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Valassis Communications Inc · 10-Q · For 3/31/99

Filed On 5/14/99 · SEC File 1-10991 · Accession Number 1067312-99-154

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 5/14/99  Valassis Communications Inc       10-Q        3/31/99    3:55                                     1067312

Quarterly Report · Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      13     68K 
 2: EX-3.(II)   By-Laws                                               40     74K 
 3: EX-27       Financial Data Schedule                                2      8K

10-Q · Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Exhibits and Reports on Form 8-K Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations
1	1st Page
2	Item 1. Financial Statements
9	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12	Item 6. Exhibits and Reports on Form 8-K

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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

___________________________ 

FORM 10-Q 
___________________________ 

(Mark One)                                                                      

X  Quarterly report pursuant to Section 13 or 15(d) of the Securities     
---                                                                         
Exchange Act of 1934                                                

For the Quarterly Period Ended March 31, 1999                       

Transition Report pursuant to Section 13 or 15(d) of the Securities 
---                                                                         
Exchange Act of 1934                                                

Commission File Number:  1-10991                                    

VALASSIS COMMUNICATIONS, INC. 
(Exact Name of Registrant 
as Specified in its Charter)  

Delaware                                     38-2760940       
(State or Other Jurisdiction of           (IRS Employer Identification Number)  
Incorporation or Organization)                                                  

19975 Victor Parkway
Livonia, Michigan 48152   
(address of principal executive offices)
Registrant's Telephone Number: (734) 591-3000 

_______________________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such reports) and, (2) has been subject to such filing         
requirements for the past 90 days:                                              

Yes   X                 No            
--------                ------- 

As of May 5, 1999, there were 57,059,600 shares of the Registrant's Common Stock
outstanding, after giving effect to the 3 for 2 stock split issued on May 12,   
1999 to shareholders of record on April 16, 1999.                               

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Part I - Financial Information                                                  

Item 1.  Financial Statements                                                   

VALASSIS COMMUNICATIONS, INC. 
Condensed Consolidated Balance Sheets 
(dollars in thousands)

                                                        · Enlarge/Download Table

                                                                March 31,        December 31, 
Assets                                                            1999              1998      
                                                            ---------------    -------------- 
                                                              (unaudited)                     
                                                                                              
Current assets:                                                                               
   Cash and cash equivalents                                        $9,570             $6,939 
   Accounts receivable (less allowance for doubtful                                           
      accounts of $1,980 at March 31, 1999 and $1,354 at                                      
      December 31, 1998)                                           103,189             95,430 
   Inventories:                                                                               
      Raw materials                                                 10,849             11,817 
      Work in progress                                              12,417             20,051 
   Prepaid expenses and other                                        6,150              5,817 
   Deferred income taxes                                             1,790              1,790 
   Refundable income taxes                                             ---              1,215 
                                                             -------------      ------------- 

                   Total current assets                            143,965            143,059 
                                                            --------------      ------------- 

Property, plant and equipment, at cost:                                                       
   Land and buildings                                               21,756             21,456 
   Machinery and equipment                                         115,124            114,912 
   Office furniture and equipment                                   20,906             20,143 
   Automobiles                                                         956              1,025 
   Leasehold improvements                                            1,048              1,022 
                                                            --------------     -------------- 
                                                                   159,790            158,558 

   Less accumulated depreciation and amortization                 (113,618)          (112,200)
                                                            --------------     -------------- 

           Net property, plant and equipment                        46,172             46,358 
                                                            --------------     -------------- 

Intangible assets:                                                                            
   Goodwill                                                         68,594             68,594 
   Other intangibles                                                85,387             85,387 
                                                            --------------    --------------- 
                                                                   153,981            153,981 

   Less accumulated amortization                                  (114,106)          (112,806)
                                                           ---------------    --------------- 

                  Net intangible assets                             39,875             41,175 
                                                          ----------------    --------------- 

Other assets (primarily debt issuance costs)                         2,598              1,422 
                                                          ----------------    --------------- 

                        Total assets                              $232,610           $232,014 
                                                          ================   ================ 

                                                                               2

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VALASSIS COMMUNICATIONS, INC. 
Condensed Consolidated Balance Sheets, Continued
(dollars in thousands, except per share data) 

                                                        · Enlarge/Download Table

                                                                       March 31,         December 31,   
Liabilities and Stockholders' Deficit                                    1999                1998       
                                                                  ----------------   ------------------ 
                                                                      (unaudited)           (note)      
                                                                                                        
Current liabilities:                                                                                    
 Accounts payable                                                          $69,938              $69,064 
 Accrued interest                                                            5,876                4,542 
 Accrued expenses                                                           20,680               26,345 
 Income paxes payable                                                       19,225                  --- 
 Progress billings                                                          49,466               58,615 
                                                                  ----------------   ------------------ 

                   Total current liabilities                               165,185              158,566 
                                                                  ----------------   ------------------ 

Long-term debt                                                             319,429              340,461 
Deferred income taxes                                                        1,511                1,511 

Commitments and contingencies                                                                           

Stockholders' deficit:                                                                                  
 Common stock of $.01 par value. Authorized 100,000,000                        627                  629 
  shares; issued 62,732,604 at March 31, 1999 and 62,854,360                                            
  at December 31, 1998; outstanding 57,048,266 at                                                       
  March 31, 1999 and 57,589,322 at December 31, 1998                                                    
 Additional paid-in capital                                                 71,962               69,416 
 Accumulated deficit                                                      (132,046)            (165,937)
 Foreign currency translations                                                (283)                (298)
 Treasury stock, at cost (5,684,338 shares at March 31, 1999 and                                        
  5,265,038 shares at December 31, 1998)                                  (193,775)            (172,334)
                                                                  ----------------   ------------------ 

                Total stockholders' deficit                               (253,515)            (268,524)
                                                                  ----------------   ------------------ 

                Total liabilities and stockholders' deficit               $232,610             $232,014 
                                                                  ================   ================== 

NOTE:  The balance sheet at December 31, 1998 has been derived from the audited 
     consolidated financial statements at that date but does not include all
of the information and footnotes required by generally accepted   
accounting principles for complete financial statements.          

See accompanying notes to condensed consolidated financial statements.          

                                                                               3

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VALASSIS COMMUNICATIONS, INC. 
Condensed Consolidated Statements of Income 
(dollars in thousands, except per share data) 
(unaudited) 

                                                        · Enlarge/Download Table

                                                                       Quarter Ended           
                                                              March 31,            March 31,   
                                                                 1999                1998      
                                                          ----------------    -----------------
                                                                                               
Revenues:                                                                                      
   Net sales                                                      $221,906             $204,951
   Other                                                               299                  732
                                                          ----------------    -----------------

   Total revenues                                                  222,205              205,683
                                                          ----------------    -----------------

Costs and expenses:                                                                            
   Cost of products sold                                           138,421              133,902
   Selling, general and administrative                              20,203               18,453
   Amortization of intangible assets                                 1,299                2,024
   Interest                                                          7,391                9,007
                                                          ----------------    -----------------

   Total costs and expenses                                        167,314              163,386
                                                          ----------------    -----------------

                   Earnings before income taxes                     54,891               42,297

   Income taxes                                                     21,000               16,250
                                                          ----------------    -----------------

                   Net earnings                                    $33,891              $26,047
                                                          ================    =================

Net earnings per common share, basic                               $   .59              $   .43
                                                          ================    =================

Net earnings per common share, diluted                             $   .58              $   .43
                                                          ================    =================

Shares used in computing net earnings per share, basic          57,118,800           60,170,219
                                                          ================    =================

Shares used in computing net earnings per share, diluted        58,244,948           60,834,840
                                                          ================    =================

See accompanying notes to condensed consolidated financial statements.          

                                                                               4

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VALASSIS COMMUNICATIONS, INC. 
Condensed Consolidated Statements of Cash Flows 
(in thousands)
(unaudited) 

                                                        · Enlarge/Download Table

                                                                                          Quarter Ended              
                                                                           ----------------------------------------- 
                                                                                MARCH 31,               MARCH 31,    
                                                                                   1999                   1998       
                                                                           -----------------      ------------------ 
                                                                                                                     
Cash flows from operating activities:                                                                                
 Net earnings                                                                        $33,891                 $26,047 
 Adjustments to reconcile net earnings to net cash provided by operating                                             
  activities:                                                                                                        
   Depreciation and amortization                                                       3,304                   3,939 
   Provision for losses on accounts receivable                                           225                     225 
   Minority interest                                                                     ---                      (3)
   (Gain)/loss on sale of property, plant and equipment                                  (65)                      6 
  Stock-based compensation charge                                                        823                   1,551 
   Changes in assets and liabilities which increase (decrease) cash flow:                                            
    Accounts receivable                                                               (7,984)                (18,573)
    Inventories                                                                        8,602                   2,337 
    Prepaid expenses and other                                                         1,013                  (3,494)
    Other assets                                                                        (176)                    105 
    Accounts payable                                                                     874                  17,375 
    Accrued expenses and interest                                                     (4,331)                 (7,896)
    Income taxes                                                                      20,440                  14,915 
    Progress billings                                                                 (9,149)                (14,961)
                                                                           -----------------      ------------------ 
             Total adjustments                                                        13,576                  (4,474)
                                                                           -----------------      ------------------ 

   Net cash provided by operating activities                                          47,467                  21,573 
                                                                           -----------------      ------------------ 

Cash flows from investing activities:                                                                                
 Additions to property, plant and equipment                                           (1,864)                 (5,770)
 Investment in Merge L.L.C.                                                           (1,000)                    --- 
 Proceeds from sale of property, plant and equipment                                     110                     --- 
 Other                                                                                    16                    (121)
                                                                           -----------------      ------------------ 
   Net cash used in investing activities                                              (2,738)                 (5,891)
                                                                           -----------------      ------------------ 

Cash flows from financing activities:                                                                                
 Repayment of long-term debt                                                        (108,380)                 (4,184)
 Proceeds from the issuance of common stock                                              375                  19,750 
 Borrowings of long-term debt                                                        100,348                     --- 
 Net borrowings (payments) under revolving line of credit                            (13,000)                    --- 
 Repurchase of common stock                                                          (21,441)                (56,166)
                                                                           -----------------      ------------------ 
   Net cash used in financing activities                                             (42,098)                (40,600)
                                                                           -----------------      ------------------ 

Net increase/(decrease) in cash                                                        2,631                 (24,918)
Cash at beginning of period                                                            6,939                  35,437 
                                                                           -----------------      ------------------ 

Cash at end of period                                                                $ 9,570                 $10,519 
                                                                           =================      ================== 

Supplemental disclosure of cash flow information:                                                                    
 Cash paid during the period for interest                                            $ 6,057                 $ 5,559 
 Cash paid during the period for income taxes                                        $   560                 $ 1,335 
 Non-cash financing activities:                                                                                      
   Stock issued under stock-based compensation plan                                  $ 2,169                 $ 2,338 

See accompanying notes to condensed consolidated financial statements.          

                                                                               5

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VALASSIS COMMUNICATIONS, INC. 
Notes to Condensed Consolidated Financial Statements

1.        Basis of Presentation                                                 

          The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles  
for interim financial information and with the instructions to Form 10-Q and    
Article 10 of Regulation S-X. Accordingly, they do not include all of the       
information and footnotes required by generally accepted accounting principles  
for complete financial statements. In the opinion of management, the information
contained herein reflects all adjustments necessary for a fair presentation of  
the information presented. All such adjustments are of a normal recurring       
nature. The results of operations for the interim periods are not necessarily   
indicative of results to be expected for the fiscal year. For further           
information, refer to the consolidated financial statements and footnotes       
thereto included in the Company's Annual Report on Form 10-K for the year ended 
December 31, 1998. Certain amounts for 1998 have been reclassified to conform to
current period classifications.                                                 

2.        Contingencies                                                         

      On February 24, 1999, the Company commenced litigation against The
News Corporation Limited ("News Corp") and News America Incorporated ("News     
America") in the State of Michigan Circuit Court for the County of Wayne. The   
Complaint seeks $150 million in compenstory damages, $300 million in punitive   
damages and injunctive relief based on allegations of tortious interference     
with prospective contractual relations and aiding and abetting a breach of      
fiduciary duty. The principal factual allegation is that Arthur Andersen LLP    
("Arthur Andersen"), with the inducement of News Corp and News America,         
repudiated a joint venture agreement with the Company relating to the           
development of a new product. On April 7, 1999, Arthur Andersen rejected        
alternative dispute resolution and filed a declaratory judgment action in the   
Chancery Division of the Cook County, Illinois Circuit Court. This action asks  
the Illinois Court to make a determination as to whether the Company and Arthur 
Andersen had a contract. The Company has filed a motion to dismiss this Illinois
action.                                                                         

        On April 12, 1999, the Company amended its lawsuit against News Corp
and News America to add Arthur Andersen as a defendant. News Corp and News      
America filed a motion to dismiss the case against News Corp and News America   
for lack of jurisdiction. On May 7, 1999, the Court found that Michigan         
jurisdiction was proper and denied their motion. The time for defendants to     
answer or move with respect to the Complaint has not yet expired.               

          The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate     
disposition of these matters will not have a material adverse effect on the     
Company's financial position, results of operations or liquidity.               

3.        Supplemental Benefit Plan                                             

       The Company established a Supplemental Benefit Plan (the "Plan") in
1998. The Plan covers management employees who are designated by the Company's  
Compensation/Stock Option Committee. Participating employees earn credited      
service for each year of continuous service with the Company. The annual amount 
of supplemental benefit is calculated by multiplying a participant's years of   
credited service by one and one-half percent of the participant's average annual
base pay while employed by the Company 36 months immediately preceding          
retirement or other termination of employment. The amount of supplemental       
benefit provided by the Plan is payable semi-annually for a period of ten years,
commencing upon retirement, death or other termination of employment.           
Supplemental benefits are provided on a non-contributing basis. Expense         
associated with the cost of future benefits under the Plan for the quarter ended
March 31, 1999 totaled approximately $148,000.                                  

4.        Subsequent Event                                                      

     On April 1, 1999, the Board of Directors approved a three-for-two
split of the Company's Common Stock, effected in the form of a 50% stock        
dividend, issued May 12, 1999, to stockholders of record as of April 16, 1999.  
Accordingly, all common share and per common share data have been restated to   
reflect this stock split. The stock split was accomplished through the issuance 
of 16,481,134 new shares and the use of 2,536,462 shares of Treasury Stock.     

                                                                               6

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5.        Segment Reporting                                                     

      The Company has two reportable segments, cooperative free-standing
inserts (FSIs) and Valassis Impact Promotions (VIP). FSIs are four-color        
booklets containing promotions from multiple advertisers distributed through    
Sunday newspapers. VIP offers its customers individualized specialty print      
promotion products in customized formats. These reportable segments are         
strategic business units that offer different products and services. They are   
managed separately because each business requires different marketing strategies
and caters to a different customer base.                                        

Assets are not allocated to reportable segments and are not used to assess the  
performance of a segment.  Intersegment sales are accounted for at cost.        

                                                        · Enlarge/Download Table


(in millions)                                 Three Months Ended March 31              
-------------                     -----------------------------------------------------
                                      FSI         VIP         All Others*      Total   
    1999                          ----------   ----------    --------------   ---------
    ----                                                                               
                                                                                       
Revenues from external customers     $167.7         $34.0            $20.3       $222.0
Intersegment revenues                   2.2           ---              ---          2.2
Depreciation/amortization               2.8           0.5              ---          3.3
Segment profit                         50.9           3.1              0.7         54.7

    1998                                                                               
    ----                                                                               
Revenues from external customers     $156.8         $29.9            $18.3       $205.0
Intersegment revenues                   1.8           ---              ---          1.8
Depreciation/amortization               3.6           0.3              ---          3.9
Segment profit                         38.5           2.3              0.8         41.6


* Segments below the quantitative thresholds are primarily attributable to four 
  segments of the Company. Those segments include a product sampling business, a
sales promotion company in Canada, a run-of-press business, and a promotion 
security service. None of these segments has met any of the quantitative    
thresholds for determining reportable segments.                             

Reconciliations to consolidated financial statement totals are as follows:      

                                Three Months Ended March 31,
                               ---------------------------------
                               1999             1998
                                ---------------     --------------
Profit for reportable segments                  $54.0              $40.8        
Profit for other segments                         0.7                0.8        
Unallocated amounts:                                                            
Interest income                                0.2                0.7     
                                ---------------     --------------
Earnings before taxes                           $54.9              $42.3        
                                ---------------     --------------

Domestic and foreign revenues for each of the three-month periods ended March 31
were as follows:                                                                
  1999        1998
   -------    --------
United States                    $216.4      $200.2                             
Canada                              5.8         5.5                             
   -------    --------
Total                            $222.2      $205.7                             
   =======    ========

                                                                               7

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6.      Earnings Per Share                                                      

Earnings per common share ("EPS") data were computed as follows:                

                                                        · Enlarge/Download Table


                                                                          Three Months           
                                                                         Ended March 31,         
                                                                   ----------------------------- 
                                                                        1999            1998     
                                                                   -------------    ------------ 
                                                                         (in thousands except for
                                                                           per share amounts)    
                                                                                                 
Net Earnings                                                             $33,891         $26,047 
                                                                   =============    ============ 

Basic EPS:                                                                                       
  Weighted average common shares outstanding                              57,119          60,170 
                                                                   =============    ============ 

Earnings per common share - basic                                        $  0.59         $  0.43 
                                                                   =============    ============ 

Diluted EPS:                                                                                     
  Weighted average common shares outstanding                              57,119          60,170 
  Weighted average shares purchased on exercise of dilutive options        4,364           2,616 
  Shares purchased with proceeds of options                               (3,267)         (1,962)
  Shares contingently issuable                                                29              11 
                                                                   -------------    ------------ 
  Shares applicable to diluted earnings                                   58,245          60,835 
                                                                   =============    ============ 

Earnings per common share - diluted                                      $  0.58         $  0.43 
                                                                   =============    ============ 

                                                                               8

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Item 2.     Management's Discussion and Analysis of Financial Condition and     
Results of Operations.                                  

Certain statements under the caption "Management's Discussion and Analysis of   
Financial Condition and Results of Operations," 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: a new    
competitor in the Company's core free-standing insert business and consequent   
price war; new technology that would make free-standing inserts less attractive;
a shift in customer preference for different promotional materials, promotional 
strategies or coupon delivery methods, including in-store advertising systems   
and other forms of coupon delivery; the inability of material third parties upon
which the Company relies to be Year 2000 compliant in a timely manner; an       
increase in the Company's paper costs; or general business and economic         
conditions. 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.                                                     

Results of Operations                                                           

Total revenues increased 8.0% from $205.7 million for the first quarter of 1998 
to $222.2 million for the first quarter of 1999.  Free-standing insert (FSI)    
revenues were up 7.0% from $156.8 million for the quarter ended March 31, 1998  
to $167.7 million for the same quarter of 1999. This increase is the result of  
continued industry page growth and moderate price increases, despite one less   
FSI publishing date during the first quarter of 1999 than in 1998. Retail       
Services revenues, which include Valassis Impact Promotions (VIP) and the newly-
developed Customer Attainment and Retention System (CARS), were up 16% to $34.8 
million compared to $29.9 million in the prior-year period. This increase is a  
result of continued strong demand from VIP's traditional customer base of food  
service companies.                                                              

Gross profit margin was 37.7% in the first quarter of 1999, up from 34.9% in the
first quarter of 1998.  This was primarily the result of the continued decline  
in the Company's three major cost components, paper, media and printing on a per
unit basis. The Company recently negotiated multi-year contracts with several   
major suppliers of coated groundwood paper designed to stabilize paper costs.   
The contracts, which stipulate pricing collars preventing the price of paper    
from going up or down more than 6-10% in any 12-month period, represent over 75%
of the Company's paper requirements.                                            

Selling, general and administrative expenses increased from $18.5 million in the
first quarter of 1998 to $20.2 million in the first quarter of 1999. This is    
primarily the result of higher incentive plan costs as a result of stronger     
sales and profits in the first quarter of 1999 as compared to the same period in
1998, as well as costs associated with new business development.                

As a result of the Company's recently completed multi-phased debt-restructuring 
plan, interest expense was down for the quarter ended March 31, 1999. The debt- 
restructuring plan included the addition of a $160 million unsecured bank       
facility, a ratings upgrade by both Moody's and S&P, the repurchase of $125.1   
million of the Company's senior notes due 2003, and the issuance of $100 million
in senior notes due 2009.                                                       

                                                                               9

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Net earnings were $33.9 million for the first quarter of 1999 versus $26.0      
million for the same period last year.  These improved results were primarily   
the result of strong FSI sales.                                                 

Financial Condition, Liquidity and Sources of Capital                           

The Company's liquidity requirements arise mainly from its working capital      
needs, primarily accounts receivable, inventory and debt service requirements.  
The Company does not offer financing to its customers. FSI customers are billed 
for 75% of each order eight weeks in advance of the publication date and are    
billed for the balance immediately prior to the publication date. The Company   
inventories its work in progress at cost while it accrues progress billings as a
current liability at full sales value. Although the Company receives            
considerable payments from its customers prior to publication of promotions,    
revenue is recognized only upon publication dates. Therefore, the progress      
billings on the balance sheet include any profits in the related receivables and
accordingly, the Company can operate with low, or even negative, working        
capital.                                                                        

Cash and cash equivalents totaled $9.6 million at March 31, 1999 versus $10.5   
million at March 31, 1998. This was the result of cash provided by operating    
activities of $47.5 million, and cash used in investing activities and financing
activities of $2.7 million and $42.1 million, respectively, in the first quarter
of 1999.                                                                        

Cash flow from operating activities increased from $21.6 million at March 31,   
1998 to $47.5 million at March 31, 1999 as a result of increased earnings and   
other positive working capital changes.                                         

During the first quarter of 1999, the Company retired $107 million in debt due  
March 1999 using amounts borrowed under its $160 million Revolving Credit       
Facility and $17 million of existing cash. As of March 31, 1999 the Company's   
debt has been reduced to $319 million, which consists of $90 million under its  
Revolving Credit Facility, $100 million of its 6-5/8% Senior Notes due 2009 and 
$129 million of its 9.55% Senior Notes due 2003.                                

The Company intends to use cash generated by operations to meet interest and    
principal repayment obligations, for general corporate purposes, to reduce its  
indebtedness and from time to time to repurchase stock through the Company's    
stock repurchase program. As of March 31, 1999, the Company had authorization to
repurchase an additional 1.8 million shares of its common stock under its       
existing share repurchase program.                                              

Management believes that the Company will generate sufficient funds from        
operations and will have sufficient lines of credit available to meet currently 
anticipated liquidity needs, including interest and required payments of        
indebtedness.                                                                   

Capital Expenditures - The Company operates three printing facilities. Capital  
expenditures were $1.9 million for the three month period ended March 31, 1999. 
Management expects future capital expenditure requirements of approximately $10 
million to $15 million over each of the next three to five years to meet        
increased capacity needs and to replace or rebuild equipment as required. It is 
expected that equipment will be purchased using funds provided by operations.   

                                                                              10

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Year 2000 Compliance                                                            

The Year 2000 issue is the result of computer programs being written using two  
digits rather than four to define the applicable year. Any of the Company's     
computer programs that have date-sensitive software may recognize a date using  
"00" as the year 1900 rather than 2000. This problem could force computers to   
either shut down or generate erroneous data or information.                     

In response to the Year 2000 issue, the Company has implemented a multi-faceted 
project plan, which covers both IT and non-IT systems. This plan encompasses    
three areas: (1) program modifications; (2) implementing new financial software 
upgrades; and (3) testing readiness of vendors and customers. Phases associated 
with the project plan are: identification and ranking of components of the      
Company's systems and equipment and those of its suppliers that may be          
vulnerable to Year 2000 problems; assessment of those components; remediation or
replacement of non-compliant systems and components; testing of systems and     
components following remediation; and the development of contingency plans.     

With regard to program modification and implementing new software upgrades, the 
Company has completed its plan and has all critical systems Year 2000 compliant.
With regard to readiness of vendors and customers, the Company is currently in  
the assessment phase and will have testing plans completed by June 30, 1999.    

The Company's plans include the development of a full contingency plan. The     
Company believes that by June 30, 1999, it will be able to fully determine its  
most likely worst case scenarios and will have its contingency plans in place.  
Potential sources of risk include the inability of suppliers (principally paper 
suppliers) to be Year 2000 compliant in a timely manner, which could result in  
delays in product deliveries from such suppliers, the disruption of the         
distribution of the Company's products to the consumer, and disruption of the   
Company's own production facilities as a result of general failure of necessary 
infrastructure such as electricity supply.                                      

The Company estimates the total costs related to the implementation of the      
program modification plan and the financial software upgrade plan to be         
approximately $400,000 and $300,000, respectively, which will be funded through 
operating cash flows and expensed as incurred. To date, expenses have totaled   
approximately $300,000 for program modifications and $30,000 for financial      
software upgrades. It is not possible to quantify the aggregate cost to the     
Company with respect to vendors, service providers and customers who fail to    
become Year 2000 compliant. This is a Year 2000 Readiness Disclosure Statement  
within the meaning of the Year 2000 Information and Readiness Disclosure Act    
(P.L. 105-271).                                                                 

                                                                              11

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Part II - Other Information                                                     

Item 6.  Exhibits and Reports on Form 8-K                                       

a.  Exhibits                                                                    

The following exhibits are included herein:                             

(3)(ii) By-Laws                                                         

(27) Financial Data Schedule                                            

b.  Form 8-K                                                                    

  The Company filed a report on Form 8-K, dated January 12, 1999, announcing
the completion of a debt-restructuring plan.                                    

                                                                              12

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Signatures                                                                      

Pursuant to the requirements of the Securities Exchange Act of 1934, the        
Registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

Dated:      May 14, 1999                                                        

         Valassis Communications, Inc.
            (Registrant)

    By: /s/Robert L. Recchia
                            ----------------------------------------
     Robert L. Recchia
                             V.P. of Finance - Chief Financial Officer

                      Signing on behalf of the Registrant and as
        principal financial officer.

                                                                              13

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-Q Filing	Date	First	Last	Other Filings

	3/31/98	9	10	10-Q/A, 10-Q
	12/31/98	2	6	10-K405
	1/12/99	12		8-K
	2/24/99	6
For The Period Ended	3/31/99	1	10
	4/1/99	6
	4/7/99	6
	4/12/99	6		DEF 14A
	4/16/99	1	6
	5/5/99	1
	5/7/99	6
	5/12/99	1	6
Filed On / Filed As Of	5/14/99	13
	6/30/99	11		10-Q

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Filing Submission - Alternative Formats (Word / Rich Text, HTML, Plain Text, SGML, XML, et al.)

Valassis Communications Inc · 10-Q · For 3/31/99

Filed On 5/14/99 · SEC File 1-10991 · Accession Number 1067312-99-154

Quarterly Report · Form 10-QFiling Table of Contents

10-Q · Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Quarterly Report · Form 10-Q
Filing Table of Contents

10-Q · Quarterly Report
Document Table of Contents