LIVONIA, Mich., Feb. 22 -- Valassis Communications, Inc., (NYSE: VCI) announced revenue increases for the quarter ended December 31, 2000 of 14%, and 7.3% for the year, versus corresponding 1999 time periods. Earnings per share were 48 cents for the quarter, and $2.22 for the year, within the company's published projections.
Valassis will hold an investor call today, to discuss the fourth quarter and year-end, at 11:00 a.m. (EST). The call-in number is 800/218-0530. The call will also be simulcast on the Valassis website, at http://www.valassis.com .
Valassis chairman, president and CEO Alan F. Schultz, said, "We delivered revenue increases in all divisions, and outstanding performances from Valassis Impact Promotions and Targeted Marketing Services. Our solid base of three core businesses enables us to post consistently strong results and generate substantial free cash flow."
Other factors affected profitability of the FSI in 2000. Three package good clients published four separate, "custom co-ops," which operate at a lower margin than the regular co-op FSI. Valassis has conservatively included another four of these publications in its 2001 projections. However, management believes that these clients will eventually move away from custom co-ops, as their efficiencies, consumer response and grocery trade support are not as great as the FSI. The average cost of paper also increased by 2% in 2000 versus 1999. Based on its ability to shift grades of paper throughout the year, and to decrease the dimensions of the FSI, Valassis projects that 2001 average paper costs will be flat versus 2000.
Valassis Impact Promotions (VIP): VIP posted a 36.6% increase in revenues in the fourth quarter versus the year ago quarter, and a 16.8% increase for the year, at $136.1 million. This increase was due to the continued strength of its core client base of franchise retailers, and growth in new categories, such as telecommunications and computer hardware. The division also expanded margins in 2000. VIP will continue to target 15% revenue growth for the year 2001.
Targeted Marketing Services (TMS): This division, in total, recorded an over 20% increase in revenues for both the fourth quarter and the full year, as well as margin expansion. The division's run-of-press (ROP) placement service and Promotion Watch consulting service exceeded their $20-$25 million revenue range; and the fast-growing sampling and advertising product line experienced over 15% growth for the quarter, and almost 35% for the year. Total division sales for the year 2000 were $84.2 million, over $55 million of which were in the sampling/advertising segment.
This division will again target 20% growth for its sampling and advertising products in 2001, and expects its ROP and Promotion Watch product lines to remain within their stated revenue range.
Customer Relationship Marketing (CRM): PreVision Marketing, acquired by Valassis in August, had 2000 revenues of $25 million, as projected, or over $10 million for the 4-month period consolidated into VCI. Other CRM revenues were approximately $2 million in 2000. During the quarter, Sue Griffin, formerly a vice president of Valassis, was named CEO of Valassis Relationship Marketing Systems, Valassis' joint venture with VNU. The company expects to report in more detail on the progress of this venture in its first quarter 2001 release.
Internet Initiatives: The company has investments in Save.com and Coupons.com, Internet coupon and promotion companies, and Independent Delivery Services (IDS), a software and system provider for on-line grocery shopping. During the quarter, Suzie Brown, a former vice president of Valassis, assumed the position of CEO of Save.com, and Valassis increased its ownership of Save.com to over 50%.
During the quarter, the company fully reserved against certain investments in Internet assets, as noted in the financial highlights. Alan Schultz explained, "We continue to believe that the Internet will be a strong promotional medium in the future. However, with the current uncertainty in the public markets regarding Internet start-ups, we felt it was necessary to take reserves against these businesses." Write-downs include investments in The Net's Best and IDS; as well as certain loans made to Save.com and IDS, which likely will not be recoverable. The move resulted in pre-tax write-downs of $21.6 million, which were offset in the company's financial results by a $27 million lawsuit settlement.
Alan Schultz added, "Many companies are predicting back-half loaded performance in the hopes of an improving economy. This is very different from our guidance. The economy has had little effect on our results in past. And, our 2001 projections are based on existing client and supplier contracts, which indicate improved year-over-year EPS growth in the second half."
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