Berlitz International Reports Results for Fourth Quarter and Full Year 1998.

PRINCETON, N.J.--(BUSINESS WIRE)--March 5, 1999--Berlitz International, Inc. (NYSE: BTZ) ("Berlitz" or the "Company") announced sales of $109.7 million for the quarter ended December 31, 1998, a 2.0% increase over 1997 sales of $107.6 million. Operating profit (before intangible amortization) of $9.6 million, down $0.2 million from the prior year, was affected by economic conditions in Asia. Fourth quarter net income was $0.4 million in 1998, down from $2.4 million in 1997. This decrease primarily reflected higher expenses associated with fixed asset disposals for language center relocations, non-operating taxes, foreign exchange losses and income taxes. Both basic and diluted earnings per share for the fourth quarter were $0.05 in 1998 compared to $0.25 for 1997.

Berlitz's sales for the twelve months ended December 31 were $436.3 million in 1998, 9.8% higher than sales of $397.2 million in 1997. Total year income before extraordinary item was $2.1 million in 1998, compared with $5.4 million in the prior year. This decrease primarily reflected the effects in 1998 of increased intangible amortization and interest expense associated with the August 1997 acquisition of ELS Educational Services, Inc. ("ELS"), partially offset by higher operating profit before intangible amortization. Both basic and diluted earnings per share in the full year period, before extraordinary item, were $0.22 in 1998 compared to $0.56 for 1997. For the 1997 twelve-month period, the Company reported a net loss of $0.9 million, or a loss per share of $0.10, after giving effect to a $6.3 million extraordinary loss from the early extinguishment of debt.

Revenues for the full year 1998 included twelve months of ELS results totalling $53.4 million, as compared to only post-acquisition revenues of $19.9 million for ELS in 1997. In addition, results for most of 1998 were affected by strength in the U.S. dollar against virtually all foreign currencies, most significantly the Japanese yen, Mexican peso, Irish punt, Brazilian real, Colombian peso and German mark. Consequently, exchange rate fluctuations had a negative impact on revenues of $0.4 million and $17.5 million, respectively, on the fourth quarter and year-to-date comparisons with the prior year.

Language Instruction sales for the 1998 fourth quarter were $83.0 million, 1.1% below the prior year. This decrease was primarily the result of reduced intensive English program revenues originating from Asia, offset by improved operating activity in all other geographic areas and in traditional language instruction in Japan. Exchange rate fluctuations had a negative impact of $0.4 million during the quarter, primarily reflecting unfavorable exchange rate fluctuations in Latin America which were partly offset by positive exchange rate fluctuations in most European countries. For the twelve months ended December 31, 1998, Language Instruction sales were $335.5 million, 12.5% above 1997. The year-to-date fluctuations primarily resulted from increased volume and average revenues per lesson and a full year of ELS' results, partly offset by reduced intensive English program revenues originating from Asia and unfavorable exchange rate fluctuations of $14.1 million. Lesson volume in the fourth quarter was approximately 1.4 million in 1998, flat with 1997, while year-to-date lesson volume was approximately 5.8 million for 1998, up 5.0% from 1997.

Translations sales for the quarter ended December 31, 1998 were $22.7 million, up 11.0% from the comparable period in 1997. This increase largely resulted from cyclical volume from certain customers in the United States and certain European countries, as well as activity from two acquisitions in Poland and France which were completed during the second half of 1998. Exchange rate fluctuations did not materially impact revenues for the quarter. For the full year period, Translations sales were $84.8 million in 1998, 0.7% higher than in 1997. Excluding the effects of unfavorable exchange rate fluctuations, full year revenues grew 4.6%.

Publishing sales were $3.4 million for the 1998 fourth quarter, compared with $3.0 million during the same period in 1997. For the twelve months ended December, revenues were $14.8 million in 1998, compared with $13.6 million in 1997. Exchange rate fluctuations were not significant in either the quarter or year-to-date periods.

The Company's cost of services and products sold, and selling, general and administrative expenses for the 1998 fourth quarter were $100.1 million, an increase of $2.3 million, or 2.4%, from the prior year. For the year-to-date period, these costs aggregated $396.0 million in 1998, an increase of $36.1 million, or 10.0%, from 1997. As a percentage of sales, these combined costs for the both the fourth quarter and year-to-date periods increased slightly from the prior year due to lower margins in the Instruction segment, particularly for intensive English programs and in Japan, which were partly offset by improved margins in the Translations segment.

Amortization of intangibles increased from the prior year's twelve month period by $3.1 million, primarily as a result of higher intangible assets arising from the ELS acquisition. Additionally, interest expense on long-term debt rose $2.4 million from the prior year-to-date period due to higher borrowings outstanding under the Company's refinanced August 1997 credit facility. "Other expense, net" increased from the prior year due largely to higher foreign exchange losses, losses on disposal of fixed assets and non-operating taxes.

The Company's effective tax rates in both 1998 and 1997 were above the U.S. statutory Federal tax rate primarily as a result of nondeductible charges related to the amortization of goodwill.

"1998 was a year of challenge but also of success and celebration", declared Mr. Hiromasa Yokoi, Vice Chairman, Chief Executive Officer and President of the Company. "Although we've seen economic slowdowns in many parts of the world, management has continued to successfully implement cost control measures and to explore new business initiatives to improve revenue and earnings growth. Consequently, we've achieved record levels of revenues, operating profits (before intangible amortization) and lesson volume."

"In 1998, we proudly celebrated 120 years of business history while building the foundation for future growth", continued Mr. Yokoi. "We reached the end of our first five-year plan and began preparation of the next five-year strategic initiative. We've positioned ELS and Berlitz on Campus for future growth by relocating ELS' corporate headquarters to Princeton and by taking steps to reduce its fixed cost structure to fully integrate it into Berlitz. Effective January 1, 1999, we reorganized the Company into two separate autonomous business segments (Language Services, which includes Language Instruction and Publishing, and Translation Services) to increase operational efficiency on a global basis. Finally, our expected investment relationship with Apollo Management IV, L.P. will add an important perspective as new directions are considered and will provide us with capital to appropriately invest in our business and spur growth. Management remains strongly committed to maintaining our position as the leader in language and translation related services."

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    Twelve months ended
                               December 31,           December 31,
                            ------------------------------------------
                              1998       1997        1998       1997
                            ------------------------------------------

Sales of services and
 products                   $ 109.7    $ 107.6     $ 436.3    $ 397.2
                            -------    -------     -------    -------
Costs and expenses:
   Cost of services and
    products sold              65.0       64.5       258.9      236.5
   Selling, general and
    administrative             35.1       33.3       137.1      123.4
   Amortization of
    publishing rights,
    excess of cost over
    net assets acquired,
    and other intangibles       4.3        4.4        17.3       14.2
   Interest expense on
    long-term debt              2.7        3.0        10.9        8.5
   Interest expense to
    affiliate                   0.6        0.5         2.2        2.1
   Other expense (income),
    net                         1.3       (0.4)        2.2       (0.6)
                            -------    -------     -------    -------
      Total costs and
       expenses               109.0      105.3       428.6      384.1
                            -------    -------     -------    -------

Income before income taxes,
 minority interest and
 extraordinary item             0.7        2.3         7.7       13.1

Income tax expense
 (benefit)                      0.5       (0.2)        5.7        7.1
Minority interest in
 subsidiary earnings
 (loss)                        (0.2)       0.1        (0.1)       0.6
                            -------    -------     -------    -------

Income before
 extraordinary item             0.4        2.4         2.1        5.4

Extraordinary loss from
 early extinguishment of
 debt, net of income tax
 benefit of $1.9                0.0        0.0         0.0        6.3
                            -------    -------     -------    -------

Net income (loss)           $   0.4    $   2.4     $   2.1    $  (0.9)
                            =======    =======     =======    =======

Income (loss) per share
 (basic and diluted):
   Income before
    extraordinary item      $  0.05    $  0.25     $  0.22    $  0.56
   Extraordinary loss          0.00       0.00        0.00      (0.66)
                            -------    -------     -------    -------
   Income (loss) per share  $  0.05    $  0.25     $  0.22    $ (0.10)
                            =======    =======     =======    =======
Average number of shares
 (000's)                      9,530      9,590       9,530      9,550
                            =======    =======     =======    =======