<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
----------------------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
----- Transition Report pursuant to Section 13 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)
19975 VICTOR PARKWAY
LIVONIA, MICHIGAN 48152
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER: (734) 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 August 10, 2000 there were 54,236,703 shares of the Registrant's Common
Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
Assets 2000 1999
------ -------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,824 $ 11,089
Accounts receivable (less allowance for doubtful
accounts of $1,827 at June 30, 2000 and $1,386 at
December 31, 1999) 99,478 94,105
Inventories:
Raw materials 15,423 11,729
Work in progress 9,809 17,498
Prepaid expenses and other 7,911 4,581
Deferred income taxes 1,473 1,473
Refundable income taxes --- 448
-------------- --------------
Total current assets 142,918 140,923
-------------- --------------
Property, plant and equipment, at cost:
Land and buildings 21,687 21,590
Machinery and equipment 123,031 121,956
Office furniture and equipment 23,548 21,909
Automobiles 1,054 1,116
Leasehold improvements 1,123 1,166
-------------- --------------
170,443 167,737
Less accumulated depreciation and amortization (118,695) (114,926)
--------------- ---------------
Net property, plant and equipment 51,748 52,811
--------------- ---------------
Intangible assets:
Goodwill 72,754 72,754
Other intangibles 85,387 85,387
-------------- --------------
158,141 158,141
Less accumulated amortization (119,604) (118,050)
--------------- ---------------
Net intangible assets 38,537 40,091
-------------- --------------
Equity investments and advances to investees 15,916 9,580
Other assets 2,182 2,412
-------------- --------------
Total assets $ 251,301 $ 245,817
============== ==============
</TABLE>
2
<PAGE>
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT 2000 1999
------------------------------------- -------------- -------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 64,157 $ 77,683
Accrued interest 3,716 3,645
Accrued expenses 28,657 30,250
Progress billings 33,835 57,733
Income taxes payable 5,976 ---
-------------- ----------
Total current liabilities 136,341 169,311
-------------- ----------
Long-term debt 287,472 291,354
Deferred income taxes 1,871 1,871
Commitments and contingencies
Stockholders' deficit:
Preferred stock of $.01 par value. Authorized 25,000,000
Shares; no shares issued or outstanding at June 30, 2000 and
December 31, 1999
Common stock of $.01 par value. Authorized 100,000,000
shares; issued 62,786,805 at June 30, 2000 and 62,715,893
at December 31, 1999; outstanding 54,840,241 at
June 30, 2000 and 56,128,478 at December 31, 1999 628 627
Additional paid-in capital 81,276 76,898
Deferred compensation (2,934) (1,135)
Retained earnings (accumulated deficit) 36,058 (51,736)
Foreign currency translations (504) (478)
Treasury stock, at cost (7,946,564 shares at June 30, 2000 and
6,587,415 shares at December 31, 1999) (288,907) (240,895)
--------------- -----------
Total stockholders' deficit (174,383) (216,719)
--------------- -----------
Total liabilities and stockholders' deficit $ 251,301 $ 245,817
============== ==========
</TABLE>
NOTE: The balance sheet at December 31, 1999 has been derived from the audited
consolidated 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
<PAGE>
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------------------- ------------------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 211,043 $ 195,152 $ 423,031 $ 417,058
Other (see Note 2) 42 (153) 27,091 146
----------------- ---------------- ---------------- ----------------
Total revenues 211,085 194,999 450,122 417,204
----------------- ---------------- ---------------- ----------------
Costs and expenses:
Cost of products sold 129,571 122,345 258,409 260,766
Selling, general and administrative 19,606 18,632 37,880 38,369
Loss on investments 1,148 231 1,812 697
Amortization of intangible assets 711 1,301 1,576 2,600
Interest 5,266 6,387 10,551 13,778
----------------- ---------------- ---------------- ----------------
Total costs and expenses 156,302 148,896 310,228 316,210
----------------- ---------------- ---------------- ----------------
Earnings before income taxes 54,783 46,103 139,894 100,994
Income taxes 20,400 17,600 52,100 38,600
----------------- ---------------- ---------------- ----------------
Net earnings $ 34,383 $ 28,503 $ 87,794 $ 62,394
================= ================ ================ ================
Net earnings per common share, basic $.63 $.50 $1.59 $1.09
================= ================ ================ ================
Net earnings per common share, diluted $.62 $.49 $1.56 $1.07
================= ================ ================ ================
Shares used in computing net earnings
per share, basic 54,782,687 56,896,255 55,212,423 57,006,912
================= ================ ================ ================
Shares used in computing net earnings
per share, diluted 55,820,017 58,307,258 56,237,970 58,252,699
================= ================ ================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------
JUNE 30, JUNE 30,
2000 1999
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 87,794 $ 62,394
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 5,531 6,803
Provision for losses on accounts receivable 458 1,345
Loss/(gain) on sale of property, plant and equipment 43 (38)
Stock-based compensation charge 2,807 823
Deferred compensation (1,799) (159)
Changes in assets and liabilities which increase (decrease) cash flow:
Accounts receivable (5,831) 5,114
Inventories 3,995 8,924
Prepaid expenses and other (2,748) 1,200
Other assets 1,826 (207)
Accounts payable (13,526) 4,530
Accrued expenses and interest (1,522) 310
Income taxes 7,413 4,783
Progress billings (23,898) (25,047)
-------------- ---------------
Total adjustments (27,251) 8,381
-------------- ---------------
Net cash provided by operating activities 60,543 70,775
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,085) (3,694)
Proceeds from the sale of property, plant and equipment 128 112
Investments and acquisitions (7,932) (1,000)
Other (25) (64)
-------------- ---------------
Net cash used in investing activities (10,914) (4,646)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (1,982) (108,380)
Borrowings of long-term debt --- 100,358
Net payments under revolving line of credit (1,900) (22,000)
Repurchase of common stock (50,672) (38,311)
Proceeds from the issuance of common stock 2,660 2,273
--------------- ---------------
Net cash used in financing activities (51,894) (66,060)
-------------- ---------------
Net increase/(decrease) in cash (2,265) 69
Cash at beginning of period 11,089 6,939
-------------- ---------------
Cash at end of period $ 8,824 $ 7,008
============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 10,480 $ 13,958
Cash paid during the period for income taxes $ 45,135 $ 34,469
Non-cash financing activities:
Stock issued under stock-based compensation plan $ 3,389 $ 2,169
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
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, 1999. Certain amounts for 1999 have been reclassified to conform to
current period classifications.
2. CONTINGENCIES
In February 1999, the Company filed a lawsuit alleging that Arthur
Andersen LLP repudiated a joint venture agreement with the Company relating to
the development of its Customer Relationship Marketing (CRM) product. The
lawsuit also named The News Corporation Limited and News America Incorporated as
defendants.
On February 9, 2000, by stipulation made in open court, followed by
execution of a settlement agreement on February 29, 2000, the Company settled
this litigation in the State of Michigan circuit court for the County of Wayne
and related litigation in the form of a declaratory judgment action that Arthur
Andersen had commenced against the Company in the State of Illinois Chancery
Court for Cook County. The amount paid to the Company by Arthur Andersen LLP
against the exchange of mutual releases and stipulations of dismissal with
prejudice and without costs as to Arthur Andersen LLP and The News Corporation
Limited and News America Incorporated is confidential under the terms of the
stipulated settlement. The proceeds of the settlement are included in other
revenues in the accompanying condensed consolidated statement of income for the
six months ended June 30, 2000.
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, results of operations or liquidity.
3. SHARE REPURCHASE
The Company recently entered into a forward share repurchase agreement with
a financial institution allowing the Company to acquire approximately 1.7
million shares of its common stock at a price of $29.72 per share, plus
interest. The purchase of 0.7 million shares settled on April 3, 2000. The
purchase of 0.5 million shares settled on July 3, 2000. The purchase of the
remaining 0.5 million shares settles on October 2, 2000. The agreement expires
on October 2, 2000.
6
<PAGE>
4. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
In June 2000, the SEC issued SAB No. 101B to defer the effective date of
implementation of SAB No. 101 until the fourth quarter of fiscal 2000. The
Company does not expect the adoption of SAB 101 to have a material effect on its
financial position or results of operations.
5. SEGMENT REPORTING
The Company has two reportable segments, cooperative free-standing inserts
(FSIs) and Valassis Impact Promotions (VIP). FSIs are four-color booklets
containing promotions from multiple advertisers distributed through Sunday
newspapers. VIP offers its customers specialty print promotion products in
customized formats. These reportable segments are strategic business units that
offer different products and services. They are managed separately because each
business requires different marketing strategies and caters to a different
customer base.
Assets are not allocated to reportable segments and are not used to assess the
performance of a segment. Intersegment sales are accounted for at cost.
<TABLE>
<CAPTION>
(IN MILLIONS) THREE MONTHS ENDED JUNE 30
------------- ------------------------------------------
FSI VIP ALL OTHERS* TOTAL
--------- --------- ----------- --------
2000
----
<S> <C> <C> <C> <C>
Revenues from external customers $ 160.7 $ 28.1 $ 21.9 $ 210.7
Intersegment revenues -- -- -- --
Depreciation/amortization 2.3 0.5 -- 2.8
Segment profit 46.6 2.9 4.9 54.4
1999
----
Revenues from external customers $ 147.6 $ 27.5 $ 19.9 $ 195.0
Intersegment revenues 0.2 -- 2.3 2.5
Depreciation/amortization 3.0 0.5 -- 3.5
Segment profit 42.3 1.6 2.2 46.1
</TABLE>
* Segments below the quantitative thresholds are primarily attributable to two
divisions of the Company. Those divisions are Targeted Marketing Services
which includes a product sampling and advertising business, a run-of-press
business, and a promotion security service, and Valassis of Canada, a sales
promotion business in Canada. None of these segments has met any of the
quantitative thresholds for determining reportable segments.
Reconciliations to consolidated financial statement totals are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) THREE MONTHS ENDED JUNE 30,
----------------------------
2000 1999
------- -------
<S> <C> <C>
Profit for reportable segments $ 49.5 $ 43.9
Profit for other segments 4.9 2.2
Unallocated amounts:
Interest income 0.4 --
Other income -- --
------- -------
Earnings before taxes $ 54.8 $ 46.1
======= =======
</TABLE>
7
<PAGE>
Domestic and foreign revenues for each of the three-month periods ended June 30
were as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 2000 1999
------- -------
<S> <C> <C>
United States $ 209.3 $ 190.2
Canada 1.8 4.8
------- -------
Total $ 211.1 $ 195.0
======= =======
</TABLE>
<TABLE>
<CAPTION>
(IN MILLIONS) SIX MONTHS ENDED JUNE 30
---------------------------------------------------------------
FSI VIP ALL OTHERS* TOTAL
----------- ------------ ------------ ----------
2000
----
<S> <C> <C> <C> <C>
Revenues from external customers $ 325.0 $ 62.2 $ 35.8 $ 423.0
Intersegment revenues -- -- -- --
Depreciation/amortization 4.6 0.9 -- 5.5
Segment profit 97.9 7.4 7.5 112.8
1999
----
Revenues from external customers $ 316.3 $ 61.5 $ 39.3 $ 417.1
Intersegment revenues 2.5 -- 2.3 4.8
Depreciation/amortization 5.7 1.0 0.1 6.8
Segment profit 90.9 4.9 5.1 100.9
</TABLE>
* Segments below the quantitative thresholds are primarily attributable to two
divisions of the Company. Those divisions are Targeted Marketing Services
which includes a product sampling and advertising business, a run-of-press
business, and a promotion security service, and Valassis of Canada, a sales
promotion business in Canada. None of these segments has met any of the
quantitative thresholds for determining reportable segments.
Reconciliations to consolidated financial statement totals are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) SIX MONTHS ENDED JUNE 30,
------------------------------
2000 1999
------- -------
<S> <C> <C>
Profit for reportable segments $ 105.3 $ 95.8
Profit for other segments 7.5 5.1
Unallocated amounts:
Interest income 0.6 0.1
Other income 26.5
------- -------
Earnings before taxes $ 139.9 $ 101.0
======= =======
</TABLE>
Domestic and foreign revenues for each of the six-month periods ended June 30
were as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 2000 1999
------- -------
<S> <C> <C>
United States $ 446.9 $ 406.7
Canada 3.2 10.5
------- -------
Total $ 450.1 $ 417.2
======= =======
</TABLE>
8
<PAGE>
6. EARNINGS PER SHARE
Earnings per common share ("EPS") data were computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30,
---------------------------
2000 1999
------------- ----------
(in thousands except for
per share amounts)
<S> <C> <C>
Net Earnings $34,383 $28,503
========= ==========
Basic EPS:
Weighted average common shares outstanding 54,783 56,896
========= ==========
Earnings per common share - basic $ 0.63 $ 0.50
========= ==========
Diluted EPS:
Weighted average common shares outstanding 54,783 56,896
Weighted average shares purchased on exercise
of dilutive options 4,018 6,271
Shares purchased with proceeds of options (3,000) (4,889)
Shares contingently issuable 19 29
Shares applicable to diluted earnings 55,820 58,307
======== ==========
Earnings per common share - diluted $ 0.62 $ 0.49
======== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------------------
2000 1999
------------- ------------
(in thousands except for
per share amounts)
<S> <C> <C>
Net Earnings $87,794 $62,394
======== ==========
Basic EPS:
Weighted average common shares outstanding 55,212 57,007
======== ==========
Earnings per common share - basic $ 1.59 $ 1.09
======== ==========
Diluted EPS:
Weighted average common shares outstanding 55,212 57,007
Weighted average shares purchased on exercise
of dilutive options 3,931 4,466
Shares purchased with proceeds of options (2,924) (3,249)
Shares contingently issuable 19 29
Shares applicable to diluted earnings 56,238 58,253
======== ==========
Earnings per common share - diluted $ 1.56 $ 1.07
======== ==========
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Certain statements under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "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: a new
competitor in the Company's core free-standing insert business and consequent
price war; new technology that would make free-standing inserts less attractive;
a shift in customer preference for different promotional materials, promotional
strategies or coupon delivery methods, including in-store advertising systems
and other forms of coupon delivery; an increase in the Company's paper costs; or
general business and economic conditions. 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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
Total revenues for the quarter ended June 30, 2000 increased 9.9% to $211.1
million, from $192.0 million for the year-ago quarter (after deducting $3.0
million to reflect the Company's Canadian direct merchandising division, which
was discontinued in the fourth quarter of 1999). Free-standing insert (FSI)
revenue increased 8.9% for the quarter ended June 30, 2000, rising to $160.7
million from $147.6 million for the quarter ended June 30, 1999. This increase
can be attributed to solid demand for FSI promotions, particularly from full-
price, consumer package goods customers and continued growth in full-page versus
half-page ads. In addition, demand for FSI promotions from e-commerce companies
remains strong. Targeted Marketing Services (TMS) revenue, which includes the
Company's Sampling and polybag advertising products, as well as Run-of-Press
(ROP) promotions and advertising, and Promotion Watch, a security consulting
business, increased 33% to $22.0 million for the quarter, versus $16.6 million
in the prior year quarter. This increase was primarily the result of increased
demand within the Sampling division from a more diverse customer base.
For the quarter, gross profit margin increased to 38.6% versus 37.3% in the year
ago quarter. Media costs were down due to increased FSI book sizes and lower
contract rates, while efficiencies at the Company's three printing facilities
contributed to lower printing costs for the quarter. Paper costs were up
slightly from the year ago period.
Selling, general and administrative expenses increased to $19.6 million for the
quarter ended June 30, 2000, from $18.6 million in the comparable period of
1999. This increase can primarily be attributed to higher incentive plan costs
as a result of stronger sales and profits in the second quarter of 2000, as
compared to the same period in 1999.
Net earnings were $34.4 million, compared to $28.5 million for the same quarter
last year. Net earnings rose primarily as a result of strong FSI volume and
significantly improved TMS results.
10
<PAGE>
SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
Net sales for the first six months of 2000 was up 3.4% to $423.0 million, as
compared to $409.2 million for the same period in 1999 (after deducting $7.8
million to reflect the Company's Canadian direct merchandising division, which
was discontinued in the fourth quarter of 1999). This increase was fueled by a
2.8% gain in FSI revenue from $316.3 million in the first six months of 1999, to
$325.0 million in the comparable 2000 period. FSI revenue rose primarily as a
result of higher volume due, in part, to industry growth. In addition, TMS
revenue increased from $30.4 million for the first six months of 1999, to $35.9
million for the first six months of 2000. Management expects sales growth in
excess of 20% for TMS in 2000.
Gross margin increased from 37.5% during the first six months of 1999 to 42.3%
for the same period in 2000. Excluding the impact of a lawsuit settlement in
the first quarter of 2000, gross margin would have increased 1.5% to 39%, due
primarily to reduced FSI media and print costs and margin improvements in the
TMS division. Management expects the cost of paper to be up slightly during the
remainder of 2000. Management noted that in March 1999, the Company signed long-
term contracts for 75% of its paper requirements which include pricing collars
that help stabilize the Company's paper cost.
Selling, general and administrative expenses were $37.9 million for the six
months ended June 30, 2000, compared with $38.4 million for the same period last
year.
Excluding the impact of a lawsuit settlement in the first quarter of 2000, for
the six months ended June 30, 2000, net earnings were $71.1 million, versus
$62.4 million for the same six months last year. The increase in net earnings is
attributable to increased volume in the FSI business, combined with the improved
performance of TMS.
FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL
The Company's liquidity requirements arise mainly from its working capital
needs, primarily accounts receivable, inventory and debt service requirements.
The Company does not offer financing to its customers. FSI customers are billed
for 75% of each order eight weeks in advance of the publication date and are
billed for the balance immediately prior to the publication date. The Company
inventories its work in progress at cost, while it accrues progress billings as
a current liability at full sales value. Although the Company receives
considerable payments from its customers prior to publication of promotions,
revenue is recognized only upon publication dates. Therefore, the progress
billings on the balance sheet include any profits in the related receivables and
accordingly, the Company can operate with low, or even negative, working
capital.
Cash and cash equivalents totaled $8.8 million at June 30, 2000, versus $11.1
million at December 31, 1999. This was the result of cash provided by operating
activities of $60.5 million, and cash used in investing activities and financing
activities of $10.9 million and $51.9 million, respectively, in the first six
months of 2000.
Cash flow from operating activities decreased from $70.8 million for the six
months ended June 30, 1999 to $60.5 million at June 30, 2000, despite increased
earnings due to a significant decrease in accounts payable and other negative
working capital changes.
As of June 30, 2000, the Company's debt has been reduced to $287.5 million,
which consists of $172.0 million under its Revolving Credit Facility, $100
million of its 6-5/8% Senior Notes due 2009 and $15.5 million of its 9.55%
Senior Notes due 2003.
The Company intends to use cash generated by operations to meet interest and
principal repayment obligations, for general corporate purposes, to reduce its
indebtedness and from time to time to repurchase stock through the Company's
stock repurchase program. The Company intends to use
11
<PAGE>
proceeds of the settlement paid by Arthur Andersen to accelerate the development
of the Customer Relationship Marketing initiative.
As of June 30, 2000, the Company had authorization to repurchase an additional
3.8 million shares of its common stock under its existing share repurchase
program, which includes the 1.7 million share repurchase agreement discussed in
Note 3 to the condensed consolidated financial statements.
Management believes that 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 payments of
indebtedness.
CAPITAL EXPENDITURES - The Company operates three printing facilities. Capital
expenditures were $3.1 million for the six-month period ended June 30, 2000.
Management expects future capital expenditure requirements of approximately $15
million annually over each of the next three to five years to meet increased
capacity needs and to replace or rebuild equipment as required. It is expected
that equipment will be purchased using funds provided by operations.
12
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company held its Annual Meeting of Stockholders on May 16, 2000.
b. The election of the nominees for directors who will serve for a term to
expire at the next Annual Meeting of Stockholders or until their respective
successors have been duly elected and qualified was voted on by the
stockholders. The nominees, all of whom were elected were: Richard N.
Anderson, Patrick F. Brennan, Seth Goldstein, Brian J. Husselbee, Joseph E.
Laird Jr., Robert L. Recchia, Marcella A. Sampson, Alan F. Schultz and Faith
Whittlesey. The Inspector of Election certified the following vote
tabulations with respect thereto:
<TABLE>
<CAPTION>
Director For Against Broker Non-Votes
-------------------------- -------------- ------------ -----------------------
<S> <C> <C> <C>
Richard N. Anderson 44,662,408 25,177 0
Patrick F. Brennan 44,662,408 25,177 0
Seth Goldstein 44,662,408 25,177 0
Brian J. Husselbee 44,662,408 25,177 0
Joseph E. Laird Jr. 44,662,408 25,177 0
Robert L. Recchia 44,662,408 25,177 0
Marcella A. Sampson 44,662,408 25,177 0
Alan F. Schultz 44,662,408 25,177 0
Faith Whittlesey 44,662,408 25,177 0
</TABLE>
c. A proposal to ratify the selection of Deloitte & Touche LLP, as auditors of
the Company for the 2000 fiscal year was approved by the stockholders.
The Inspector of Election certified the following vote tabulations:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
44,669,333 8,752 9,500 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a. The following exhibits are included herein:
(27) Financial Data Schedule
b. Form 8-K
The Company did not file any current report on Form 8-K during the three
months ended June 30, 2000.
13
<PAGE>
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.
Dated: August 11, 2000
Valassis Communications, Inc.
(Registrant)
By:/s/ Robert L. Recchia
-----------------------------------------
Robert L. Recchia
Executive Vice President-Chief Financial
Officer
Signing on behalf of the Registrant and as
principal financial officer.
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