Vertis Reports 2007 Fourth Quarter and Full-Year Results

-- Adjusted EBITDA of $131.9 Million Exceeds Previous Guidance

-- Operational Turnaround Continues On-Track

-- Management Reviewing Financial Restructuring Options
BALTIMORE--(Business Wire)--
Vertis Communications ("Vertis" or the "Company"), a leading
provider of targeted advertising, media and marketing solutions,
announced today results for the three and twelve months ended December
31, 2007.

Revenue

Revenue for the fourth quarter of 2007 was $383.0 million versus
$415.6 million in the fourth quarter of 2006. The 7.8 percent decline
primarily reflects the expected changes in the Advertising Inserts
segment driven by reduced volume and lower paper costs which resulted
in lower revenues. The overall product mix in the segment was
favorable for the quarter, which helped to offset the volume decline.
Revenue in the Direct Mail segment was up over 9 percent for the
quarter and reflects strong quarter-over-quarter volume growth, albeit
at slightly lower pricing due to product mix.

On a year-to-date basis, revenue was $1,365.2 million, a decrease
of $103.5 million or 7 percent, from revenue of $1,468.7 million in
2006. Consistent with our overall expectations, the decrease was
driven by similar revenue declines as seen in the fourth quarter in
Advertising Inserts and our "Other" segment (Premedia and Media),
which were somewhat offset by revenue growth in Direct Mail.

Net Loss

During the fourth quarter, the Company performed an evaluation on
its $246.5 million in goodwill. The Company concluded that, based on
several factors, the goodwill was impaired and that the entire balance
be written-off as a non-cash charge in the fourth quarter. As a
result, the net loss during the quarter grew to $257.0 million from
net income of $18.5 million in the same quarter one year ago. In
addition, the 2006 fourth quarter included the gain on sale from
discontinued operations of approximately $21.4 million. Through
December 31, 2007, the net loss was also substantially impacted by the
impairment charge. The remaining increase in net loss for the year
compared to 2006 was driven by the expected volume declines in
Advertising Inserts offset by improved pricing, which includes
product, customer and equipment mix. Also driving the increase was an
improvement in Direct Mail volume. Additionally, the Company continued
its overall company wide investment in lean and continuous improvement
aimed at improving productivity and performance as well as upgrading
quality and customer service, which resulted in increase costs.

Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA")

EBITDA in the fourth quarter of 2007 declined to $(206.3) million
from $44.5 million for the same period in 2006. This decrease is
primarily the result of the non-cash write-off of goodwill in the
amount of $246.5 million. Adjusted EBITDA was $44.4 million in the
fourth quarter of 2007, a decline of $7.5 million, or 14 percent, from
Adjusted EBITDA of $51.9 million in the same quarter of 2006. This
decline was largely due to the volume, pricing and costs factors
mentioned above.

On a year-to-date basis, EBITDA declined to $(134.1) million in
2007 versus $142.0 million for the same period in 2006. Adjusted
EBITDA amounted to $131.9 million for the year of 2007 versus $169.4
million in 2006.

See below for a reconciliation of EBITDA and Adjusted EBITDA to
loss from continuing operations before cumulative effect of accounting
change, which is the most comparable measure under accounting
principles generally accepted in the United States ("GAAP").

Cash and Liquidity

The Company ended the year with $6.2 million in cash and debt of
$1,152.6 million. In addition, the off-balance sheet accounts
receivable facility stood at $130.0 million. The Company ended the
year with $52.6 million available under its $250 million senior credit
facility. At December 31, 2007, the last 12-month Adjusted EBITDA
calculated for covenant purposes was $131.9 million or $6.9 million
above the minimum requirement.

Additional information on the results discussed above will be
available in the Company's Annual Report on Form 10-K when filed with
the Securities and Exchange Commission.

Turnaround and Restructuring

The Company implemented a turnaround plan in early 2007 involving
new management and a multi-faceted turnaround strategy that includes
1) gaining a better understanding of customer's expectations and a
commitment to exceed those expectations via our Customers Delight
Initiatives; 2) establishing a platform of operational excellence
driving improved quality, service and efficiency via a re-engineered
manufacturing system based on lean and six sigma; and 3) enhancing
management processes throughout the Company.

The turnaround initiatives are beginning to show results, one of
which includes the regaining of more than 100 customers who had
previously stopped doing business with Vertis. In addition, we have
reduced excess capacity, reduced overhead, as well as enhanced
customer service, quality and efficiency. A brief update on the
Company's turnaround progress will be provided on the conference call.

The Company is now focused on the next phase of its turnaround
which is establishing a capital structure to sustain long term
stability and growth. The Company has retained a financial advisor
Lazard Ltd. to help develop and implement this phase of its
restructuring plan. The Company's Board of Directors has authorized
management and its financial advisors to evaluate the Company's
existing capital structure and consider various options to strengthen
its balance sheet including potential mergers combined with a debt
exchange as well as other alternatives.

Management Comments

Mike DuBose, chairman and chief executive officer commented, "Our
financial results as measured by Adjusted EBITDA for the first twelve
months of the Vertis turnaround were in excess of our most recent
guidance and only slightly below our very initial assessment. Even
more important, the key components of the turnaround plan we put in
place one year ago are meeting our expectations via improved
operational efficiency, improved quality, management process
development and customer recapture."

As we enter the next phase of our turnaround, our success to date
and our commitment to the long term stability and growth of Vertis
should clearly signal to our customers, employees, and business
partners that Vertis is taking prudent steps to ensure we have the
right plan going forward," DuBose said. "As always, we will review all
options available to us. This is an important time in the history of
the Company and we intend to ensure the decisions made today best
position the Company for tomorrow and the years ahead."

Conference Call

Vertis will be holding a conference call on Monday, March 31, 2008
at 2:00 p.m. EDT, to discuss earnings for the three and twelve months
ended December 31, 2007. Mike DuBose, chairman and chief executive
officer, will host the conference call at 800.462.3053 or
1.706.902.2200 for international callers, and the passcode
confirmation is 40781664. A recording of the call will be available
for review for one week at 800.642.1687 or 1.706.645.9291 for
international callers.

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Attachments

Financial Highlights
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
Condensed Consolidated Balance Sheets
Condensed Consolidated Statement of Operations
Condensed Consolidated Statement of Cash Flows
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Financial Highlights

Following is a summary of Vertis' results for the three and twelve
months ended December 31, 2007 and 2006.

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Vertis, Inc.
----------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
(Dollars in millions) 2007 2006 2007 2006
--------- -------- --------- ---------

Revenue $ 383.0 $415.6 $1,365.2 $1,468.7

Loss from continuing operations
before cumulative effect of
accounting change (1) $(256.9) $ (3.6) $ (326.5) $ (47.8)

Net Loss (1) $(257.0) $ 18.5 $ (326.8) $ (26.2)

EBITDA (1) $(206.3) $ 44.5 $ (134.1) $ 142.0

Adjusted EBITDA $ 44.4 $ 51.9 $ 131.9 $ 169.4

(1) Includes a $246.5 million non-cash impairment charge in 2007 to
reflect the impairment of goodwill in each of the Company's reporting
units.
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For definitions of EBITDA and Adjusted EBITDA, see "Reconciliation
of Non-GAAP Financial Measures to GAAP Financial Measures" below.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures

The following table reconciles the differences between Vertis'
loss from continuing operations before cumulative effect of accounting
change as determined under GAAP, EBITDA and Adjusted EBITDA.

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Vertis, Inc.
----------------------------------------------------------------------
Three Months Twelve Months
Ended Ended
December 31, December 31,
--------------- ----------------
(Dollars in millions) 2007 2006 2007 2006
-------- ------ -------- -------

Loss from continuing operations
before cumulative effect of
accounting change $(256.9) $(3.6) $(326.5) $(47.8)
Add:
Interest expense, net 34.2 32.4 134.6 131.0
Tax expense (benefit) 0.1 - 0.4 -
Depreciation and amortization 16.3 15.7 57.4 58.8
-------- ------ -------- -------

EBITDA $(206.3) $44.5 $(134.1) $142.0
Add:
Restructuring charges 2.1 3.8 10.9 16.0
Non-cash goodwill impairment 246.5 - 246.5 -
Loss on sale of accounts receivable 1.7 1.8 6.8 6.5
(Gain) loss on sale of property,
plant & equipment (2.6) 1.9 (1.2) 2.5
Management fees (non-cash) 0.4 - 1.3 -
Other 2.6 (0.1) 1.7 2.4
-------- ------ -------- -------

Adjusted EBITDA $44.4 $51.9 $131.9 $169.4
======== ====== ======== =======
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Note:

EBITDA represents the sum of loss from continuing operations
before cumulative effect of accounting change, net interest expense,
income taxes, depreciation and amortization of intangible assets.
Adjusted EBITDA is used in calculating covenant compliance under the
Company's credit agreements. Adjusted EBITDA is defined as EBITDA
excluding restructuring charges and certain non-cash charges as well
as fees on our Accounts Receivable facility. EBITDA and Adjusted
EBITDA are not measures of financial performance in accordance with
GAAP. You should not consider them as alternatives to loss from
continuing operations before cumulative effect of accounting change as
a measure of operating performance. Our calculation of EBITDA and
Adjusted EBITDA may be different from the calculations used by other
companies and therefore comparability may be limited. We present
EBITDA to provide additional information regarding our performance and
because it is a measure by which we gauge our profitability. In
addition, information concerning Adjusted EBITDA is being presented
because it reflects important components included in the financial
covenants of the Company's credit agreements. The most comparable
measure to EBITDA and Adjusted EBITDA in accordance with GAAP is loss
from continuing operations before cumulative effect of accounting
change.

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Vertis, Inc. and Subsidiaries
Consolidated Balance Sheets

In thousands, except per share amounts
----------------------------------------------------------------------

As of December 31, 2007 2006

ASSETS
Current Assets:
Cash and cash equivalents $ 6,217 $ 5,710
Accounts receivable 84,267 139,426
Inventories 42,776 48,227
Maintenance parts, net 20,291 22,292
Prepaid expenses and other current assets 10,366 8,578
------------ -----------
Total current assets 163,917 224,233
Property, plant and equipment, net 328,026 330,039
Goodwill - 246,260
Deferred financing costs, net 9,629 14,838
Other intangible assets 2,659 4,219
Other assets, net 23,935 25,097
------------ -----------
Total assets $ 528,166 $ 844,686
============ ===========

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Accounts payable $ 136,758 $ 186,638
Compensation and benefits payable 39,733 34,755
Accrued interest 13,889 14,300
Current portion of long-term debt 165,454 5
Other current liabilities 25,784 29,062
------------ -----------
Total current liabilities 381,618 264,760
Due to parent 3,277 3,491
Long-term debt 987,118 1,096,036
Other long-term liabilities 31,236 30,482
------------ -----------
Total liabilities 1,403,249 1,394,769
------------ -----------

Stockholder's deficit:
Common stock - authorized 3,000 shares;
$0.01 par value; issued
and outstanding 1,000 shares
Contributed capital 409,689 409,689
Accumulated deficit (1,279,960) (953,090)
Accumulated other comprehensive loss (4,812) (6,682)
------------ -----------
Total stockholder's deficit (875,083) (550,083)
------------ -----------
Total liabilities and stockholder's
deficit $ 528,166 $ 844,686
============ ===========

See Notes to Consolidated Financial Statements.
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Vertis, Inc. and Subsidiaries
Consolidated Statements of Operations

In thousands
----------------------------------------------------------------------

Year Ended December 31, 2007 2006 2005

Revenue $1,365,154 $1,468,661 $1,470,088
----------- ----------- -----------
Operating expenses:
Costs of production 1,081,612 1,160,392 1,140,582
Selling, general and
administrative 152,524 142,916 149,395
Goodwill impairment 246,527
Restructuring charges 10,912 16,001 17,119
Depreciation and amortization of
intangibles 57,356 58,788 62,829
----------- ----------- -----------
Total operating expenses 1,548,931 1,378,097 1,369,925
----------- ----------- -----------
Operating (loss) income (183,777) 90,564 100,163
----------- ----------- -----------
Other expenses:
Interest expense, net 134,644 131,023 128,821
Other, net 7,685 7,337 7,653
----------- ----------- -----------
Total other expenses 142,329 138,360 136,474
----------- ----------- -----------

Loss from continuing operations
before income taxes and cumulative
effect of accounting change (326,106) (47,796) (36,311)
Income tax expense (benefit) 388 (1) (8,070)
----------- ----------- -----------
Loss from continuing operations
before cumulative effect of
accounting change (326,494) (47,795) (28,241)

Discontinued operations:
(Loss) income from discontinued
operations (251) 21,600 (143,389)
----------- ----------- -----------
Loss before cumulative effect of
accounting change (326,745) (26,195) (171,630)

Cumulative effect of accounting
change -- -- (1,600)
----------- ----------- -----------

Net loss $ (326,745) $ (26,195) $ (173,230)
=========== =========== ===========

See Notes to Consolidated Financial Statements.
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Vertis, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
In thousands
----------------------------------------------------------------------
Year Ended December 31, 2007 2006 2005

Cash Flows from Operating Activities:
Net loss $(326,745) $(26,195) $(173,230)
Adjustments for discontinued
operations 251 (21,600) 143,389
---------- --------- ----------
Net loss from continuing operations (326,494) (47,795) (29,841)
Adjustments to reconcile net loss
from continuing operations to net
cash provided by continuing
operating activities:
Depreciation and amortization 57,356 58,788 62,829
Amortization of deferred financing
costs 7,193 6,306 7,265
Accretion of long-term debt
discounts 3,962 3,961 3,961
Goodwill impairment 246,527
Gain on sale leaseback (2,940)
Cumulative effect of accounting
change 1,600
Provision for doubtful accounts 463 942 1,544
Other, net 1,707 2,544 1,532
Changes in operating assets and
liabilities (excluding effect of
acquisitions and dispositions):
Decrease (increase) in accounts
receivable 54,632 9,078 (7,537)
Decrease (increase) in inventories 5,451 5,211 (10,664)
Decrease (increase) in prepaid
expenses and other assets 441 2,234 (5,574)
Decrease in accounts payable and
other liabilities (30,551) (28,033) (19,263)
---------- --------- ----------
Net cash provided by continuing
operating activities 17,747 13,236 5,852
---------- --------- ----------
Net (loss) income from discontinued
operations (251) 21,600 (143,389)
Change in net assets of discontinued
operations held for sale (23,146) 143,230
---------- --------- ----------
Net cash used in discontinued
operations (251) (1,546) (159)
---------- --------- ----------
Net cash provided by operating
activities 17,496 11,690 5,693
---------- --------- ----------
Cash Flows from Investing Activities:
Capital expenditures (63,914) (46,936) (40,165)
Software development costs
capitalized (1,303) (2,049) (2,032)
Proceeds from sale of property, plant
and equipment 576 785 1,021
Proceeds from sale leaseback
transaction 10,691
Acquisition of business, net of cash
acquired (203) (21,017) (3,430)
Proceeds from sale of discontinued
operations, net 1,000 41,071 2,361
Investing activities of discontinued
operations (1,520)
---------- --------- ----------
Net cash used in investing activities (53,153) (28,146) (43,765)
---------- --------- ----------
Cash Flows from Financing Activities:
Net borrowings under revolving credit
facilities 2,574 41,470 21,197
Borrowing under term loan 50,000
Repayments of long-term debt (34) (6)
Deferred financing costs (1,982) (388) (1,204)
(Decrease) increase in outstanding
checks drawn on controlled
disbursement accounts (14,328) (21,807) 15,030
Dividends to parent (4)
(Advances to) distributions from
parent (214) (480) 1,150
Financing activities of discontinued
operations 1,546 3,169
---------- --------- ----------
Net cash provided by financing
activities 36,050 20,307 39,332
Effect of exchange rate changes on cash 114 31 (2,070)
---------- --------- ----------
Net increase (decrease) in cash and
cash equivalents 507 3,882 (810)
Cash and cash equivalents at beginning
of year 5,710 1,828 2,638
---------- --------- ----------
Cash and cash equivalents at end of
year $ 6,217 $ 5,710 $ 1,828
========== ========= ==========

See Notes to Consolidated Financial Statements.
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About Vertis Communications

Vertis Communications is a premier provider of print advertising
and direct marketing solutions to America's leading retail and
consumer services companies. Vertis delivers marketing programs that
create strategic value for clients by using proprietary customer
research, database targeting technologies, premedia and media
services, combined with its world-class printing expertise.
Headquartered in Baltimore with over 100 locations in the U.S., Vertis
Communications has been recognized as one of Fortune magazine's "Most
Admired Companies" in advertising and marketing. For more information,
visit www.vertisinc.com.

This press release and conference call may contain forward-looking
statements. The words "believes, "anticipates, "expects, "estimates,
"plans, "intends," and similar expressions are intended to identify
forward-looking statements. All forward-looking statements are subject
to a number of risks and uncertainties that could cause actual results
to differ materially from projected results. Factors that may cause
these differences include fluctuations in the cost of raw materials we
use, changes in the advertising, marketing and information services
markets, the financial condition of our customers, actions by our
competitors, changes in the legal or regulatory environment, general
economic and business conditions in the U.S. and other countries, and
changes in interest and foreign currency exchange rates.

Consequently, you should consider any such forward-looking
statements only as our current plans, estimates, and beliefs. Even if
those plans, estimates, or beliefs change because of future events or
circumstances, we decline any obligation to publicly update or revise
any such forward-looking statements.

Sitrick
Brenda Adrian, 212-573-6100
or
Vertis Communications
Grace Platon, 800-365-8957

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