Berlitz International Reports Results for 1999 First Quarter.

PRINCETON, N.J.--(BUSINESS WIRE)--May 14, 1999--

Berlitz International, Inc. (NYSE: BTZ) ("Berlitz" or the "Company") announced sales of $104.4 million for the quarter ended March 31, 1999, a 0.3% decrease from 1998 sales of $104.7 million. Operating profit (before intangible amortization) was $3.6 million, down $4.0 million from the prior year. The Company reported a net loss before extraordinary item of $2.7 million in 1999, compared with break-even net income in 1998. Both basic and diluted loss per share for the 1999 first quarter, before extraordinary item, were $0.28, compared with a break-even earnings per share in 1998. After giving effect to an extraordinary loss from the extinguishment of debt in March 1999, Berlitz reported a net loss of $4.8 million, or $0.51 per share, for 1999.

As of January 1, 1999, the Company reorganized into two separate autonomous business segments: (i) Language Services, including Language Instruction, Publishing, Franchising, Cross Cultural and ELS/BOC (i.e., ELS Educational Services, Inc. ("ELS") and Berlitz on Campus ("BOC"), both of which provide intensive English programs); and (ii) Berlitz GlobalNET (formerly Translation Services). Language Services is geographically organized into four operating divisions (North America, Asia, Latin America and Europe) while Berlitz GlobalNET is consolidated into three geographic divisions: the Americas (North and Latin Americas), Asia and Europe. The lines-of-business orientation is expected to increase operational efficiency on a global basis.

Language Services sales for the 1999 first quarter were $82.8 million, $1.8 million, or 2.1%, below the prior year. This decline reflects a reduction in ELS revenues of $2.7 million, unfavorable exchange rate fluctuations of $1.0 million (primarily against Latin American currencies) and a $0.5 million shortfall in Publishing (primarily due to lower direct response sales). These were partly offset by a $2.3 million, or 3.4%, increase in operating activity for Language Instruction due to average revenue per lesson increases in most countries. Within Language Instruction, total lesson volume increased 0.3% from the prior year, primarily as strength in Europe was offset by weakness in Asia.

Within Language Services, ELS' revenues declined 21.9% from the prior year, while BOC's revenues remained flat. Both ELS and BOC continue to be affected by weakened Asian student enrollments due to the economic conditions in the Far East. In addition, as a result of temporary transition problems associated with the relocation of the ELS headquarters from Los Angeles to Princeton in the latter part of 1998, ELS' overseas sales agents did not sell the ELS programs as aggressively in the latter months of 1998. This impacted student arrivals during the first quarter of 1999. ELS has since taken a number of actions to resolve these problems, including filling vacant sales positions and articulating its new business plan to its agents. Consequently, ELS is beginning to see indications of improved sales relationships and effectiveness.

Berlitz GlobalNET sales for the quarter ended March 31, 1999 were $21.6 million, up 6.2% from the comparable period in 1998 excluding the favorable effect of exchange rate fluctuations of $0.3 million. This increase largely resulted from volume in certain European countries, as well as activity from two acquisitions in Poland and France which were completed during the second half of 1998. The increase was partially offset by a decline in Ireland due in part to delays by a client in the start up of certain major projects.

The Company's cost of services and products sold, and selling, general and administrative expenses for the 1999 first quarter were $100.8 million, an increase of $3.7 million, or 3.8%, from the prior year. As a percentage of sales, these combined costs rose to 96.5% in 1999 from 92.7% in 1998. This deterioration reflects a number of items, including: (i) a $1.3 million decline in operating profit (before intangible amortization) for ELS, where the percentage decline in revenues outpaced the percentage decline in certain costs; (ii) the impact of the sales shortfall in Publishing; (iii) increases in rent and salary related costs; and (iv) a $0.4 million decline in operating profit (before intangible amortization) for Berlitz GlobalNET due largely to lower sales in Ireland.

Interest expense on long-term debt for the three months ended March 31, 1999 decreased $1.0 million from the comparable prior year period, due to lower average interest rates and principal balances outstanding, as well as the extinguishment of debt in mid-March 1999. Interest expense on the new convertible debentures, placed in March 1999, was $0.4 million for the first quarter of 1999. "Other income, net" for the three months ended March 31, 1999 increased by $0.6 million over the prior year, primarily due to higher foreign exchange gains.

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 goodwill.

On March 11, 1999, in connection with the issuance of the 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. Consequently, in the first quarter of 1999, the Company recorded an extraordinary loss, net of tax benefit, of approximately $2.1 million, consisting of the interest rate swap's fair market value and existing unamortized deferred finance costs relating to the underlying debt.

"For a variety of reasons, including the Asian economic conditions and the timing of sales volume for Berlitz GlobalNET and Berlitz Publishing, we have not achieved our objectives in the first quarter of 1999", declared Mr. Hiromasa Yokoi, Vice Chairman, Chief Executive Officer and President of the Company. "However, I remain optimistic due to our strong management team, dedicated employees, and focus on strategic initiatives. I also see good, positive signs for Language Services as well as GlobalNET with better, more active business inquiries and orders toward the end of the first quarter."

For over 120 years, Berlitz has come to mean excellence in language services. Berlitz and its franchisees have more than 400 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. -0-

                     BERLITZ INTERNATIONAL, INC.
                   FINANCIAL HIGHLIGHTS (Unaudited)
           (Dollars in millions, except per share amounts)

                                                 Three months ended
                                                      March 31,
                                             ------------------------
                                                1999           1998
                                             ----------     ---------

Sales of services and products               $    104.4     $   104.7
                                             ----------     ---------

Costs and expenses:
   Cost of services and products sold              64.7          63.3
   Selling, general and administrative             36.1          33.8
   Amortization of publishing rights,
     excess of cost over net assets
     acquired, and other intangibles                4.3           4.3
   Interest expense on long-term debt               1.9           2.9
   Interest expense on convertible debentures       0.4            -
   Interest expense on notes to affiliates          0.6           0.5
   Other income, net                               (1.0)         (0.4)
                                             ----------     ---------
     Total costs and expenses                     107.0         104.4
                                             ----------     ---------

(Loss) income before income taxes, minority
interest and extraordinary item                    (2.6)          0.3

Income tax expense                                  0.2           0.2
Minority interest in subsidiary
  (loss) earnings                                  (0.1)          0.1
                                             ----------     ---------

(Loss) income before extraordinary item            (2.7)          0.0

Extraordinary loss from early
extinguishment of debt, net of
income tax benefit of $0.1                          2.1           0.0
                                             ----------     ---------

Net (loss) income                            $     (4.8)    $     0.0
                                             ==========     =========

Loss per share (basic and diluted):
  Loss before extraordinary item             $    (0.28)    $    0.00
  Extraordinary loss                              (0.23)         0.00
                                             ----------     ---------
  Loss per share                             $    (0.51)    $    0.00
                                             ==========     =========
Average number of shares (000's)                  9,530         9,530
                                             ==========     =========