Valassis Q1: Legal Bills Running at 22% of Profits; Hints of Layoffs?
Valassis had another awful quarter in which its legal bills were 22 percent of its profit and CFO Robert Recchia hinted that there may be more layoffs to come at the company. He’s seeking to get $25 million out of his sales, general and admin budget — the expense line that wages and salaries come out of. He needs those savings because Valassis’ business is shrinking dramatically.
The basics: Revenue was $551 million, down 7.7 percent. Net income was $13 million, down 19.1 percent. Valassis burned another $2.9 million on lawyers to fight News America Marketing; the first trial is upcoming and once that’s over the company may be able to ease back on the legal bills and start returning a bit more money to shareholders.
The company also lost $41 million in cash-on-hand. Valassis also said the economic environment was so unpredictable that it will not offer any more guidance to analysts in 2009. The good news? There was no writedown of goodwill this time round, something that cost the company millions in the last quarter.
Here’s what Recchia said about possible layoffs:
We expected to cut approximately $57.5 million of cost from our 2008 spending levels in 2009. … the cuts are coming in the areas of SG&A $25 million, cost of good sold, $26 million and the elimination of unprofitable businesses or product lines $6.5 million.
Valassis’ results also say some strange things about the company’s strategy of moving away from newspapers toward shared junk mail and the RedPlum.com coupon site. This graphic tells the tale (click to enlarge).
You can see that in terms of revenue, newspapers held up better than Valassis’ other businesses, declining only 5.1 percent. The company’s revenue in that area only declined by $5 million.
Digital, in contrast, declined 19 percent to just $34 million.
Valassis will defend itself by noting that if you ignore revenues in favor of profits, then papers are their least profitable segmemt and shared mail is its most profitable.
In terms of the War Against News America Marketing, Valassis offered little that was new. Here’s a mystery executive’s chat (general counsel Todd Wisely?) with one Wall Street Excel jockey:
Unidentified Analyst: Okay, just quickly on the pending trial … Can you give us any sense of the parameters about, your claim and if you really won and won everything, what parameters you could put on this based on public information. Is there any kind of color, you can give us on this … ?
Unidentified Company Representative: I don’t think we can do that because, I don’t think we like everybody in a situation like this, hire damage experts and we do have the damage expert that’s done their calculation. I don’t believe that that damage calculation is yet public information, I don’t think it’s actually available to the public. But in the midst of the trial that certainly will become public information and you get a sense of what the damages are, at that point.
- See BNET’s previous coverage of the in-store marketing wars:
- News America Marketing Sues Valassis Alleging Bogus Web Posts
- Valassis Accused of Using Hidden Identities in Online War With News America Marketing
- News America Marketing Forces Whistleblower Into Bankruptcy
- News America Marketing Whistleblower: Clients Were Charged for Ads That Never Appeared
- Was N.Y. Post’s Carlucci the Reason for News America Marketing’s Settlement With Floorgraphics?
- News America Marketing’s Alleged Plans to Seize Safeway Account Outlined in Suit
- Valassis to Stick With “Majority” of Newspapers; Settles Fraser Billing Dispute
- Valassis, Insignia Stock Jumps on News America Marketing Group Settlement
- Valassis CEO Got Big Raise Despite Company’s Losses
- News America Marketing Group Wins Summary Judgment Against Whistleblower Robert Emmel
- News America Marketing Group Buys Floorgraphics Just Hours After Settling Spying Lawsuit
- News America Marketing Group Settles With Floorgraphics; Valassis, Insignia Likely Rejoicing
- Valassis May Not Be Able to Pay Debt; Litigation May “Materially Harm” the Company
- Trial: Did News America Marketing Group Break Into Floorgraphics’ Computers?
- Valassis Stock Threatened With De-listing by NYSE
- Valassis’ Plan to End Newspaper Coupons Outrages Middle America
- Valassis Suit vs. News America Being Conducted in Secrecy
- Valassis: Layoffs Will Continue as It Reduces Newspaper Coupon Business; It’s All News America’s Fault
- Valassis Writes Down $245 Million in Assets; Legal Bills Running at 10% of Profits
- Valassis Angers Blogger Moms by Yanking RedPlum Coupons From Newspapers
- Valassis Reduces the Cost of Fun for Employees
- Direct Mail Giant Valassis Is “Not Paying Its Bills”; Stock Is “Worth $0”
- The Cost of Valassis’ Suit vs. News America Is Eating Its Profit
Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.
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