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Vertis loss grows worse

The Baltimore Sun

The chief executive of Vertis Communications, a Baltimore advertising and marketing company, assured analysts yesterday that its turnaround initiatives are showing progress after reporting that its second-quarter loss nearly quadrupled and revenue declined.

In a news release late Thursday, Vertis said it lost $19.7 million in the three months that ended June 30. That compared with a loss of $5 million in the second quarter last year. Vertis, a privately held company, announced financial results because its debt is publicly traded.

Revenue dropped 5.2 percent to $332.1 million from $350.5 million in the corresponding period last year, mostly because of continued erosion in its advertising inserts business. Sales from direct mail were up slightly, but a recent increase in postal rates affected orders, the company said.

"Our primary goal during 2007 is to turn around Vertis via systemic improvements with the objective of dramatically improving results for 2008 and beyond," said Vertis Chief Executive Officer Michael DuBose.

"We remain committed to our strategy to transform the business in 2007, and [are] confident of future success," DuBose said.

Vertis is operating in a tough industry where traditional print advertising is losing ground to the Internet and other media. As the news audience increasingly turns elsewhere, advertisers, too, are shifting their spending to alternative channels.

Vertis is one of the largest providers of advertising products and services, including coupons, television guides and Sunday comics inserted into newspapers. It also offers consumer research and direct mail.

To better compete in such an environment, Vertis is acquiring one of its largest competitors, American Color Graphics.

The two companies are expected to sign a definitive merger agreement this month. Vertis executives made no further comments about the transaction during a conference call with analysts yesterday.

DuBose, a turnaround expert hired in December, said the company's second-quarter results were in line with expectations. Since the beginning of the year, Vertis has been addressing quality, performance, and operational and customer service issues that have hurt it.

DuBose said the company has made key management and personnel hires as well as shown production and quality-control improvements.

"Investment in critical areas combined with our drive for quality and operational excellence and a sincere commitment to customers at the management level is showing early results," DuBose said.

For instance, DuBose said the company has regained 12 customers that stopped doing business with Vertis in recent years.

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