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Merrill Corporation Reports Net Income Up $6.2 Million on 7% Revenue Growth

Press release from the issuing company

St. Paul, Minn.- Merrill Corporation, a global, diversified communications and document services provider, today announced net earnings for the fiscal third quarter ended October 31, 2003. Net income for the quarter ended October 31, 2003, improved $6.2 million to $1.5 million, compared to a $4.7 million net loss for the same period in the prior fiscal year. Revenue in the third quarter was $144 million, an increase of $9 million or 7 percent from the comparable prior year's quarter. The strong net income results were due largely to increased revenues and related gross profit. The loss in the prior year included $3.2 million of debt restructuring and other restructuring costs. The revenue increase was broad-based across our businesses and included the first quarter-over-quarter increase in Merrill's financial transaction revenues since fiscal 2001. Revenues continue to grow in Merrill's Real Estate, Brand Management and Document Management Services markets. While financial (investment company) services revenues increased slightly over the same period in the prior fiscal year, we are uncertain what impact the recent mutual fund difficulties will have on this market. "We saw the first upturn in nearly three years in our transaction revenues this quarter and continue to see revenue growth in most our other businesses. We believe we have turned a corner in the financial transaction market and most leading indicators are positive in this area. We experienced lower revenue growth in other areas like financial services. We are continuing to control costs and leverage resources to improve our bottom-line," said John Castro, CEO of Merrill Corporation. "We continue to identify and capitalize on growth opportunities in our diversified businesses." Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the fiscal quarter ended October 31, 2003, was $15.5 million, more than doubling the $7.6 million generated in the prior year's fiscal third quarter. EBITDA is a non-GAAP (Generally Accepted Accounting Principles) financial measure that is commonly used in the industry to assist investors in the understanding of operating results. Certain covenants of the corporation's debt agreements are also based on calculations of EBITDA. As such, EBITDA is an important performance measure to our lenders and investors. Revenue for the nine months ended October 31, 2003 was $451 million, a decrease of $6 million or 1 percent from the first nine months in the prior fiscal year. Net income for the nine months ended October 31, 2003 was $7.7 million, compared to $ 3.6 million for the first nine months in the prior fiscal year. EBITDA for the nine months ended October 31, 2003 was $53.5 million, a 12 percent increase from the $47.6 million in the prior fiscal year's first nine months.