Valassis Communications

(VCI)

, a provider of various marketing products and services to manufacturers, direct marketers, retailers, franchisees, and other advertisers, said Thursday its third-quarter earnings fell 68.9% from the year ago period, hurt by higher interest expenses and lower sales.

The company earned $6.6 million, or 14 cents a share, in the quarter, compared with $21.3 million, or 42 cents a share, a year ago. Adjusted for charges related to the proposed acquisition of

Advo

( AD) and the subsequent lawsuit to rescind the agreement and $2.3 million of non-recurring charges, the company earned $19 million, or 40 cents a share. Analysts surveyed by Thomson First Call were expecting earnings of 36 cents a share in the most recent quarter.

Third-quarter revenue fell 6.5% from a year ago to $248.9 million as against analysts' expectation of $264.9 million.

Valassis expects to reach to the lower end of the full year earnings guidance of $1.60 a share to $1.80 a share, excluding transaction costs and one-time charges. Analysts are expecting earnings of $1.60 a share.

"Additionally, several factors, including the pending outcome of the ADVO litigation and continuing negotiations of the remaining FSI business to be contracted for 2007, suggest that now is not the best time to provide 2007 EPS guidance. At the same time, we believe existing contracts and those currently in negotiation are expected to lead to a pricing decline next year, similar to the one experienced in 2006, which is approximately 10 percent," the company added.

Third-quarter operating income fell 31.1% from a year ago to $23.1 million, and operating margin dropped 330 basis points to 9.3%.

Shares of Valassis were trading up 11 cents at $16.92 Thursday.

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