidance: revenue up approx. 80% • Changing fee structure for some contracts • Improved operating margin dollars of 10% to 15% in question • 2005 guidance: revenue up 5% to 10% Valassis — Connecting People to Brands™

  16. Cluster Targeted Products Products targeted around geographic and demographic clusters at a neighborhood level • Includes preprinted inserts, polybag sampling & advertising and door hangers • Expanding customer base • 9 month 2004 revenue: $182 million, up 6.4% • 2004 guidance: revenue up less than 10% with margins improving • 2005 guidance: revenue up 10% to 15% Valassis — Connecting People to Brands™

  17. 1 to 1 Products • Direct Mail • Database-driven direct mail programs • Valassis Relationship Marketing Systems (VRMS) • Provider of loyalty marketing software for frequent shopper data • PreVision Marketing • Direct marketing agency Products and services that pinpoint individuals or households to build brand loyalty Valassis — Connecting People to Brands™

  18. 1 to 1 Products • Purchased Catalina Marketing’s Direct Marketing Services (DMS) business on 9/17/04 • Relationships with retailers • Kroger - Safeway • Food Lion - Albertsons • Winn Dixie • 9 month 2004 revenue: $42.9 million, up 55.4% • 2004 guidance: revenue up 45% to 50% • 2005 guidance: revenue up 20% to 25% Valassis — Connecting People to Brands™

  19. International & Services • NCH Marketing Services, Inc. • Promotion information management products, marketing services and coupon clearing • Operations in the United States, France, Germany, Italy, Spain, the United Kingdom and Mexico • Valassis Canada • Promotional products and services available in Canada • Promotion Watch • Promotion and sweepstakes security consulting services Valassis — Connecting People to Brands™

  20. International & Services • 9 month 2004 revenue: $70 million, up 22.6% • 2004 guidance: revenue up over 10% • 2005 guidance: revenue up mid-single digit percentage • Continued testing of media products and services in Europe Valassis — Connecting People to Brands™

  21. Financials: 2004 Guidance • Revenue: driving toward $1 billion (up approx. 10%) • 9 month 2004 revenue: $741.8, up 9.4% • Capital expenditures: $20 million • SG&A: up approx. 5% • Free cash flow: $82 million to $92 million • EPS range: $1.73 to $1.85 Valassis — Connecting People to Brands™

  22. Financials: Balance Sheet • Cash position: $205.1 million as of 9/30/04 • Net debt position: $68.6 million as of 9/30/04 • Net debt/EBITDA: less than 1:1 Valassis — Connecting People to Brands™

  23. Financials: 2005 Guidance A year of transition • Revenue: up mid-single digit percentage • Free cash flow: $90 million to $100 million • Capital expenditures: approx. $20 million • SG&A: up approx. 5% • EPS range: $1.80 to $2.00 • Number of integrated solutions: approx. 75 Valassis — Connecting People to Brands™

  24. Financials: Alternative Uses of Cash • Future uses of cash will be determined at December Board Meeting • Alternatives include: • Capital expenditures • Acquisition opportunities • Continued share repurchase (current authorization of up to 75% of free cash flow) • Dividend • Debt reduction Valassis — Connecting People to Brands™

  25. Summary • Macro trends will drive growth in home-delivered promotional media • Broad product portfolio uniquely positions us to offer integrated solutions • Cautiously optimistic about co-op FSI pricing environment • Cash flow and balance sheet are strong Valassis — Connecting People to Brands™

  26. Questions? Valassis — Connecting People to Brands™

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