Shared Mail Drop, Impairment Charge Damp Valassis Year

Valassis generated $626.3 million during fourth-quarter 2008, a drop from the $661.5 million it pulled in during fourth-quarter 2007. But the company took an eye-popping $222 million loss during the quarter, largely due to a $245 million non-cash impairment charge. In fourth-quarter 2007, Valassis recorded $20.6 million in net income.

For the year, the company’s revenue notched up to $2.38 billion from $2.23 billion in 2007. The first three months of 2007 did not include the company’s acquisition of Advo. But the company took a net loss of $207.5 million for the year, compared with income of $58 million in 2007, again primarily due to the impairment charge.

Results from its operations – Shared Mail, Neighborhood Targeted Products, Market Delivered Free-standing Inserts and International, Digital Media and Services – were a mixed bag. The company’s Shared Mail division reported the largest year-over year revenue drops. Shared mail revenue for fourth quarter 2008 was $337.1 million, down 11% compared to the prior year. Valassis attributed the drop to reduced spending in the mass merchandising vertical, lightweighting by grocery retailers and lower wrap revenue.

Profits within the segment fell to $22.8 million from $34.4 million a year earlier. Full-year 2008 segment revenue was $1.37 billion, compared with pro forma full-year 2007 segment revenue of $1.41 billion. Full-year 2008 segment profit was $89.8 million.

Within Neighborhood Targeted Products, fourth-quarter revenue was $153.8 million, up 8% from fourth-quarter 2007’s $142.4 million. Most of the spending increase came from the financial, insurance and telecom verticals. Segment profit for the quarter was $11 million, down from $16.1 million a year ago. Segment profit declines for the quarter were due primarily to a shift in product mix.

Full- year 2008 segment revenue was $469.2 million, down 2.4% from full-year 2007. Full-year 2008 segment profit was $38.8 million, down 36.7% from full-year 2007.

Market Delivered Free-standing Inserts’ revenue for the fourth quarter of 2008 was $91.5 million, up 1.4% compared to the prior year quarter due to an increase in industry unit volume of 5.2%. Segment profit for the quarter was $2 million compared to $1.2 million in fourth-quarter 2007. Full-year 2008 segment revenue was $370.2 million, down 7.7% from 2007 due primarily to a mid-single digit price decline. Full-year 2008 segment profit was $1.8 million, down 91.3% from full-year 2007.

The company’s International, Digital Media & Services unit generated $43.9 million during the quarter, down 12.5% compared to the prior year quarter due primarily to its sale of the French and one-to-one direct mail services businesses and the discontinuance of media business in other European countries. Segment profit for the quarter was $3.8 million, including restructuring charges of $600,000, compared to a loss of $2.4 million for the prior year quarter which included restructuring charges of $7.6 million.

Full-year 2008 segment revenue was $171.7 million, down 1.7% from full-year 2007. Segment profit for the full-year 2008 was $0.6 million and included restructuring charges of $2.5 million, down 77.8% from full-year 2007.

"As the prolonged economic downturn continues to constrict client advertising budgets, we remain focused on what we can control -- our strategy, execution and costs," said Alan F. Schultz, Valassis chairman, president and CEO, in a statement.