Berlitz International Reports Fourth Quarter and Full Year Results.

Business Editors

PRINCETON, N.J.--(BUSINESS WIRE)--March 24, 2000

Berlitz International, Inc. (NYSE: BTZ) ("Berlitz" or the "Company") announced sales of $111.2 million for the quarter ended December 31, 1999, up 5.0% from 1998 sales of $109.7 million after excluding $4.1 million of unfavorable exchange rate fluctuations.

Operating profit (before intangible amortization) for the third quarter was $7.6 million, down $2.0 million from the prior year. The quarter's net income before intangible amortization and cumulative effect of accounting change was $3.3 million for 1999, compared with $4.8 million in 1998. The Company reported a fourth quarter net loss of $1.3 million in 1999, compared with net income of $0.4 million in 1998. Both basic and diluted loss per share for the 1999 fourth quarter were $0.14, compared with income per share of $0.05 in 1998.

Year-to-date 1999 revenues were $446.2 million, up 4.2% from 1998 after excluding $8.4 million of unfavorable exchange rate fluctuations. Year-to-date operating profit (before intangible amortization) was $30.2 million, down $10.1 million from the prior year. Net income before intangible amortization, extraordinary item and cumulative effect change was $12.7 million for 1999, compared with $19.4 million in 1998. The Company reported a net loss before extraordinary item and a cumulative effect change of $5.3 million in 1999, compared with net income of $2.1 million in 1998. Both basic and diluted year-to-date loss per share for 1999, before extraordinary item and a cumulative change, were $0.56, compared with income per share of $0.22 in 1998. After giving effect to an extraordinary loss from the extinguishment of debt in March 1999, and the cumulative effect of a change in accounting for deferred revenues for lessons paid for but not expected to be taken, Berlitz reported a net loss of $13.1 million, or $1.37 per share, for 1999.

Fourth quarter 1999 revenues for the Language Services business segment (which includes Instruction, ELS/BOC, Publishing, Franchising, and Cross Cultural Sub-Segments), were $87.6 million, $0.4 million above prior year. Year-to-date Language Services revenues were $350.8 million, $1.3 million below prior year. For the quarter, a $6.3 million increase in operating activity for Instruction (including children's programs) was largely offset by reductions in ELS/BOC and Publishing revenues of $2.0 million and $0.7 million, respectively, and by unfavorable exchange rate fluctuations of $2.9 million. Instruction benefited primarily from average revenue per lesson and volume increases, while the unfavorable exchange rate fluctuations resulted from a strengthened dollar against Latin American and European currencies, which was partially offset by a weaker dollar against the Japanese yen. In the year-to-date period, a $16.2 million operating increase in Instruction (including children's programs) was more than offset by a reduction in ELS/BOC and Publishing revenues of $9.5 million and $1.8 million, respectively, and by unfavorable exchange rate fluctuations of $6.6 million. Fourth quarter and year-to-date Language Services lesson volume increased 5.3% and 2.8%, respectively, from the prior year, reflecting improvements in all geographic regions except North America.

ELS/BOC fourth quarter and year-to-date revenues declined 14.9% and 14.3%, respectively, from the prior year. ELS/BOC was affected by weakened Asian student enrollments due to the economic conditions in the Far East. Enrollments from Latin America were also down due to the economic instability in Venezuela and Brazil, and the increased strength of the dollar over the currencies in these countries. Aggressive pricing and agent commission structures by competitors also adversely affected results. ELS/BOC has taken actions to address these matters, including filling vacant sales positions and articulating its new business plan to its agents, monitoring and reducing overhead expenses, undertaking significant sales and promotional activities to inform new and existing sales agents about the new consolidated ELS Language Center network, and initiating a website project to support agent sales, direct marketing and relationship marketing efforts.

Berlitz GlobalNET quarter and year-to-date revenues were $23.4 and $95.4 million, respectively, up 9.2% and 15.4%, respectively, from comparable periods in 1998, excluding the unfavorable effect of exchange rate fluctuations. The results reflect strength in traditional business (such as for interpretation services), volume increases in certain Scandinavian countries, results from acquisitions in Poland and France which were completed during the second half of 1998, and acquisitions in the Americas completed in June and August 1999.

The Company's cost of services and products sold, and selling, general and administrative expenses for the 1999 fourth quarter and year-to-date periods were $103.5 million and $416.0 million, respectively. As a percentage of sales, these combined costs for the quarter rose to 93.1% in 1999 from 91.3% in 1998, while for the full year they were 93.2% in 1999 compared with 90.8% in 1998. This deterioration reflected a number of items, including: (i) a $0.6 million and $3.9 million shortfall in fourth quarter and year-to-date operating profits (before intangible amortization) for ELS/BOC, where the percentage decline in revenues outpaced the percentage reduction in certain costs; (ii) lower Berlitz GlobalNET profits arising from tighter margins on interpretation services with the U.S. government, investment in sales and technology resources, and integration costs associated with current year acquisitions, and (iii) increases in salary and related costs and other administrative costs.

On March 11, 1999, in connection with the issuance of convertible debentures and an affiliate note, the Company extinguished the long-term debt under its 1997 credit agreement (the "Bank Facility"). The Company also terminated its interest rate swap agreement, which hedged the floating rate Bank Facility, for a cash payment of approximately $1.1 million. As a result of these transactions, the Company's combined interest expense on long-term debt and convertible debentures for the 1999 fourth quarter and full year decreased $0.6 million and $2.5 million, respectively, from the prior year, due principally to a reduced effective interest rate. In addition, for year-to-date 1999, the Company recorded an extraordinary loss, net of tax benefit, of approximately $2.2 million, consisting of the interest rate swap's fair market value and existing unamortized deferred finance costs relating to the underlying debt.

The Company's effective tax rates in both 1999 and 1998 were above the U.S. statutory Federal tax rate primarily as a result of nondeductible charges related to the amortization of intangible.

As a result of its adoption of the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" as of January 1, 1999, the Company changed its method of recognizing income from deferred revenues on lessons paid for but not expected to be taken. The cumulative effect of the accounting change resulted in a charge to 1999 earnings of $5.6 million (net of income tax benefit of $2.9 million and minority interest expense of $0.2 million).

"Although 1999 results were below plan and prior year due to continued economic challenges in certain regions, I am optimistic about the future", stated Mr. Hiromasa Yokoi, Vice Chairman, Chief Executive Officer and President of the Company. "Our restructuring in 2000 into two subsidiary companies, Berlitz Language Services and Berlitz GlobalNET, the support and creativity of a strong management team, and initiatives commenced in 1999, such as our Berlitz Kids business, are all expected to position Berlitz for growth well into the new century."

For over 120 years, Berlitz has meant excellence in language services. Berlitz and its franchisees have more than 450 locations in over 50 countries worldwide offering language instruction, cross-cultural training, document translation, software localization and interpretation services. In addition, Berlitz offers a wide range of publishing products such as dictionaries, phrase books, travel guides and self-study language instruction materials including CD-ROMs and audiocassettes. For more information, please visit the Berlitz Web site at www.berlitz.com.

                                      Three months       Twelve months
                                        ended                ended
                                       December 31,       December 31,
                                    ----------------   ----------------
                                      1999     1998     1999     1998
                                    -------  -------   -------  -------

Sales of services and products      $ 111.2  $ 109.8   $ 446.2  $ 436.3
                                    -------  -------   -------  -------
Costs and expenses:
Cost of services and products sold     66.7     65.0     267.2    253.8
Selling, general and administrative    36.8     35.2     148.8    142.1
Amortization of publishing rights,
 excess of cost over net assets
 acquired, and other intangibles        4.7      4.3      18.0     17.3
Interest expense on long-term debt      0.1      2.7       2.0     11.0
Interest expense on convertible
  debentures                            2.0    -           6.4     -
Interest expense on notes to
 affiliates                             0.7      0.6       2.6      2.2
Other expense (income), net            (0.1)     1.3      (0.5)     2.2
                                    -------  -------   -------  -------
Total costs and expenses              110.9    109.1     444.5    428.6
                                    -------  -------   -------  -------

Income before income taxes, minority
 interest, extraordinary item and
 cumulative effect of accounting
 change                                 0.3      0.7       1.7      7.7


Income tax expense                     (2.2)    (0.5)     (7.7)    (5.7)
Minority interest in subsidiary
 loss                                   0.6      0.2       0.7      0.1
                                    -------  -------   -------  -------

(Loss) income before extraordinary
 item and cumulative effect of
 accounting change                     (1.3)     0.4      (5.3)     2.1

Extraordinary loss from
 extinguishment of debt, net             -        -       (2.2)    -
Cumulative effect of accounting
 change, net                             -        -       (5.6)
                                    -------  -------   -------  -------

Net (loss) income                   $  (1.3) $   0.4   $ (13.1) $   2.1
                                    =======  =======   =======  =======

(Loss) income per share (basic
and diluted):
(Loss) income before extraordinary
 item and cumulative effect of
 accounting change                  $ (0.14) $  0.05   $ (0.56) $  0.22
Extraordinary loss                      -        -       (0.22)    -
Cumulative effect of accounting
 change                                 -        -       (0.59)    -
                                    -------  -------   -------  -------
(Loss) income per share             $ (0.14) $  0.05   $ (1.37) $  0.22
                                    =======  =======   =======  =======
Average number of shares (000's)      9,530    9,530     9,530    9,530
                                    =======  =======   =======  =======