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Vertis Announces 2004 Earnings, Direct Mail Softens in Q4

Press release from the issuing company

Baltimore, MD -- Vertis, Inc. (“Vertis” or the “Company”), a leading provider of targeted advertising, media and marketing services, today announced results for the three and twelve months ended December 31, 2004. For the three months ended December 31, 2004, net sales were $449.1 million, or 0.6% above the fourth quarter of 2003. For the year ended December 31, 2004, net sales amounted to $1,645.1 million, a 3.7% increase from the year ended December 31, 2003. Excluding pass-through costs for paper and the impact of foreign exchange, revenue would have been down 3.0% in the fourth quarter and 0.6% on a full-year basis. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) amounted to $50.9 million and $131.5 million for the three and twelve months ended December 31, 2004, respectively. These amounts represent full-year declines of 13.6% and 23.9% versus EBITDA of $58.9 million and $172.7 million for the three and twelve months ended December 2003, respectively. Included in the full-year 2004 EBITDA is the $44.0 million non-cash loss from the termination of our interests in leveraged leases reported in the third quarter. The full-year 2003 EBITDA includes a $10.1 million recovery from a settlement of a legal proceeding in the first quarter. Restructuring and restructuring-related charges amounted to $4.1 million and $6.9 million for the three and twelve months ended December 31, 2004 compared to $8.6 million and $15.5 million in the comparable 2003 periods. Excluding all of these items, the decline in EBITDA would have been $12.5 million, or 18.5%, in the fourth quarter. For the full-year, EBITDA would have increased $4.3 million, or 2.4% on the same basis. Dean D. Durbin, President and Chief Financial Officer commented, “After posting strong performance in North America in the first nine months of 2004, this platform had a weaker than expected fourth quarter. After very strong volume growth through September 30, especially in our direct mail business, we experienced a softening in direct mail volume in the fourth quarter relative to the fourth quarter of 2003, and our pricing across the North American platform, which includes the impact of product, customer, and equipment mix changes, was also down in the quarter.” Mr. Durbin also noted, “In Europe, quarter-over-quarter EBITDA, excluding restructuring charges, declined $5.4 million, predominately due to a continuation of the poor direct mail business”. “On a full-year basis, our North American segment posted solid EBITDA growth driven by higher volume and lower costs which were partially offset by lower pricing and the difficult conditions in Europe. The latter reduced our EBITDA performance by nearly $9 million,” stated Mr. Durbin.