October 26, 2004

Valassis — Connecting People to Brands™ 2

Safe Harbor Statement

Certain statements found in this document 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: 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.


Agenda

Overview

Favorable Macro Trends

Mass Products

Cluster Targeted Products

1 to 1 Products

International & Services

Financial Summary and Guidance

Summary


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™”


• Coupon clearing (NCH Marketing Services)

• European operations (NCH)

• Sweepstakes/ security consulting (Promotion Watch)

• Valassis Canada

• Direct mail sampling/advertising

• Customized frequentshopper direct mail

• Customer relationship management software

• Internet-deliveredpromotions

Overview: Valassis Product Portfolio

• Newspaper-deliveredproduct sampling

• Newspaper polybag advertising

• Preprinted inserts

• Direct-to-doorsampling/advertising

• Co-op newspaper inserts (Free-standing Inserts)

• On-page newspaper advertising (ROP)

Mass(Markets)

Cluster Targeted(Neighborhoods)

1 to 1(Households) International & Services

Integrated SolutionsConnecting People to Brands™


FSI 51%

Cluster Targeted

24%

1 to 16%

International & Services 9%

ROP10%


9%

FSI 54%ROP6%

Cluster Targeted

27%

1 to 14%

Overview: Share of Revenue

2003*

First 9 Months - 2004

*NCH Marketing Services, Inc. was acquired February 13, 2003


Specialty Retail15%

Franchise Food10%

Consumer Services

7%Grocery Retail*

5%

Other4%

Direct Marketers9%

Overview: Customer BaseOur customer base is strong, diverse and continues to grow.

% of Revenue by Customer Segment for 2003

Consumer Packaged Goods 50%

*Also includes Drug, Wholesale & Mass Merchants


Overview: CustomersValassis does business with 80% of Advertising Age’s list of the 100 Leading National Advertisers.



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



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


Mass Products

Products which provide mass market reach at a low cost

Co-op Free-standing Inserts (FSIs)

Run of Press (ROP)


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


Mass: Free-standing Inserts (FSIs)

Two-player industry

Building upon low-risk price improvement

initiative; management cautiously

optimistic

2004 market share: approx. 46%


Mass: Free-standing Inserts (FSIs)9 Month 2004 revenue: $376.7 million, down 1%

Guidance 2004 2005

FSI Revenue Relatively flat Down low-single digit percentage

Traditional Co-op FSI Circulation

58.5 million households

58.7 million households

Traditional Co-op FSI Dates

41 41

Custom Co-op FSI Dates(single customer FSIs)

Approx. 11 Approx. 12

FSI Cost of Goods Sold Relatively flat on a CPM basis

Up low-single digits, due to paper


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%


Cluster Targeted Products

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


Products targeted around geographic and demographic clusters at a neighborhood level


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


1 to 1 Products

Purchased Catalina Marketing’s Direct Marketing Services (DMS) business on 9/17/04

Relationships with retailers Q Kroger - Safeway

Q Food Lion - Albertsons

Q Winn Dixie

9 month 2004 revenue: $42.9 million, up 55.4%





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



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


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

Quarter Projected

EPS Range Actual EPS

1 $0.44 to $0.50 $0.47 2 $0.44 to $0.50 $0.51 3 $0.37 to $0.43 $0.43 4 $0.38 to $0.44


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


Financials: 2005 Guidance

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

A year of transition


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


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


Questions?

October 26, 2004

Documents

Transcript of October 26, 2004