Valassis's Profits Pinched by Charges, Paper Costs

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Valassis Communications Inc., Livonia, MI, posted revenue gains for both its fourth quarter and year but said that higher paper costs and one-time charges hindered profit growth.

The company, which sells coupons and free-standing inserts and provides other marketing services, reported fourth-quarter profits of $7.9 million, or 21 cents per share, down about 56.4 percent from profits of $18.1 million, or 45 cents per share, in the year-ago fourth quarter. Fourth-quarter revenues were $189.7 million, up 13.1 percent over revenues of $167.8 million in the prior-year period.

The company incurred a charge of $13.6 million after taxes in the more recent quarter for the early retirement of debt. Profits for the quarter would have risen about 18.8 percent over the year-ago results, to $21.5 million, without the one-time charge, the company said.

For the year, profits rose 1.1 percent, to $70.7 million, or $1.79 per share, compared with profits of $69.9 million, or $1.69 per share, in the preceding year. In addition to the fourth-quarter charge, the recent year also included a one-time charge of $3.7 million in the second quarter, while the preceding year included a charge of $6.4 million.

Revenues for the year were $741.4 million, up 9.8 percent over revenues of $675.5 million in the preceding year.

Sales of free-standing inserts grew 5.3 percent for the quarter, to $139.9 million, and 8.9 percent for the year, $567.7 million, compared with the year-ago results. Revenues from other marketing-services businesses grew as follows:

* Valassis Impact Promotions revenues increased 27.7 percent for the quarter, to $29.5 million, and 15.6 percent for the year, to $103.1 million;

* Valassis Sampling revenues increased 126.3 percent for the quarter, to $4.3 million, and 79.1 percent for the year, to 28.3 million;

* Valassis of Canada revenues increased 25.5 percent for the quarter, to $6.9 million, and 10.9 percent for the year, to $20.3 million. Valassis said the Canadian division also recently upgraded its computer systems for its direct-to-consumer database marketing efforts.

The company said its paper costs, on a per unit basis, increased 11 percent for the quarter and 17 percent for year, vs. year-ago results. The company's cost of goods sold for the recent year totaled $485.1 million, or 65.4 percent of revenues, vs. $$436.2 million, or 64.5 percent of revenues in the preceding year.

Paper costs have begun declining in 1999, the company said.

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