Berlitz International Reports Results for 2000 Second Quarter.

Business Editors

PRINCETON, N.J.--(BUSINESS WIRE)--August 14, 2000

Berlitz International, Inc. (NYSE: BTZ) ("Berlitz" or the "Company") announced sales of $119.4 million for the quarter ended June 30, 2000, up 9.8% from 1999 sales of $111.2 million after excluding $2.7 million of unfavorable exchange rate fluctuations. Operating profit (before intangible amortization) was $8.7 million, up $0.1 million from the comparable prior year period. The Company reported a second quarter net loss of $0.8 million in 2000, compared with a net loss of $0.3 million in 1999. Both basic and diluted loss per share for the 2000 second quarter were $0.8, compared with a loss per share of $0.3 in 1999.

Year-to-date revenues, were $232.0 million, up 10.3% from 1999 after excluding $5.9 million of unfavorable exchange rate fluctuations. Operating profit (before intangible amortization) was $16.0 million, up $3.8 million from the comparable prior year period. The Company reported a net loss before extraordinary item and cumulative effect of a change in accounting of $2.8 million in 2000, compared with a net loss of $2.9 million in 1999. Both basic and diluted year-to-date loss per share for 2000, before extraordinary item and a cumulative effect of a change in accounting, were $0.29, compared with a loss per share of $0.31 in 1999. 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 $10.6 million, or $1.12 per share, for 1999.

Second quarter 2000 revenues for the Language Services business segment (which includes the Instruction, ELS, Publishing, Franchising and Cross Cultural sub-segments) were $94.7 million, up 9.8% from the comparable period in 1999, after excluding $1.4 million of unfavorable exchange rate fluctuations. This increase reflects a $7.0 million increase in operating activity for Instruction and a $1.6 million increase in operating activity for other sub-segments. Year-to-date revenues were $183.1 million, up 9.4% from the comparable period in 1999, after excluding $3.4 million of unfavorable exchange rate fluctuations. This year-to-date increase reflects a $15.1 million increase in operating activity for Instruction and a $1.0 million increase in operating activity for other sub-segments. Instruction benefited from both volume increases and average revenue per lesson increases, while the unfavorable exchange rate fluctuation resulted from a strengthened dollar against European currencies, which was partially offset by a weakened dollar against the Japanese yen. Within Instruction, total second quarter and year-to-date lesson volume increased 6.4% and 7.6%, respectively, from the comparable prior year period, reflecting improvements in all geographic regions.

ELS second quarter and year-to-date revenues increased 20.2% and 7.6% from the comparable prior year period, primarily attributable to the launch of a 20 hour Semi-Intensive Program, the brand merger of ELS Language Centers and Berlitz on Campus Centers and the restructuring of operations resulting in the closing of five centers.

Berlitz GlobalNET second quarter and year-to-date revenues were $24.7 million and $48.9 million, respectively, up 9.7% and 13.7%, respectively, from the comparable period in 1999, after excluding $1.3 million and $2.5 million, respectively, of unfavorable exchange rate fluctuations. This increase largely came from Europe due primarily to an acquisition, completed in the last quarter of 1999 and strong volume in France and Ireland offset by a strong U.S. dollar against European currencies.

The Company's total cost of services and products sold, and selling, general and administrative expenses for the 2000 second quarter and year-to-date periods were $110.7 million and $216.0 million, respectively. As a percentage of sales, these combined costs for the quarter rose to 92.7% in 2000 from 92.3% in 1999 while year-to-date they were 93.1% in 2000 compared with 94.3% in 1999. The deterioration in the second quarter is primarily attributable to higher teacher salaries, whereas the improvement in the year-to-date results reflects an increase in business volume over the prior year as well as reduced costs from the closure of five ELS centers.

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. In addition, for year-to-date 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.

The Company's effective tax rates in both 2000 and 1999 were above the U.S. statutory Federal tax rate primarily as a result of nondeductible charges related to the amortization of intangibles.

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 the strong revenue growth we experienced in the 2000 first quarter has continued into the second quarter, our flat operating profit is evidence of the challenges we still face," stated Mr. James Kahl, Vice Chairman of the Company. "We are confident, however, that with the recently announced restructuring of the Company into two operating subsidiaries we will be better positioned to face these challenges so as to ensure the long-term growth and prosperity of the Company."

For over 120 years, Berlitz has meant 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.

(Financials follow)

                       Three months ended         Six months ended
                           June 30,                   June 30,
                      -----------------------   --------------------
                          2000         1999        2000       1999
                        ---------   --------    --------    -------

Sales of
services
and products          $     119.4  $   111.2  $    232.0  $   215.6
                        ---------    -------    --------    -------

Operating costs
and expenses:
 Cost of services
  and products sold          71.8       65.0       139.5      128.9
 Selling, general
  and administrative         38.9       37.6        76.5       74.5
 Amortization of
  publishing rights,
  excess of cost
  over net assets
  acquired, and other
  intangibles                 4.5        4.4         9.2        8.7
                        ---------    -------    --------    -------

Operating profit              4.2        4.2         6.8        3.5

   Interest expense           2.6        2.7         5.3        5.5
   Other expense, net         0.2        0.1         0.3       (0.9)
                        ---------    -------    --------    -------

Income (loss) before
 income taxes,
 minority interest,
 extraordinary
 item and
 cumulative effect of
 accounting change            1.4        1.4         1.2       (1.1)

Income tax expense           (2.1)      (1.8)       (3.8)      (2.0)
Minority interest
 in subsidiary
 (earnings) loss             (0.1)       0.1        (0.2)       0.2
                        ---------    -------    --------    -------

Loss before
extraordinary item           (0.8)      (0.3)       (2.8)      (2.9)

Extraordinary
 loss from early
extinguishment of
debt, net                  --         --          --           (2.1)
Cumulative effect
of accounting
 change, net               --         --          --           (5.6)
                        ---------    -------    --------    -------

Net loss              $      (0.8) $    (0.3) $     (2.8) $   (10.6)
                        =========    =======    ========    =======

Loss per share (basic
 and diluted):
 Loss before
  extraordinary item
  and cumulative effect
  of accounting change $  (0.08)  $   (0.03) $    (0.29) $   (0.31)
 Extraordinary loss         --         --          --        (0.22)
 Cumulative effect
   of accounting change      --         --          --        (0.59)
                        ---------    -------    --------    -------
  Loss per share      $     (0.08) $   (0.03) $    (0.29) $   (1.12)
                        =========    =======    ========    =======
Average number
of shares (000's)           9,546      9,530       9,546      9,530
                        =========    =======    ========    =======