Sales Down 55% Over 1st Quarter '98; Positive Income From Operations ---------------------------------------------------------------------- MIAMI--(BUSINESS WIRE)--May 24, 1999--Vitech America, Inc. (Nasdaq:VTCH), a leading US-based manufacturer and direct marketer of computer and integrated computing solutions in Brazil, today reported financial results for the first quarter ended March 31, 1999. Vitech reported sales of $15.3 million and a net loss of $22.7 million, including a total of $22.9 million of foreign currency exchange losses, interest expense and discount on sale of receivables, or ($1.55) per share, compared to sales of $33.8 million and net income of $3.1 million, or $0.25 per share assuming dilution, in the first quarter of 1998. William C. St. Laurent, president and COO of Vitech America, commented: "The economic crisis in Brazil and the chaos that followed significantly impacted our business. The first quarter of 1999 was a challenging period for Vitech, and resulted in the first loss in the history of our Company." Sales were adversely affected by several factors during the quarter, including the devaluation of the Real, Vitech's need to renegotiate contracts with government and corporate customers on outstanding orders, and the first-quarter sales cycle, which is typically the slowest in the PC business. Mr. St. Laurent continued, "In January, an economic crisis struck Brazil. The currency crisis and devaluation had a negative effect on our balance sheet and income statement for the first quarter of 1999. Virtually all of our assets decreased in value in dollar terms. We experienced large foreign exchange losses. However, one of the benefits going forward is that our Real denominated overhead and labor costs have decreased in U.S. dollars in virtue of the devaluation, creating a lower-cost structure. Our sales prices have also been adjusted upward to maintain the U.S. dollar pre-devaluation prices, which should yield better operating margins for the Company. "There are many reported indications of a recovery in the Brazilian economy," Mr. St. Laurent continued. "The Real has partially rebounded and stabilized, there has been a steady decline in interest rates, the International Monetary Fund has delivered a portion of its promised $41.5 billion, and the Brazilian market has risen 32% (in dollar terms). Also, some market participants are acutely feeling the effects of the crisis; some have discontinued operations. While we are dissatisfied with our first quarter performance, relatively speaking, we weathered the crisis well. The implementation of the needed changes in Brazil's economic policies is underway and we remain positive about Brazil's ability to achieve sustainable growth. Our business is positioned to improve as 1999 progresses, and we are encouraged about our future prospects," Mr. St. Laurent concluded. Vitech's future growth plan is to enhance product and service offerings, focusing on three areas: integrated products, using those integrated products in its own operation to improve efficiency and enhance quality, and leveraging the Microtec premium brand name to sell these higher-end product and service offerings. The Company is developing PC-based products that go beyond the hardware offering to solve customer problems and selling these products directly to the corporate and government sectors. These two market sectors have continued their pursuit of leading-edge technology solutions with IT spending as a key part of their strategies to attain their goals of fiscal austerity, improved services and competitiveness. About Vitech America Vitech America, Inc. is a U.S.-headquartered manufacturer and direct marketer of its own brand name personal computers, business systems integration and networking equipment, servers and related products in Brazil under the names: Microtec(tm), Vision(tm), Mythus(tm), Quest(tm), Spalla(tm), and Vesper(tm). The Company's national sales force sells direct to corporate, government, individual and Small Office/Home Office (SoHo) customers throughout Brazil. Vitech is the low-cost producer of high quality Microsoft(R)- and Intel(R)-based systems offering complete solutions from low-end Pentium workstations to high-end integrated networks powered by multi-processor superservers. In addition, Vitech's Systems Integration Group designs, installs and provides ongoing services for local-area (LAN) and wide-area (WAN) networks. Except for the historical information herein, the matters discussed in this press release include forward-looking statements that may involve a number of risks and uncertainties. Future results may vary significantly based on a number of factors, including, but not limited to, risks in market acceptance of new products and continuing product demand, the impact of competitive products and pricing, changing economic conditions, both here and in Brazil and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission. Vitech America, Inc. Summary of Operation (Unaudited) Three Months Ended March 31, 1999 1998 ---- ---- Sales $ 15,302,714 $ 33,774,644 Cost of sales 8,359,136 20,707,324 Gross profit 6,943,578 13,067,320 SG&A 6,743,260 7,137,360 Foreign currency exchange losses 16,656,880 1,125,673 Operating income 200,318 5,929,960 Net income (loss) (22,722,258) 3,106,500 Earnings (loss) per share - basic (1.55) 0.26 Earnings (loss) per share - diluted (1.55) 0.25 Weighted average number of shares outstanding - diluted 14,670,538 12,407,005 Vitech America, Inc. Summary Balance Sheet March 31, 1999 December 31, 1998 (Unaudited) Assets Current assets Cash & cash equivalents $ 4,797,353 $ 7,719,185 Accounts receivable 39,747,775 75,893,857 Inventories 32,688,694 40,351,585 Other current assets 5,128,838 23,214,964 ---------- ---------- Total current assets 82,362,660 147,179,591 ---------- ---------- Goodwill 19,918,156 20,191,646 Property, plant & equipment 19,474,114 19,696,097 Other assets 4,921,069 8,599,641 ---------- ---------- Total assets $ 126,675,999 $ 195,666,975 ================================== Liabilities & Shareholders' Equity Current liabilities Accounts payable $ 33,056,101 $ 36,748,951 Notes payable - related party 17,200,000 6,700,000 Short-term debt 14,403,501 25,036,536 Accrued expenses 1,579,667 4,811,130 Other liabilities 2,772,902 3,708,813 ---------- ---------- Total current liabilities 69,012,171 77,005,430 Convertible notes 11,530,535 13,730,535 Long-term debt 2,143,102 2,709,655 Total shareholders' equity 43,990,191 102,221,355 ---------- ---------- Total liabilities & shareholders' equity $ 126,675,999 $ 195,666,975 =====================================  