UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1999

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
                        For the transition period from to

                         Commission File Number 1-10390

                           Berlitz International, Inc.
                           ---------------------------
             (Exact name of registrant as specified in its charter)

           New York                                            13-355-0016
           --------                                            -----------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)

              400 Alexander Park, Princeton, New Jersey 08540-6306
              ----------------------------------------------------
                    (Address of principal executive offices)

                                 (609) 514-9650
                                 --------------
               Registrant's telephone number, including area code

                                       N/A
               ---------------------------------------------------
               Former name, former address and former fiscal year,
                          if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

The number of shares outstanding of the registrant's common stock, at the close
of business on August 13, 1999, is 9,529,788.

                                  Page 1 of 36
<PAGE>

                          PART I. FINANCIAL INFORMATION
                          Item 1. FINANCIAL STATEMENTS

                           BERLITZ INTERNATIONAL, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                       FOR THE THREE MONTHS ENDED JUNE 30
                (Dollars in thousands, except per share amounts)

                                                          1999          1998
                                                        ---------    ---------
Sales of services and products                          $ 111,182    $ 107,509
                                                        ---------    ---------
Costs and expenses:
   Cost of services and products sold                      66,072       63,161
   Selling, general and administrative                     36,556       33,750
   Amortization of publishing rights, excess of cost
      over net assets acquired, and other intangibles       4,369        4,276
   Interest expense on long-term debt                          20        2,768
   Interest expense on Convertible Debentures
      with related parties                                  2,004           --
   Interest expense on notes to affiliates                    648          549
   Other expense, net                                          80          789
                                                        ---------    ---------
      Total costs and expenses                            109,749      105,293
                                                        ---------    ---------
Income before income taxes, minority
   interest in (loss) earnings of subsidiary, and
   extraordinary item                                       1,433        2,216

Income tax expense                                          1,811        1,479
Minority interest in (loss) earnings
   of subsidiaries                                            (60)          37
                                                        ---------    ---------
(Loss) income before extraordinary item                      (318)         700

Extraordinary loss from extinguishment
    of debt                                                     4           --
                                                        ---------    ---------

Net (loss) income                                       $    (322)   $     700
                                                        =========    =========

(Loss) income per share - basic and diluted
   (Loss) income before extraordinary item              $   (0.03)   $    0.07
   Extraordinary loss                                          --           --
                                                        ---------    ---------
   (Loss) income per share                              $   (0.03)   $    0.07
                                                        =========    =========

Average number of shares outstanding (000's)                9,530        9,530
                                                        =========    =========

See accompanying Notes to the Consolidated Financial Statements.


                                        2
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                        FOR THE SIX MONTHS ENDED JUNE 30
                (Dollars in thousands, except per share amounts)

                                                              1999        1998
                                                            --------    --------

Sales of services and products                              $215,544    $212,165
                                                            --------    --------

Costs and expenses:
   Cost of services and products sold                        130,789     126,397
   Selling, general and administrative                        72,587      67,581
   Amortization of publishing rights, excess of cost
      over net assets acquired, and other intangibles          8,722       8,615
   Interest expense on long-term debt                          1,873       5,617
   Interest expense on Convertible Debentures
      with related parties                                     2,435          --
   Interest expense on notes to affiliates                     1,236       1,091
   Other (income) expense, net                                  (885)        351
                                                            --------    --------
      Total costs and expenses                               216,757     209,652
                                                            --------    --------

(Loss) income before income taxes, minority
   interest in (loss) earnings of subsidiary, and
   extraordinary item                                         (1,213)      2,513

Income tax expense                                             1,973       1,684
Minority interest in (loss) earnings
   of subsidiaries                                              (179)        106
                                                            --------    --------

(Loss) income before extraordinary item                       (3,007)        723

Extraordinary loss from extinguishment of
   debt, net of income tax benefit of $44                      2,144          --
                                                            --------    --------

Net (loss) income                                           $ (5,151)   $    723
                                                            ========    ========

(Loss) income per share - basic and diluted
   (Loss) income before extraordinary item                  $  (0.32)   $   0.08
   Extraordinary loss                                          (0.22)         --
                                                            --------    --------
   (Loss) income per share                                  $  (0.54)   $   0.08
                                                            ========    ========

Average number of shares outstanding (000's)                   9,530       9,530
                                                            ========    ========

See accompanying Notes to the Consolidated Financial Statements.


                                        3
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                (Unaudited)
                                                                  June 30,   December 31,
                                                                   1999         1998
                                                                 ---------    ---------
<S>                                                              <C>          <C>
ASSETS
Current assets:
Cash and temporary investments                                   $  28,215    $  25,327
Accounts receivable, less allowance for
  doubtful accounts of $2,540 and $2,295                            47,606       46,650
Unbilled receivables                                                10,399        6,873
Inventories, net                                                    10,493       11,606
Prepaid expenses and other current assets                            7,679        7,965
                                                                 ---------    ---------
  Total current assets                                             104,392       98,421
Property and equipment, net of accumulated
  depreciation of $26,590 and $25,530                               43,880       41,144
Publishing rights, net of accumulated amorti-
  zation of $5,643 and $5,203                                       16,342       16,782
Excess of cost over net assets acquired and other intangibles,
  net of accumulated amortization of $82,620 and $75,573           482,773      486,232
Other assets                                                        23,220       20,882
                                                                 ---------    ---------
  Total assets                                                   $ 670,607    $ 663,461
                                                                 =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt                                $   1,007    $  20,135
Accounts payable                                                    10,777       11,280
Deferred revenues                                                   42,369       41,603
Payrolls and commissions                                            13,534       15,079
Income taxes payable                                                 1,047          365
Interest payable on convertible debentures                           1,938           --
Accrued expenses and other current liabilities                      19,257       17,255
                                                                 ---------    ---------
  Total current liabilities                                         89,929      105,717
Long-term debt                                                       5,598      129,387
Convertible debentures with related parties                        155,000           --
Notes payable to affiliates                                         50,000       42,755
Other liabilities                                                   18,290       20,333
Minority interest                                                   10,104       10,283
                                                                 ---------    ---------
  Total liabilities                                                328,921      308,475
                                                                 ---------    ---------

Shareholders' equity:
Common stock                                                         1,003        1,003
Additional paid-in capital                                         372,518      372,518
(Accumulated deficit) retained earnings                               (578)       4,574
Treasury stock at cost                                              (6,361)      (6,361)
Accumulated other comprehensive loss:
  Cumulative translation adjustment                                (24,896)     (16,748)
                                                                 ---------    ---------
  Total shareholders' equity                                       341,686      354,986
                                                                 ---------    ---------
  Total liabilities and shareholders' equity                     $ 670,607    $ 663,461
                                                                 =========    =========
</TABLE>

See accompanying Notes to the Consolidated Financial Statements.


                                       4
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                   (Unaudited)
                             (Dollars in thousands)


                                               Three months ended June 30,
                                               ---------------------------
                                                    1999        1998
                                                   -------    -------

Net (loss) income                                  $  (322)   $   700

Other comprehensive loss, net of tax:
   Foreign currency items, including translation
     adjustments, and the effects of certain
     hedges and intercompany transactions           (1,915)    (1,308)
                                                   -------    -------

Comprehensive loss                                 $(2,237)   $  (608)
                                                   =======    =======


The tax expense allocated to each component of other comprehensive loss is as
follows:

Foreign currency items                             $   433    $   442
                                                   =======    =======

                                                Six months ended June 30,
                                                -------------------------
                                                     1999        1998
                                                   --------    --------

Net (loss) income                                  $ (5,151)   $    723

Other comprehensive loss, net of tax:
   Foreign currency items, including translation
     adjustments, and the effects of certain
     hedges and intercompany transactions            (8,148)     (2,806)
                                                   --------    --------

Comprehensive loss                                 $(13,299)   $ (2,083)
                                                   ========    ========

The tax expense allocated to each component of other comprehensive loss is as
follows:

Foreign currency items                             $  1,185    $    947
                                                   ========    ========

See accompanying Notes to the Consolidated Financial Statements.


                                       5
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                        FOR THE SIX MONTHS ENDED JUNE 30,
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                          1999          1998
                                                                        ---------    ---------
<S>                                                                     <C>          <C>
Cash flows from operating activities:
   Net (loss) income                                                    $  (5,151)   $     723
   Adjustments to reconcile net (loss) income to net cash
    provided by operating activities:
     Depreciation and amortization                                         14,086       13,384
     Other (primarily provision for bad debts and foreign
      Exchange gains)                                                        (648)       1,160
     Changes in operating assets and liabilities                           (1,892)       4,410
                                                                        ---------    ---------
       Net cash provided by operating activities                            6,395       19,677
                                                                        ---------    ---------

Cash flows from investing activities:
   Capital expenditures                                                   (10,565)      (8,506)
   Acquisitions of businesses                                              (8,373)      (3,347)
                                                                        ---------    ---------
       Net cash used in investing activities                              (18,938)     (11,853)
                                                                        ---------    ---------

Cash flows from financing activities:
   Proceeds from issuance of Convertible Debentures                       155,000           --
   Proceeds from issuance of note payable to affiliate                     50,000           --
   Net borrowings under revolving credit facility                           4,000        4,000
   Repayment of long-term debt                                           (146,899)      (8,509)
   Repayment of notes to affiliates                                       (42,366)          --
   Payment of deferred finance costs                                       (2,782)        (177)
                                                                        ---------    ---------
       Net cash provided by (used in) financing activities                 16,953       (4,686)
                                                                        ---------    ---------

Effect of exchange rate changes on cash and
  temporary investments                                                    (1,522)        (510)
                                                                        ---------    ---------

Net increase in cash and temporary investments                              2,888        2,628
Cash and temporary investments, beginning of period                        25,327       26,665
                                                                        ---------    ---------

Cash and temporary investments, end of period                           $  28,215    $  29,293
                                                                        =========    =========

Supplemental disclosures of cash flow information:
  Cash payments for:
         Interest                                                       $   3,084    $   5,442
                                                                        =========    =========
         Income taxes                                                   $   2,898    $   4,544
                                                                        =========    =========
  Cash refunds of income taxes                                          $     417    $     666
                                                                        =========    =========
</TABLE>

See accompanying Notes to the Consolidated Financial Statements.


                                       6
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Dollars in thousands, except per share amounts)

1.   General

     The Consolidated Financial Statements of Berlitz International, Inc. (the
     "Company" or "Berlitz") have been prepared in accordance with the
     instructions to Form 10-Q and are unaudited. The information reflects all
     adjustments of a normal recurring nature which are, in the opinion of
     management, necessary for a fair presentation of such financial statements.
     The financial statements should be read in conjunction with the financial
     statements and related notes to the Company's 1998 Annual Report on Form
     10-K, as filed with the Securities and Exchange Commission.

     Reclassifications

     Certain reclassifications have been made in the prior years' notes to
     conform with the 1999 presentation.

2.   Long-Term Debt

     Long-term debt consists of the following:

                                     June 30,  December 31,
                                       1999       1998
                                     --------   --------
         Term Loan                   $     --   $ 98,250
         Revolving credit facility      4,000     48,000
         Other                          2,605      3,272
                                     --------   --------
             Total                      6,605    149,522
         Less current maturities        1,007     20,135
                                     --------   --------
             Long-term debt          $  5,598   $129,387
                                     ========   ========

     As discussed in Notes 3 and 4, on March 11, 1999, the Company issued
     Convertible Debentures, as well as a promissory note to Benesse Holdings
     International, Inc. ("BHI"), and used a portion of the resulting proceeds
     to repay in full all outstanding indebtedness under the Term Loan and
     revolving credit facility (collectively, the "Bank Facility"). The existing
     Bank Facility was then terminated.

     On March 31, 1999, the Company entered into a new $25,000 revolving credit
     facility (the "Revolving Facility"), which expires in February 2002. At the
     option of the Company, outstanding borrowings under the Revolving Facility
     bear interest at variable rates equal to either (i) a base rate
     approximating the U.S. prime rate or (ii) the rate offered by certain
     reference banks to prime banks in the interbank Eurodollar market, fully
     adjusted for reserves plus a margin ranging from 0.375% to 0.5%; such
     margin is dependent on a specified leverage ratio of the Company. In
     addition, a commitment fee ranging from .125% to .20% will be charged on
     the available but unused amounts under the revolving credit facility,
     depending on a specified leverage ratio. There were $4,000 in outstanding
     borrowings under the Revolving Facility at June 30, 1999. The average
     interest rate on outstanding borrowings under the revolving facility for
     the period ending June 30, 1999 was 5.725%.


                                       7
<PAGE>

     The Revolving Facility is subject to standard affirmative covenants,
     including financial and other informational reporting, compliance with
     laws, maintenance of insurance, maintenance of properties, payment of
     taxes, and preservation of corporate existence. The Revolving Facility also
     includes limitations on the ability of the Company and its subsidiaries to:
     (i) enter into mergers, acquisitions or sales of assets; (ii) incur, create
     or permit to exist liens; (iii) incur indebtedness and guarantee
     obligations; (iv) make loans or investments; (v) enter into transactions
     with affiliates; (vi) prepay subordinated indebtedness; and (vii) change
     the nature of the business conducted. Financial covenants included within
     the Revolving Facility require the Company to maintain certain levels of
     cash flow and impose limitations on total and senior debt.

3.   Convertible Debentures with Related Parties

     On March 11, 1999 (the "Issue Date"), the Company's shareholders approved
     the issuance of, and the Company issued, $155,000 aggregate principal
     amount 12-year convertible debentures (the "Convertible Debentures") in a
     private placement, pursuant to definitive investment agreements (the
     "Investment Agreements") dated as of October 2, 1998. The Convertible
     Debentures were issued as follows: a) $100,000 aggregate principal amount
     (the "Apollo Debentures") to two affiliates of Apollo Management IV, L.P.
     ("Apollo"), a private investment firm; and b) $55,000 aggregate principal
     amount (the "Benesse Debentures") to BHI, the Company's majority
     shareholder. The Convertible Debentures bear interest at 5% per annum,
     payable semi-annually. Principal amounts outstanding under such debentures
     are not due until March 2011, and the Company is not required to establish
     a bond sinking fund for repayment of this principal.

     The Convertible Debentures are convertible at any time into shares of the
     Company's common stock at a conversion price of $33.05 per share, subject
     to anti-dilution related adjustments to offset the effects of stock
     dividends and other changes in equity. The Company will, at all times,
     reserve out of its authorized but unissued common stock the full number of
     shares then issuable upon conversion of all outstanding Convertible
     Debentures.

     The Apollo and Benesse Debentures each independently provide for optional
     redemption by the Company, in whole but not in part, anytime following 60
     trading days after the third anniversary of the Issue Date. If the average
     closing price of the Company's common stock for the 30 trading days
     following the third anniversary of the Issue Date exceeds $39.66 per share,
     the Company may redeem at par. Otherwise, if the Convertible Debentures are
     redeemed, the Company shall pay a redemption premium, expressed as a
     percentage of outstanding principal, as follows: a) 4% for redemptions
     occurring in the fourth year after issue; b) 2% for redemptions occurring
     in the fifth year after issue; and c) 0% for redemptions occurring
     thereafter. All such redemptions are subject to the holders' rights to
     first convert into common stock of the Company.

     The Convertible Debentures also allow Apollo and BHI to elect to exchange
     their convertible debentures, in whole, into non-convertible, 7-year fixed
     rate debt (the "Fixed Rate Debentures"). Such election may only be made if
     the average closing price of the Company's common stock during the 30
     trading days immediately preceding the third anniversary of the Issue Date
     does not exceed $33.05.


                                       8
<PAGE>

     Furthermore, BHI may only effect an exchange if Apollo does so. Upon the
     determination, by an independent financial institution, of fixed interest
     rates that accurately price the Fixed Rate Debentures at par under
     specified circumstances at the time of the exchange, Apollo and BHI shall
     irrevocably decide whether to proceed with their exchanges. If only Apollo
     proceeds with such an exchange, the Company, no later than 150 days from
     the third anniversary of the Issue Date, must either a) redeem all of the
     Apollo Debentures at par, or b) deliver the Fixed Rate Debentures to
     Apollo. If both Apollo and BHI proceed with their exchanges, the Company,
     within the same 150 day period, shall either a) redeem both the Apollo and
     Benesse Debentures, or b) deliver the Fixed Rate Debentures to both Apollo
     and BHI.

     Principal amounts outstanding under the Fixed Rate Debentures would not be
     payable until maturity, while interest payments would be made
     semi-annually. The Fixed Rate Debentures interest rate is subject to a cap
     of a) the applicable U.S. treasury rate + 5% (not to exceed 13%) if only
     Apollo receives Fixed Rate Debentures, or b) the applicable U.S. treasury
     rate + 7% (not to exceed 14%) if both Apollo and BHI receives Fixed Rate
     Debentures. The Fixed Rate Debentures may be redeemed by the Company after
     the third anniversary of their issue upon payment of principal amounts of
     the Fixed Rate Debentures and the following redemption premiums, expressed
     as a percentage of the outstanding principal amount: a) one half of the per
     annum interest rate for redemptions occurring in the fourth year after
     issue; b) one quarter of the per annum interest rate for redemptions
     occurring in the fifth year after issue; and c) no premium for redemptions
     occurring thereafter.

     Prior to the third anniversary of the Issue Date, if Benesse sells 80% or
     more of the shares of Berlitz common stock owned directly or indirectly by
     it on the Issue Date, the Company shall be required to make an offer to
     repurchase for cash: i) the Apollo Debentures at a value equal to 110% of
     the principal amount then outstanding; and ii) the Benesse Debentures at a
     value equal to 101% of the principal amount then outstanding. In addition,
     if at any time on or after the Issue Date, a change of control, as defined
     in the Investment Agreements, occurs but Benesse sells less than 80% of its
     shares, or if Benesse sells 80% of its shares on or after the third
     anniversary of the Issue Date, the Company shall be required to make an
     offer to repurchase for cash the Convertible Debentures (but not the Fixed
     Rate Debentures) at a value equal to 101% of the principal amount of the
     Convertible Debentures.

     The Convertible Debentures are subject to standard affirmative covenants,
     including financial and other informational reporting, compliance with
     laws, maintenance of insurance, maintenance of properties, payment of
     taxes, and preservation of corporate existence. Negative covenants that the
     Convertible Debentures are subject to include: prohibitions on certain
     mergers, consolidations and asset transfers; forbearance from restrictions
     on rights of holders to convert or exchange the Convertible Debentures;
     and, in the case of the Apollo Debentures, forbearance from amending
     certain understandings between the Company, Berlitz Japan, Inc. and
     Benesse.

     The Investment Agreements include a number of other provisions, including:
     a) the granting of certain demand and piggyback registration rights to the
     holders of the Convertible Debentures; b) the granting of a certain number
     of board seats to Apollo on the Company's Board of Directors; c) the
     granting of approval rights to Apollo, at


                                       9
<PAGE>

     the Company's Board level, over certain transactions; and d) certain
     restrictions on the transferability of the Apollo Debentures. The Company
     expanded its Board of Directors from 10 seats to 12 seats effective March
     11, 1999 and appointed two representatives of Apollo to the Board.

     The estimated fair value of the Convertible Debentures in March 1999, the
     month of issuance, was $142,600. This estimate was based on the then
     current interest rates and Berlitz stock price volatility.

4.   Transactions with Affiliates

     On March 11, 1999, BHI loaned $50,000 to the Company, evidenced by a
     12-year fixed rate subordinated promissory note (the "BHI Note"). Such note
     bears interest for the first five years at 5.2% per annum, and, thereafter,
     at a renegotiated fixed rate approximating LIBOR plus a margin based on the
     Company's then existing leverage. Interest is payable semiannually in cash
     while principal repayment is deferred until maturity. The BHI Note includes
     standard covenants similar to those included in the Benesse Debentures. In
     the event of a change in control, the BHI Note provides for redemption by
     the Company, at the option of BHI, at a price equal to 101% of the note's
     principal amount.

     The estimated fair value of the BHI Note in March 1999, the month of
     issuance, was $31,955, based on interest rates then currently available for
     borrowings with similar terms and maturities.

     The Company has used a portion of the proceeds from the issuance of the BHI
     Note and Convertible Debentures to repay in full the existing notes payable
     to affiliates.

     The Company incurred approximately $2,800 in deferred finance costs
     associated with the issuance of the Convertible Debentures and BHI Note.
     Such costs will be amortized over the 12-year life of the Convertible
     Debentures and BHI Note.

5.   Extraordinary Loss

     On March 11, 1999, in connection with the issuance of the Convertible
     Debentures and BHI Notes and the extinguishment of the Bank Facility, the
     Company terminated its interest rate swap agreement, which hedged the
     floating rate Bank Facility, for a cash payment of approximately $1,100. As
     a consequence of the debt extinguishment, the Company has recorded an
     extraordinary loss, net of tax benefit, of $2,144, consisting primarily of
     the interest rate swap's fair market value and existing unamortized
     deferred finance costs at the time of extinguishment of the underlying
     debt.

6.   Other (Income) Expense, net

                                           Three months      Three months
                                              ended             ended
                                          June 30, 1999     June 30, 1998
                                          -------------     -------------

Interest income on temporary investments      $(166)            $(165)
Foreign exchange (gains) losses, net           (294)              633
Other non-operating taxes                       111                33
Loss on disposal of fixed assets                103                91
Other investment expense (income), net           72               (48)
Other expense, net                              254               245
                                              -----             -----
     Total other expense, net                 $  80             $ 789
                                              =====             =====


                                       10
<PAGE>

                                                  Six months        Six months
                                                    ended              ended
                                                June 30, 1999     June 30, 1998
                                                -------------     -------------

Interest income on temporary investments           $  (257)          $  (310)
Foreign exchange (gains) losses, net                (1,202)              215
Other non-operating taxes                              231               107
Loss on disposal of fixed assets                       122               207
Other expense, net                                     221               132
                                                   -------           -------
     Total other (income) expense, net             $  (885)          $   351
                                                   =======           =======

7.   Earnings (Loss) Per Share

     Reconciliations between Basic and Diluted earnings (loss) per share ("EPS")
     computations for "income (loss) before extraordinary item" for the three
     and six months ended June 30, 1999 and 1998 are as follows:

                                                      Weighted
                                                       average
                                                        number
                                        (Loss)       of shares      Per-share
                                        Income     outstanding         amount

Three months ending June 30, 1999:
Basic EPS:
  Loss before extraordinary item        $  (322)       9,530          $(0.03)
Effect of dilutive securities:
  Stock options                              --           --              --
                                        -------      -------          ------
Diluted EPS:
  Loss before extraordinary item        $  (322)       9,530          $(0.03)
                                        =======      =======          ======

Three months ending June 30, 1998:
Basic EPS:
  Income before extraordinary item      $   700        9,530          $ 0.07
Effect of dilutive securities:
  Stock options                              --           36              --
                                        -------      -------          ------
Diluted EPS:
  Income before extraordinary item      $   700        9,566          $ 0.07
                                        =======      =======          ======

Six months ending June 30, 1999:
Basic EPS:
  Loss before extraordinary item        $(5,151)       9,530          $(0.54)
Effect of dilutive securities:
  Stock options                              --           --              --
                                        -------      -------          ------
Diluted EPS:
  Loss before extraordinary item        $(5,151)       9,530          $(0.54)
                                        =======      =======          ======

Six months ending June 30, 1998:
Basic EPS:
  Income before extraordinary item      $   723        9,530          $ 0.08
Effect of dilutive securities:
  Stock options                              --           27              --
                                        -------      -------          ------
Diluted EPS:
  Income before extraordinary item      $   723        9,557          $0.08
                                        =======      =======          ======


                                       11
<PAGE>

8.   Stock Option and Incentive Plans

     In 1999, the Company paid $2,855 in awards under its 1996 New Long-Term
     Executive Incentive Compensation Plan.

     In June 1999, the Company's shareholders approved the adoption of the
     Berlitz 1999 Long-Term Executive Incentive Compensation Plan (the "1999
     LTIP"). The 1999 LTIP provides for potential cash awards (currently
     expected to range from $0 to $7,200 in the aggregate) to be paid to senior
     management in 2002 if certain revenue, earnings and cash flow targets are
     achieved for the three-year period from 1999 to 2001. The 1999 LTIP is
     intended to be an unfunded plan, and the Company is not required to
     establish any fund or segregate any assets for payments under it. For the
     three and six months ended June 30, 1999, the Company recorded $183 in
     expense related to the 1999 LTIP.

9.   Acquisitions of businesses

     In June 1999, the Company acquired certain assets, operating subsidiaries
     and key personnel of Language Management International, Inc., a
     translations services company. The purchase price was $7,750, plus a
     contingent payment based on gross revenues for the twelve months ending
     June 30, 2000. The Company also incurred various transaction-related
     expenditures and accrued expenses. At June 30, 1999, in connection with
     this acquisition, the Company recorded $11,800 of goodwill and $4,000 of
     accrued current liabilities for transaction-related expenses and
     contingencies.

     The Company made several other acquisitions during the first six months,
     none of which were material.

10.  Subsequent events

     On July 1, 1999, Berlitz entered into a license agreement (the "Agreement")
     with Children's Television Workshop ("CTW"). Pursuant to this license
     agreement, CTW has agreed to create and produce, at its expense, a
     television series, entitled "Sesame English", which will initially consist
     of 52 15-minute episodes which will be complemented by instruction
     curricula and materials developed by Berlitz. In addition, Berlitz was
     granted certain rights by CTW, including the exclusive right to use certain
     Sesame Street and Sesame English names, logos and characters in connection
     with language instructional products, services and schools.

     The Agreement, covering an initial term of five years, provides for
     payments to CTW of $4,000 at inception and an aggregate of $6,000 in
     minimum guaranteed royalties paid in installments over the initial term of
     the agreement. In the event that Berlitz enters into any sublicenses or
     other third-party arrangements with a sublicensee for language instruction
     services in Japan, such minimum guaranteed royalties shall be


                                       12
<PAGE>

     reduced dollar for dollar, up to a maximum of $2,000, from CTW's share of
     payments from such Japanese sublicensees. If certain conditions are met,
     Berlitz may extend the Agreement for another five years in exchange for
     annual minimum guaranteed royalties equal to the greater of $2,000, or an
     amount equal to 80% of the royalties earned by CTW during the fifth year of
     the initial term.

     As part of its CTW and general marketing efforts, Berlitz is in the process
     of pursuing opportunities to expand the use of the Internet for the
     marketing and distribution of its products and services.

11.  Operating Segments

     Effective January 1, 1999, the Company's operations are principally
     conducted through two segments: Language Services (consisting of the
     Instruction, ELS/BOC (i.e., ELS Educational Services, Inc. ("ELS") and
     Berlitz on Campus ("BOC")), Publishing, Franchising, and Cross Cultural
     sub-segments), and Berlitz GlobalNET (formerly Translation Services). These
     are strategic business units that offer different products and services and
     are managed separately by senior management due to different technology and
     marketing strategies.

     Within Language Services, the Instruction sub-segment (through the use of
     proprietary methods and materials) provides predominantly live language
     education in virtually all spoken languages. The ELS/BOC sub-segment
     provides intensive English education programs. The Publishing sub-segment
     offers a wide range of publishing products such as dictionaries, phrase
     books, travel guides and self-study language materials, including CD-ROMs
     and audiocassettes. The Franchising sub-segment sells Berlitz language
     center franchises to independent franchisees in certain locations. The
     Cross Cultural sub-segment complements language study by providing
     expatriates with detailed practical and cultural information about the
     countries to which they are relocating.

     Berlitz GlobalNET provides high quality technical documentation
     translation, software localization (i.e., the translation of
     software-related products), software quality assurance testing,
     interpretation services, electronic publishing services, and other foreign
     language-related services.

     The Company evaluates operating segment performance based on EBITA, defined
     as sales of services and products, less costs of services and products sold
     and selling, general and administrative expenses. EBITA includes
     depreciation and similar non-cash charges, but excludes amortization of
     publishing rights, excess of cost over net assets acquired, and other
     intangibles.

     The following tables present information about reported segment profit or
     loss and segment assets, and reconcile reportable segment revenues, profit
     or loss, and assets to the Company's consolidated totals:


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                Three Months ended June 30,  Six Months ended June 30,
                                                ---------------------------  -------------------------
                                                     1999         1998         1999         1998
                                                  ---------    ---------    ---------    ---------
<S>                                               <C>          <C>          <C>          <C>
Revenues:
  Revenues from external customers:
     Language Services:
       Instruction                                $  69,863    $  68,568    $ 136,264    $ 133,667
       ELS/BOC                                       12,403       13,950       24,876       29,037
       Publishing                                     4,126        3,386        7,214        6,954
       Franchising                                      469          368          709          601
       Cross Cultural                                   645          601        1,232        1,183
       Other                                             (1)           3           (2)           9
                                                  ---------    ---------    ---------    ---------
     Total Language Services                         87,505       86,876      170,293      171,451
     Berlitz GlobalNET                               23,677       20,633       45,251       40,714
                                                  ---------    ---------    ---------    ---------
       Total external revenues                      111,182      107,509      215,544      212,165
                                                  ---------    ---------    ---------    ---------

  Intersegment revenues:
     Language Services:
       Instruction                                       --            7           --           16
       Franchising                                      125          262          238          346
                                                  ---------    ---------    ---------    ---------
     Total Language Services                            125          269          238          362
     Berlitz GlobalNET                                   35           13           44           13
                                                  ---------    ---------    ---------    ---------
                                                  ---------    ---------    ---------    ---------
       Total intersegment revenues                      160          282          282          375
                                                  ---------    ---------    ---------    ---------

  Total revenues for reportable segments            111,342      107,791      215,826      212,540
  Elimination of intersegment revenues                 (160)        (282)        (282)        (375)
                                                  ---------    ---------    ---------    ---------
     Total consolidated revenues                  $ 111,182    $ 107,509    $ 215,544    $ 212,165
                                                  =========    =========    =========    =========

(Loss) income before taxes, minority interest,
and extraordinary item:
Operating Profit:
  Segment EBITA:
     Language Services:
       Instruction                                $  14,777    $  15,831    $  26,658    $  28,496
       ELS/BOC                                          123          866         (264)       1,789
       Publishing                                       755         (103)         563          433
       Franchising                                      124           83           86           44
       Cross Cultural                                    85          119          238          290
       Language Service overhead expenses and        (5,424)      (4,620)     (10,560)      (9,332)
        other
                                                  ---------    ---------    ---------    ---------
     Total Language Services                         10,440       12,176       16,721       21,720
     Berlitz GlobalNET                                1,644        1,793        2,289        2,778
     General corporate HQ expenses                   (3,530)      (3,371)      (6,842)      (6,311)
                                                  ---------    ---------    ---------    ---------
   Total EBITA                                        8,554       10,598       12,168       18,187
                                                  ---------    ---------    ---------    ---------

   Amortization of publishing rights, excess of
     cost over net assets acquired, and other
     intangibles:
     Language Services:
       Instruction                                   (2,525)      (2,528)      (5,070)      (5,072)
       ELS/BOC                                       (1,348)      (1,336)      (2,695)      (2,696)
       Publishing                                       (99)        (100)        (199)        (200)
       Cross Cultural                                    (2)          (3)          (5)          (6)
                                                  ---------    ---------    ---------    ---------
     Total Language Services                         (3,974)      (3,967)      (7,969)      (7,974)
     Berlitz GlobalNET                                 (395)        (309)        (753)        (641)
                                                  ---------    ---------    ---------    ---------
     Total intangible amortization                   (4,369)      (4,276)      (8,722)      (8,615)
                                                  ---------    ---------    ---------    ---------

Total operating profit                                4,185        6,322        3,446        9,572
Interest expense on long-term debt                      (20)      (2,768)      (1,873)      (5,617)
Interest expense on Convertible Debentures           (2,004)          --       (2,435)          --
Interest expense to affiliates                         (648)        (549)      (1,236)      (1,091)
Other income (expense), net                             (80)        (789)         885         (351)
                                                  ---------    ---------    ---------    ---------
Total consolidated income (loss) before taxes,
minority interest, and extraordinary item         $   1,433    $   2,216    $  (1,213)   $   2,513
                                                  =========    =========    =========    =========
</TABLE>


                                       14
<PAGE>

           Assets:                                              December 31,
                                           June 30, 1999              1998
                                           ---------             ---------
Language Services:
  Instruction                              $ 424,281             $ 426,641
  ELS/BOC                                    106,086               111,980
  Publishing                                  25,771                23,982
  Franchising                                  6,785                 6,640
  Other                                        1,296                   427
                                           ---------             ---------
Total Language Services                      564,219               569,670
Berlitz GlobalNET                             96,040                84,794
General corporate                             15,306                13,495
Eliminations of intersegment receivables      (4,958)               (4,498)
                                           ---------             ---------
  Total consolidated assets                $ 670,607             $ 663,461
                                           =========             =========

<TABLE>
<CAPTION>
                                    Three Months ended June 30,   Six Months ended June 30,
                                    ---------------------------   -------------------------
                                         1999      1998                  1999      1998
                                       -------   -------               -------   -------

<S>                                    <C>       <C>                   <C>       <C>
Depreciation:
  Language Services:
     Instruction                       $ 1,297   $ 1,164               $ 2,452   $ 2,290
     ELS/BOC                               209       226                   490       457
     Publishing                            417       279                   841       493
     Franchising                             6         5                    10        15
     Language Service overhead and         121       126                   237       223
      other
                                       -------   -------               -------   -------
  Total Language Services                2,050     1,800                 4,030     3,478
  Berlitz GlobalNET                        474       513                 1,041     1,027
  General corporate                        122       140                   293       264
                                       -------   -------               -------   -------
     Total consolidated depreciation   $ 2,646   $ 2,453               $ 5,364   $ 4,769
                                       =======   =======               =======   =======

Capital expenditures:
  Language Services:
     Instruction                       $ 3,754   $ 3,039               $ 7,051   $ 5,628
     ELS/BOC                               197        99                   577       285
     Publishing                            881       910                 1,370     1,501
     Franchising                            25        --                    30        --
                                       -------   -------               -------   -------
  Total Language Services                4,857     4,048                 9,028     7,414
  Berlitz GlobalNET                        475       466                   666       772
  General corporate                        522       121                   871       320
                                       -------   -------               -------   -------
     Total consolidated capital
       expenditures                    $ 5,854   $ 4,635               $10,565   $ 8,506
                                       =======   =======               =======   =======
</TABLE>

     The following tables present certain information about the geographic areas
     in which the Company operates:

<TABLE>
<CAPTION>
                                   Three Months ended June 30,   Six Months ended June 30,
                                   ---------------------------   -------------------------
                                        1999       1998               1999       1998
                                      --------   --------           --------   --------
<S>                                   <C>        <C>                <C>        <C>
Revenues from external customers:
  United States                       $ 37,430   $ 40,087           $ 71,750   $ 78,261
  Japan                                 17,064     14,763             32,877     29,191
    Germany                             10,801     10,194             21,904     20,126
    Ireland                              6,621      7,034             13,020     15,048
  France                                 5,923      4,345             11,369      8,531
    Brazil                               3,955      5,820              6,865     10,734
  Other foreign countries               29,388     25,266             57,759     50,274
                                      --------   --------           --------   --------
     Total                            $111,182   $107,509           $215,544   $212,165
                                      ========   ========           ========   ========
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                 Three Months ended June 30,  Six Months ended June 30,
                                                     1999          1998          1999          1998
                                                   ---------    ---------      ---------    ---------
<S>                                                <C>          <C>            <C>          <C>
           Operating (loss) profit:
             EBITA :
                United States                      $   3,802    $   4,173      $   5,133    $   7,363
                Japan                                  1,309        2,055          1,850        3,014
                Germany                                1,197        1,320          2,454        2,656
                Ireland                                  284          583            277        1,031
                France                                   648          157          1,047          410
                Brazil                                   617        1,066            903        1,606
                Other foreign countries                5,451        5,654          9,610       10,194
                General corporate expenses            (4,754)      (4,410)        (9,106)      (8,087)
                                                   ---------    ---------      ---------    ---------
                  Total EBITA                          8,554       10,598         12,168       18,187
                                                   ---------    ---------      ---------    ---------

             Amortization of publishing rights,
              excess of cost over net assets
              acquired, and other intangibles:
                United States                         (3,664)      (3,569)        (7,287)      (7,163)
                Japan                                   (326)        (288)          (660)        (594)
                Germany                                  (63)         (64)          (129)        (128)
                Ireland                                  (11)         (12)           (24)         (48)
                France                                   (71)         (38)          (146)         (76)
                Brazil                                   (16)         (16)           (32)         (32)
                Other foreign countries                 (218)        (289)          (444)        (574)
                                                   ---------    ---------      ---------    ---------
                  Total  intangible amortization      (4,369)      (4,276)        (8,722)      (8,615)
                                                   ---------    ---------      ---------    ---------

             Intercompany royalties:
                United States                          3,995        4,470          7,583        7,769
                Japan                                   (956)      (1,485)        (1,522)      (1,965)
                Germany                                 (400)        (373)          (815)        (749)
                Ireland                                 (289)        (333)          (525)        (678)
                France                                  (224)        (242)          (531)        (493)
                Other foreign countries               (2,126)      (2,037)        (4,190)      (3,884)
                                                   ---------    ---------      ---------    ---------
                  Total intercompany royalties            --           --             --           --
                                                   ---------    ---------      ---------    ---------

           Total operating profit                  $   4,185    $   6,322      $   3,446    $   9,572
                                                   =========    =========      =========    =========
</TABLE>

<TABLE>
<CAPTION>
           Long lived assets:                      Property &
                                                   Equipment      Other     Intangible
                                                      net        Assets*      Assets        Total
                                                   ---------    ---------    ---------    ---------
<S>                                                <C>          <C>          <C>          <C>
           June 30, 1999:
             United States                         $  10,205    $   7,747    $ 405,377    $ 423,329
             Japan                                     8,122           38       45,438       53,598
               Germany                                 3,065           --        8,416       11,481
             France                                    1,783           --        6,230        8,013
               Brazil                                  3,009           --        2,113        5,122
               Ireland                                 1,076            5        1,569        2,650
             Other foreign countries                  11,459          362       28,376       40,197
             General corporate                         5,161        3,966        1,596       10,723
                                                   =========    =========    =========    =========
                Total                              $  43,880    $  12,118    $ 499,115    $ 555,113
                                                   =========    =========    =========    =========

           December  31, 1998:
             United States                         $   8,414    $   7,335    $ 402,507    $ 418,256
             Japan                                     8,685           97       49,165       57,947
             Germany                                   3,008           --        9,443       12,451
             France                                    1,783           --        7,192        8,975
             Brazil                                    3,250           --        2,145        5,395
             Ireland                                   1,562          151        1,793        3,506
             Other foreign countries                  10,533          192       29,173       39,898
             General corporate                         3,909        2,557        1,596        8,062
                                                   =========    =========    =========    =========
                Total                              $  41,144    $  10,332    $ 503,014    $ 554,490
                                                   =========    =========    =========    =========
</TABLE>

*Excludes financial instruments and deferred tax assets.


                                       16
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                          PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and notes thereto and with the Company's
audited Consolidated Financial Statements and notes thereto for the fiscal year
ended December 31, 1998. Certain statements contained within this discussion
constitute forward-looking statements. See "Special Note Regarding Forward
Looking Statements."

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 organized geographically 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.

Results of Operations - Quarter Ended June 30, 1999 vs. June 30, 1998

Sales for the quarter ended June 30, 1999 were $111.2 million, 3.4% above the
prior year. This rise was primarily due to increases in operating activity for
Language Instruction and Berlitz GlobalNET, partially offset by reduced
intensive English program revenues and unfavorable exchange rate fluctuations.
Excluding the effects of unfavorable exchange rate fluctuations of $2.6 million,
sales increased from the prior year by 5.9%. The following table compares
revenues by business segment for the second quarter.

Business Segment Revenues:                (Dollars in millions)
--------------------------------------------------------------------------------
                              June 30,       Growth (Decline) from Prior Year
                          ---------------   ------------------------------------
                           1999     1998    Exchange(2)  Operations(1)  Total
                          ------   ------   -----------  -------------  ------
Language Services:
   Instruction            $ 69.9   $ 68.6     $ (2.2)       $  3.5      $  1.3
   ELS/BOC                  12.4     14.0         --          (1.6)       (1.6)
   Publishing                4.1      3.4         --           0.7         0.7
   Franchising               0.6      0.6         --            --          --
   Other                     0.5      0.3         --           0.2         0.2
                          ------   ------     ------        ------      ------
Total Language Services     87.5     86.9       (2.2)          2.8         0.6
Berlitz GlobalNET           23.7     20.6       (0.4)          3.5         3.1
                          ------   ------     ------        ------      ------
Total                     $111.2   $107.5     $ (2.6)       $  6.3      $  3.7
                          ======   ======     ======        ======      ======

----------------------------------
(1) Adjusted to eliminate fluctuations in foreign currency from year-to-year by
    assuming a constant exchange rate over two years, using as the base the
    first year of the periods being presented.
(2) The unfavorable exchange rate fluctuations ($2.6 million) primarily resulted
    from a strengthened dollar against the Latin American currencies (most
    significantly the Brazilian real) and all European currencies, offset by a
    weaker dollar against the Japanese yen.


                                       17
<PAGE>

Within Language Services, Language Instruction sales for the 1999 second quarter
rose 1.9% from the prior year, and excluding unfavorable exchange rate
fluctuations, were 5.1% higher than in 1998. This improvement was primarily due
to average revenue per lesson ("ARPL") increases in most countries. Total lesson
volume increased 1.9% from the prior year, primarily as strength in Europe and
Latin America was offset by weakness in North America and Asia. Geographically,
Language Instruction revenue and lesson volume was dispersed as follows:

Language Instruction Revenue:    (Dollars in millions)
---------------------------------------------------------------------
                   June 30,         Growth (Decline) from Prior Year
                -------------     -----------------------------------
                 1999    1998     Exchange    Operations    Total
                -----   -----     --------    ----------    -----

North America   $12.4   $13.3      $  --        $(0.9)      $(0.9)(1)
Asia             16.4    15.1        1.8         (0.5)        1.3(2)
Latin America    12.9    14.3       (2.8)         1.4        (1.4)(3)
Europe           28.2    25.9       (1.2)         3.5         2.3(4)
                -----   -----      -----        -----       -----
Total revenue   $69.9   $68.6      $(2.2)       $ 3.5       $ 1.3
                =====   =====      =====        =====       =====

-------------------------------------
(1) Decline is due to lesson volume shortfalls in the USA.
(2) Primarily reflects the effect of a weaker US dollar against the Japanese
    yen, which was partially offset by reduced lesson volume in Japan due to the
    continued poor local economic conditions.
(3) Primarily reflects the effect of a stronger dollar against the Brazilian
    real, partially offset by volume and ARPL increases, primarily in Mexico.
(4) Primarily reflect improved volume and ARPL in most countries (in particular
    Belgium, France, Germany, Israel, Poland, and Spain), partly offset by a
    strengthened dollar against all European currencies.

<TABLE>
<CAPTION>
Language Instruction Lesson Volume:            (Lessons in thousands)
--------------------------------------------------------------------------------------
                                        June 30,      Growth (Decline) from Prior Year
                                   -----------------  --------------------------------
                                                          Number of
                                     1999      1998        lessons      Percentage
                                   -------   -------       -------      -----------
<S>                                <C>       <C>              <C>           <C>
North America                        288.3     304.6         (16.3)        (5.4)%(1)
Asia                                 256.4     269.8         (13.4)        (5.0)%(2)
Latin America                        366.5     349.5          17.0          4.9%(3)
Europe                               642.9     601.5          41.4          6.9%(4)
                                   =======   =======       =======      =======
Total lesson volume                1,554.1   1,525.4          28.7          1.9%
                                   =======   =======       =======      =======
</TABLE>

-------------------------------------
(1) North America's volume decline primarily reflects reduced institutional
    training volume due to mergers and acquisitions in the petroleum and
    financial service sectors, as well as reduced lesson demand due to
    downsizing, decrease in expatriations, and the freezing of training budgets.
(2) Asia's volume has decreased due to the continued economic recession in Japan
    and Hong Kong.

(Footnotes are continued on next page)


                                       18
<PAGE>

(3) Lesson volume increased in Latin America primarily due to strong sales in
    Mexico, as well as the opening of five new language centers in the first
    half of 1999. Lesson volume was down in Venezuela and Argentina due to
    current economic recessions in these countries.
(4) Europe's volume improvement reflects continued demand for Berlitz services,
    with the largest increases generated by Germany, France, Israel, Spain,
    Poland, Italy and Belgium. Both Poland and Israel had new school openings
    during the first half of 1999, which contributed to the improved volume.

For the second quarter of 1999, ARPL was $39.88, as compared to $40.25 in the
comparable prior-year period. The decrease reflected the unfavorable impact of
exchange rate fluctuations of ($1.40); excluding the effects of the exchange,
ARPL increased over prior year by $1.03. ARPL ranged from a high of
approximately $59.50 in Japan to a low of $15.36 in Thailand, reflecting effects
of foreign exchange rates and differences in the economic value of the service.

Within Language Services, ELS/BOC revenues for the second quarter declined 11.1%
from the prior year. ELS/BOC continued to be affected by weakened Asian student
enrollments due to the economic conditions in the Far East. Enrollments from
Latin America are also down due to the economic instability in Venezuela and
Brazil, and the increased strength of the dollar over the currencies in these
countries. More aggressive pricing and agent commission structures by
competitors, and a market trend toward less intensive schedules has also
adversely affected results. ELS/BOC has taken actions to address these problems,
including filling vacant sales positions and articulating its new business plan
to its agents, and monitoring overhead expenses. ELS/BOC also expects to
intensify its recruitment activities, introduce an enhanced website, build
strong brand recognition through completion of various marketing projects, and
increase training and motivation of its key representatives.

Publishing revenues increased 21.9% over prior year, due to increased licensing
royalty revenue, and increased sales in North America due to a 1999 warehouse
club promotion. Franchising revenues were slightly lower than prior year. The
Company opened one Berlitz Franchise in Mexico in the second quarter of 1999.

Berlitz GlobalNET sales, excluding the effects of exchange rate fluctuations,
rose 16.9% from 1998. Geographically, sales are above prior year in all regions.
The following table compares Berlitz GlobalNET revenues by region for the second
quarter:


                                       19
<PAGE>

<TABLE>
<CAPTION>
    Berlitz GlobalNET Revenue:                   (Dollars in millions)
    -------------------------- ---------------------------------------------------------
                                  June 30,            Growth (Decline) from Prior Year
                               --------------       ------------------------------------
                                1999     1998       Exchange    Operations     Total
                               -----    -----       --------    ----------     -----
<S>                            <C>      <C>          <C>          <C>          <C>
America                        $11.6    $ 9.2        $  --        $ 2.4        $ 2.4(1)
Asia                             1.2      1.0          0.1          0.1          0.2
Europe                          12.3     11.0         (0.5)         1.8          1.3(2)
Inter-company eliminations      (1.4)    (0.6)          --         (0.8)        (0.8)
                               =====    =====        =====        =====        =====
Total revenue                  $23.7    $20.6        $(0.4)       $ 3.5        $ 3.1
                               =====    =====        =====        =====        =====
</TABLE>

    (1) North America had a strong quarter, due in part to large projects from
        the automotive industry during this period, and continued growth in the
        interpretation service business.
    (2) The sales increase in Europe is attributable to volume increases in
        Norway and Denmark, and sales from acquisitions made in France and
        Poland in the second and fourth quarters of 1998, respectively. These
        increases were partially offset by sales decline in Ireland, due in part
        to the delay of major projects by a certain client.

The total Company's cost of services and products sold as a percentage of sales
was 59.4% in the 1999 second quarter, compared to 58.7% in the same prior year
period. The higher percentage is mainly attributable to higher teacher costs,
lower GlobalNET production margins, and an increase in the provision for
doubtful accounts over prior year. Selling, general and administrative expenses
as a percentage of sales were 32.9% in the 1999 second quarter, compared with
31.4% in the comparable prior year period. The increase is due to higher
administrative salaries and related costs, and higher advertising costs.

The Company's total EBITA* for the 1999 second quarter was $8.6 million, or 7.7%
of sales, compared to $10.6 million, or 9.9% of sales, in the same prior year
period. The following table displays the comparative second quarter EBITA by
business segment:

Business Segment EBITA:                     (Dollars in millions)
-----------------------  -------------------------------------------------------
                             June 30,          Growth (Decline) from Prior Year
                         ----------------     ----------------------------------
                          1999       1998     Exchange     Operations     Total
                         -----      -----     --------     ----------     -----
Language Services:
   Instruction           $14.8      $15.8      $(0.7)       $(0.3)(2)     $(1.0)
   ELS/BOC                 0.1        0.9         --         (0.8)(3)      (0.8)
   Publishing              0.8       (0.1)        --          0.9(4)        0.9
   Franchising             0.1        0.1         --           --            --
   Overhead & Other       (5.4)      (4.5)       0.1         (1.0)(5)      (0.9)
                         -----      -----      -----        -----         -----
Total Language Services   10.4       12.2       (0.6)        (1.2)         (1.8)
Berlitz GlobalNET          1.7        1.8         --         (0.1)(6)      (0.1)
Corporate and other       (3.5)      (3.4)        --         (0.1)(7)      (0.1)
                         -----      -----      -----        -----         -----
Total                    $ 8.6      $10.6      $(0.6)(1)    $(1.4)        $(2.0)
                         =====      =====      =====        =====         =====

(Footnotes are continued on next page)


                                       20
<PAGE>

              EBITA Margin %:                            June 30,
              ---------------                   --------------------------
                                                   1999            1998
                                                -----------    -----------
              Language Services:
                 Instruction (8)                    21.2%          23.1%
                 ELS/BOC (3)                         1.0%           6.2%
                 Publishing (4)                     18.3%          (3.0)%
                 Franchising                        20.9%          13.2%
              Total Language Services               11.9%          14.0%
              Berlitz GlobalNET (9)                  6.9%           8.7%
              Total                                  7.7%           9.9%

              --------------------------

     (1) The net unfavorable foreign exchange impact is mainly attributable to
         the Latin American countries.
     (2) The decline in Instruction  operating  EBITA is due mainly to the North
         American region and Asia. In North America, the combined effect of
         decreased volume and increases in teacher salaries and rent expense led
         to the decline over prior year. The decline in Asia is primarily due to
         decreased volume and increases in advertising costs and salary
         expenses. The decreases in these countries were partially offset by
         exceptional EBITA increases in Mexico, and profitable results generated
         by the European countries, notably; Denmark and France.
     (3) Despite reductions in its overall costs from the prior year, ELS/BOC's
         EBITA and EBITA margin has decreased because the cost cutting has not
         been enough to cover the shortfalls in sales. In addition, an ELS joint
         venture in Japan consummated in October 1998 generated an EBITA loss of
         $0.2 million in the second quarter of 1999 due to its start-up nature.
     (4) The increased sales over prior year in Publishing combined with
         decreases in advertising costs, and other sundry expenses led to a
         profit for the quarter, compared to a loss in the prior year.
     (5) Language Service's overhead costs increased over the prior year due to
         increases in fixed employee costs, advertising, and travel expenses.
     (6) The decline in EBITA for Berlitz GlobalNET is due to decreases in
         Europe, primarily Ireland and Germany due largely to temporary lower
         sales volume, and Norway and Denmark due to low margin projects. These
         declines are partially offset by activity in France and Poland from
         acquisitions made in the second and fourth quarters of 1998,
         respectively. In the Americas, EBITA increased $0.2 million due to
         improved margins.
     (7) Corporate expenses rose due to increases in salary-related costs.
     (8) The reduction in Instruction's 1999 EBITA margin occurred primarily as
         teacher costs, rent, and advertising expenses grew faster than
         revenues.
     (9) GlobalNET's EBITA margin decreased due to low translation production
         margins in Europe, and income of $0.2 million being reported in
         provision for doubtful accounts in the second quarter of the prior
         year.

--------------------------------------------------------------------------------
*EBITA as used herein is defined as sales less cost of services and products
sold, and selling, general and administrative expenses. It is calculated using
amounts determined in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"). EBITA is not a defined term under U.S. GAAP and is not
indicative of operating income or cash flows from operations as determined under
U.S. GAAP.


                                       21
<PAGE>

Interest expense on long-term debt for the three months ended June 30, 1999
decreased $2.7 million from the comparable prior year period, due to the
extinguishment of debt in mid-March 1999. Interest expense on the new
Convertible Debentures was $2.0 million for the second quarter of 1999. Other
expense, net for the three months ended June 30, 1999 decreased by $0.7 million
over the prior year, primarily due to foreign exchange gains.

The Company recorded second quarter income tax expenses of $1.8 and $1.5 million
for 1999 and 1998, respectively. The effective tax rates in both 1999 and 1998
were above the U.S. Federal statutory tax rate primarily as a result of
nondeductible amortization charges.

Results of Operations - Six Months Ended June 30, 1999 vs. June 30, 1998

Sales for the six months ended June 30, 1999 were $215.5 million, 1.6% above the
prior year. The sales growth is primarily due to activity generated from the
Language Instruction and Berlitz GlobalNET business segments, which is partially
offset by reduced sales volume from ELS/BOC programs, and unfavorable foreign
exchange rate fluctuations. Excluding the effects of unfavorable exchange rate
fluctuations of $3.4 million, sales increased from the prior year by 3.2%. The
following table compares revenues by business segment for the first half of the
year.

Business Segment Revenues:                 (Dollars in millions)
--------------------------  --------------------------------------------------
                                June 30,     Growth (Decline) from Prior Year
                            ---------------  ---------------------------------
                             1999     1998   Exchange(2)  Operations(1)  Total
                            ------   ------  -----------  -------------  -----
Language Services:
   Instruction              $136.3   $133.7    $ (3.1)       $  5.7      $ 2.6
   ELS/BOC                    24.9     29.0        --          (4.1)      (4.1)
   Publishing                  7.2      7.0        --           0.2        0.2
   Franchising                 0.9      0.9      (0.1)          0.1         --
   Other                       0.9      0.9        --            --         --
                            ------   ------    ------        ------      -----
Total Language Services      170.2    171.5      (3.2)          1.9       (1.3)
Berlitz GlobalNET             45.3     40.7      (0.2)          4.8        4.6
                            ======   ======    ======        ======      =====
Total                       $215.5   $212.2    $ (3.4)       $  6.7      $ 3.3
                            ======   ======    ======        ======      =====

----------------------------------
(1) Adjusted to eliminate fluctuations in foreign currency from year-to-year by
    assuming a constant exchange rate over two years, using as the base the
    first year of the periods being presented.
(2) The unfavorable exchange rate fluctuations ($3.4 million) primarily resulted
    from a strengthened dollar against the Latin American currencies (most
    significantly the Brazilian real), offset by a weaker dollar against the
    Japanese yen.


                                       22
<PAGE>

Within Language Services, Language Instruction sales for the 1999 first half
rose 1.9% from the prior year, and excluding unfavorable exchange rate
fluctuations, were 4.3% higher than in 1998. This improvement was primarily due
to ARPL increases in most countries. Total lesson volume increased 1.1% from the
prior year, primarily as strength in Europe and Mexico was offset by weakness in
Asia and the USA. Geographically, Language Instruction revenue and lesson volume
was dispersed as follows:


                                       23
<PAGE>

<TABLE>
<CAPTION>
Language Instruction Revenue:                 (Dollars in millions)
-----------------------------  --------------------------------------------------
                                   June 30,      Growth (Decline) from Prior Year
                               ---------------   --------------------------------
                                1999     1998    Exchange  Operations     Total
                               ------   ------   --------  ----------  ----------
<S>                            <C>      <C>      <C>       <C>          <C>
North America                  $ 24.2   $ 24.9   $ (0.1)   $ (0.6)      $ (0.7)(1)
Asia                             32.0     29.9      3.0      (0.9)         2.1(2)
Latin America                    23.1     26.5     (5.5)      2.1         (3.4)(3)
Europe                           57.0     52.4     (0.5)      5.1          4.6(4)
                               ======   ======   ======    ======       ======
Total revenue                  $136.3   $133.7   $ (3.1)   $  5.7       $  2.6
                               ======   ======   ======    ======       ======
</TABLE>

-------------------------------------
(1) Decline is due to lesson volume shortfalls in the USA.
(2) Primarily reflects the effect of a weaker US dollar against the Japanese
    yen, which was partially offset by reduced lesson volume in Japan due to the
    continued poor local economic conditions.
(3) Primarily reflects the effect of a stronger dollar against all Latin America
    currencies, notably the Brazilian real and Mexican peso, partially offset by
    volume increases in Mexico and Peru and ARPL increases in Mexico.
(4) Primarily reflect improved volume and ARPL in most countries (in particular
    Belgium, France, Germany, Israel, Poland, and Spain), as well as unfavorable
    exchange rate fluctuations in Israel and Poland.

<TABLE>
<CAPTION>
Language Instruction Lesson Volume:                 (Lessons in thousands)
-----------------------------------  --------------------------------------------------
                                         June 30,      Growth (Decline) from Prior Year
                                     ----------------  --------------------------------
                                                          Number of
                                       1999    1998        lessons    Percentage
                                     -------  -------     ---------   ----------
<S>                                  <C>      <C>           <C>         <C>
   North America                       567.2    587.4      (20.2)      (3.4)%(1)
   Asia                                500.3    524.6      (24.3)      (4.6)%(2)
   Latin America                       656.5    637.9       18.6        2.9%(3)
   Europe                            1,288.3  1,229.4       58.9        4.8%(4)
                                     -------  -------      -----       ----
   Total lesson volume               3,012.3  2,979.3       33.0        1.1%
                                     =======  =======      =====       ====
</TABLE>

-------------------------------------
(1) North America's volume decline primarily reflects reduced institutional
    training volume due to mergers and acquisitions in the petroleum and
    financial service sectors, as well as reduced lesson demand due to
    downsizing, decrease in expatriations, and the freezing of training budgets
    by these companies.
(2) Asia's volume has decreased due to the continued economic recession in Japan
    and Hong Kong.
(3) Lesson volume increased in Latin America primarily due to strong sales in
    Mexico, and the opening of five new language centers in the first half of
    1999 in the Latin America region. Lesson volume is down in Venezuela and
    Argentina due to current economic recessions in these countries.
(4) Europe's volume improvement reflects continued growth in the region, with
    the largest increases generated by Germany, Israel, France, Poland, Spain
    and Italy. Both Israel and Poland had new school openings during the first
    half of 1999, which contributed to the improved volume.


                                       24
<PAGE>

For the first half of 1999, ARPL was $40.42, as compared to $40.37 in the
comparable prior-year period. The increase reflected the favorable impact of
product mix and price increases (i.e.,$1.07), partly offset by the effects of
unfavorable exchange rate fluctuations ($1.02). ARPL ranged from a high of
approximately $59.74 in Japan to a low of $15.38 in Thailand, reflecting effects
of foreign exchange rates and differences in the economic value of the service.

Within Language Services, ELS/BOC revenues declined 14.3% from the prior year.
ELS/BOC continued to be affected by weakened Asian student enrollments due to
the economic conditions in the Far East. Enrollments from Latin America are also
down due to the economic instability in Venezuela and Brazil, and the increased
strength of the dollar over the currencies in these countries. More aggressive
pricing and agent commission structures by competitors has also adversely
affected results. In addition, due to organization changes and the relocation of
the ELS headquarters from Los Angeles to Princeton in the latter part of 1998,
many overseas sales agents did not sell the ELS programs as aggressively in the
latter months of 1998 and early part of 1999 due to perceived uncertainties with
the future of ELS programs. This has impacted student arrivals during the first
and second quarter of 1999. ELS/BOC has taken actions to address these problems,
including filling vacant sales positions and articulating its new business plan
to its agents, and monitoring overhead expenses. ELS/BOC also expects to
intensify its recruitment activities, introduce an enhanced web-site, build
strong brand recognition through completion of various marketing projects, and
increase training and motivation of its key representatives.

Publishing revenues increased 3.7% over prior year, due to increased licensing
royalty revenue. Franchising revenues remained flat with the prior year. The
Company opened five ELS franchises in the first quarter of 1999, four of which
are located in Taiwan, and the other in Indonesia. Berlitz Franchising opened
one franchise in Mexico during the second quarter of 1999.

Berlitz GlobalNET sales, excluding the unfavorable effects of exchange rate
fluctuations, rose 11.6% from 1998. Geographically, sales are above prior year
in all regions. The following table compares Berlitz GlobalNET revenues by
region for the first half:

Berlitz GlobalNET Revenue:                  (Dollars in millions)
--------------------------   --------------------------------------------------
                                June 30,      Growth (Decline) from Prior Year
                             --------------   ---------------------------------
                              1999     1998      Exchange  Operations  Total
                             -----    -----      --------  ----------  -----

America                      $20.4    $18.0       $(0.1)     $ 2.5     $ 2.4(1)
Asia                           2.4      2.0         0.2        0.2       0.4
Europe                        24.6     22.5        (0.2)       2.3       2.1(2)
Inter-company eliminations    (2.1)    (1.8)       (0.1)      (0.2)     (0.3)
                             -----    -----       -----      -----     -----
Total revenue                $45.3    $40.7       $(0.2)     $ 4.8     $ 4.6
                             =====    =====       =====      =====     =====

    (1) Sales are higher than prior year in the North America due partly to
        large projects from the automotive industry during the second quarter of
        1999, and continued strength in traditional business.
    (2) The sales increase in Europe is attributable to volume increases in
        Norway and Denmark, and sales from acquisitions made in France and
        Poland in the second and fourth quarters of 1998, respectively. These
        increases were partially offset by sales decline in Ireland, due in part
        to a temporary delay of major projects by a certain client.


                                       25
<PAGE>

The total Company's cost of services and products sold as a percentage of sales
was 60.7% in the 1999 first half, compared to 59.6% in the same prior year
period. The higher percentage is mainly attributable to higher teacher salaries,
a slight decline in GlobalNET production margins, and rent expense. Selling,
general and administrative expenses as a percentage of sales were 33.7% in the
first six months of 1999, compared with 31.9% in the comparable prior year
period. The increase is due to higher administrative salaries, advertising and
rent expense.

The total Company's EBITA for the 1999 first half was $12.2 million, or 5.6% of
sales, compared to $18.2 million, or 8.6% of sales, in the same prior year
period. The following table displays the comparative EBITA for the first half of
the year by business segment:

Business Segment EBITA:                 (Dollars in millions)
-----------------------   --------------------------------------------------
                              June 30,      Growth (Decline) from Prior Year
                          --------------    --------------------------------
                           1999     1998    Exchange    Operations  Total
                          -----    -----    --------    ----------  -----
Language Services:
   Instruction            $26.7    $28.5    $(1.2)      $(0.6)(2)   $(1.8)
   ELS/BOC                 (0.3)     1.8       --        (2.1)(3)    (2.1)
   Publishing               0.6      0.4       --         0.2(4)      0.2
   Franchising              0.1       --       --         0.1         0.1
   Overhead & Other       (10.4)    (9.0)     0.2        (1.6)(5)    (1.4)
                          -----    -----    -----       -----       -----
Total Language Services    16.7     21.7     (1.0)       (4.0)       (5.0)
Berlitz GlobalNET           2.3      2.8     (0.1)       (0.4)(6)    (0.5)
Corporate and other        (6.8)    (6.3)      --        (0.5)(7)    (0.5)
                          -----    -----    -----       -----       -----
Total                     $12.2    $18.2    $(1.1)(1)   $(4.9)      $(6.0)
                          =====    =====    =====       =====       =====

           EBITA Margin %:                             June 30,
                                              --------------------------
                                                 1999            1998
                                              -----------    -----------
           Language Services:
              Instruction (8)                    19.6%          21.3%
              ELS/BOC (3)                        (1.1)%          6.2%
              Publishing                          7.8%           6.2%
              Franchising                         9.1%           4.6%
           Total Language Services                9.8%          12.7%
           Berlitz GlobalNET (9)                  5.1%           6.8%
           Total                                  5.6%           8.6%

           --------------------------------

     (1) The net unfavorable foreign exchange impact is attributable mainly to
         the Latin American countries.
     (2) The decline in Instruction operating EBITA is due mainly to the U.S.
         and Japan. In the U.S., the growth in rent and certain other fixed
         costs outpaced the growth in sales. The decline in Japan primarily is
         due to increases in teacher salaries, salary expenses, and rent. The
         decreases in these countries were partially offset by EBITA increases
         in Mexico, Peru, and the profitable results generated by the European
         countries, notably; France, Denmark, Belgium and Austria.

     (Footnotes are continued on next page)


                                       26
<PAGE>

     (3) Despite reductions in its overall costs from the prior year, ELS/BOC's
         EBITA and EBITA margin has decreased because the percentage decline in
         ELS' revenues outpaced the percentage decline of certain costs (most
         notably teachers' salaries, commissions and rent expense). In addition,
         an ELS joint venture in Japan consummated in October 1998 generated an
         EBITA loss of $0.5 million in the first half of 1999 due to its
         start-up nature.
     (4) The increase in Publishing EBITA is due to the combined effects of the
         increase in sales and the decrease in operating expenses.
     (5) Language Service's overhead cost increase over prior year is
         attributable to fixed employee costs, advertising and travel expenses.
     (6) The decline in EBITA for Berlitz GlobalNET is due to decreases in
         Europe and Asia, primarily Ireland and Germany, due in part to lower
         sales volume. These declines are is partially offset by increased
         activity in France and Poland from acquisitions made in the second and
         fourth quarters of 1998, respectively. In the Americas, EBITA increased
         $0.4 million over prior year due to stronger sales and improved
         margins.
     (7) Corporate expenses rose due to increases in salary-related costs, and
         other sundry expenses.
     (8) The reduction in Instruction's 1999's EBITA Margin occurred primarily
         as teacher costs, rent and salary related costs grew faster than
         revenues.
     (9) GlobalNET's EBITA margin decreased due to lower margins in certain
         European countries, and increases in administrative positions and rent
         expense.

Interest expense on long-term debt for the six months ended June 30, 1999
decreased $3.7 million from the comparable prior year period, due to the
extinguishment of debt in mid-March 1999. Interest expense on the new
Convertible Debentures was $2.4 million for the first half of 1999. Other
income, net for the six months ended June 30, 1999 increased by $1.2 million
over the prior year, primarily due to foreign exchange gains.

The Company recorded income tax expenses of $2.0 million and $1.7 million in
first six months of 1999 and 1998, repectively. The effective tax rates in both
1999 and 1998 were above the U.S. Federal statutory tax rate primarily as a
result of nondeductible amortization charges.


                                       27
<PAGE>

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 half of
1999, the Company has 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 at the time of
extinguishment of the underlying debt.

Financial Condition

Historically, the primary source of the Company's liquidity has been the cash
provided by operations; capital expenditures, working capital requirements and
acquisitions (except ELS) generally have been funded from internally generated
cash. Although each geographic area exhibits different patterns of lesson volume
over the course of the year, the Company's sales are generally not seasonal in
the aggregate.

Net cash used in operating activities was $6.4 million for the six months ended
June 30, 1999, compared with net cash provided of $19.7 million in the
comparable prior period. This decline of $13.3 million primarily resulted from:
(i) an increase in accounts receivable; (ii) a reduced EBITA; (iii) the payment
of year-end bonus, long-term incentive plan, and non-recurring ELS vacation/sick
pay accruals; and (iv) a payment to terminate the Company's interest rate swap.

Net cash used in investing activities totaled $18.9 million for the six months
ended June 30, 1999, up $7.1 million from the comparable prior year period. This
increase is primarily due to an acquisition of a translation services business
in the second quarter of 1999. In addition, capital expenditures for the first
half of 1999 increased $2.1 million over the prior year.

Net cash provided by financing activities for the six months ended June 30, 1999
was $17.0 million, $21.6 million higher than in the prior year. This change
primarily reflected the excess of the (i) net proceeds from the issuance of
convertible debentures and notes payable to an affiliate over (ii) the related
extinguished debt.

Other items impacting the Company's liquidity and capital resources are as
follows:

o    Reported within accrued expenses at June 30, 1999 were $1.4 million related
     to the ELS acquisition.

o    On July 1, 1999, Berlitz entered into a license agreement (the "Agreement")
     with Children's Television Workshop ("CTW"). Pursuant to this license
     agreement, CTW has agreed to create and produce, at its expense, a
     television series, entitled "Sesame English", which will initially consist
     of 52 15-minute episodes which will be complemented by instruction
     curricula and materials developed by Berlitz. In addition, Berlitz was
     granted certain rights by CTW, including the exclusive right to use certain
     Sesame Street and Sesame English names, logos and characters in connection
     with language instructional products, services and schools.


                                       28
<PAGE>

     The Agreement, covering an initial term of five years, provides for
     payments to CTW of $4 million at inception and an aggregate of $6 million
     in minimum guaranteed royalties paid in installments over the initial term
     of the agreement. In the event that Berlitz enters into any sublicenses or
     other third-party arrangements with a sublicensee for language instruction
     services in Japan, such minimum guaranteed royalties shall be reduced
     dollar for dollar, up to a maximum of $2 million from CTW's share of
     payments from such Japanese sublicensees. If certain conditions are met,
     Berlitz may extend the Agreement for another five years in exchange for
     annual minimum guaranteed royalties equal to the greater of $2 million, or
     an amount equal to 80% of the royalties earned by CTW under the Agreement
     during the fifth year of the initial term.

o    As part of its CTW and general marketing efforts, Berlitz is in the process
     of pursuing opportunities to expand the use of the Internet for the
     marketing and distribution of its products and services.

o    In June 1999, the Company acquired certain assets, operating subsidiaries
     and key personnel of Language Management International, Inc., a
     translations services company. The purchase price was $7.8 million, plus a
     contingent payment based on gross revenues for the twelve months ending
     June 30, 2000. The Company also incurred various transaction-related
     expenditures and accrued expenses. At June 30, 1999, in connection with
     this acquisition, the Company recorded $11.8 million of goodwill and $4.0
     million of accrued current liabilities for transaction-related expenses and
     contingencies.

o    On June 8, 1999, the Company's shareholders approved the Company's 1999
     Long-Term Executive Incentive Compensation Plan (the "1999 LTIP"). The 1999
     LTIP provides for potential cash awards to be paid to senior management in
     2002 if certain revenue, earnings and cash flow targets are achieved for
     the three year period from 1999 to 2001. The 1999 LTIP is intended to be an
     unfunded plan, and the Company is not required to establish any fund or
     segregate any assets. Based on limitations contained within the 1999 LTIP,
     total awards are currently expected to range from a minimum of $0 to a
     maximum of $7.2 million.

o    On March 31, 1999, the Company entered into a new $25 million revolving
     credit facility (the "Revolving Facility"), which expires in February 2002.
     At the option of the Company, outstanding borrowings under the Revolving
     Facility bear interest at variable rates equal to either (i) a base rate
     approximating the U.S. prime rate or (ii) the rate offered by certain
     reference banks to prime banks in the interbank Eurodollar market, fully
     adjusted for reserves plus a margin ranging from 0.375% to 0.5%; such
     margin is dependent on a specified leverage ratio of the Company. In
     addition, a commitment fee ranging from 0.125% to 0.20% will be charged on
     the available but unused amounts under the revolving credit facility,
     depending on a specified leverage ratio. There were $4.0 million of
     outstanding borrowings under the Revolving Facility at June 30, 1999.

o    The Company's Supplemental Executive Retirement Plan ("SERP") provides
     retirement income / disability retirement benefits, retiree medical
     benefits and death benefits to certain designated executives and their
     designated beneficiaries. The Company intends to fund the SERP through a
     combination of funds generated from operations and life insurance policies
     on the participants.


                                       29
<PAGE>

o    The Company is party to currency coupon swap agreements with a financial
     institution to hedge the Company's net investments in certain foreign
     subsidiaries. These agreements require the Company, in exchange for U.S.
     dollar receipts, to periodically make foreign currency payments,
     denominated in the Japanese yen, the Swiss franc, the British pound, and
     the German mark. Credit loss from counterparty nonperformance is not
     anticipated. The estimated fair value of these swap agreements at June 30,
     1999, representing the amount that could be settled based on estimates
     obtained from a dealer, was a net liability of approximately $0.1 million.

o    On March 11, 1999, the Company's shareholders approved the issuance of, and
     the Company issued, $155 million aggregate principal amount 12-year
     convertible debentures (the "Convertible Debentures") in a private
     placement, pursuant to definitive investment agreements (the "Investment
     Agreements") dated as of October 2, 1998. Such debentures were issued as
     follows: a) $100 million aggregate principal amount (the "Apollo
     Debentures") to two affiliates of Apollo Management IV, L.P. ("Apollo"), a
     private investment firm; and b) $55 million aggregate principal amount (the
     "Benesse Debentures") to Benesse Holding International, Inc. ("BHI"), the
     Company's majority shareholder. The Convertible Debentures bear interest at
     5% per annum, payable semi-annually. Principal amounts outstanding under
     such debentures are not due until March 2011, and the Company is not
     required to establish a bond sinking fund for repayment of this principal.
     The Convertible Debentures are convertible at any time into shares of the
     Company's common stock at a conversion price of $33.05 per share, subject
     to anti-dilution related adjustments.

     In a separate transaction on March 11, 1999, BHI loaned $50 million to the
     Company, evidenced by a 12-year fixed rate subordinated promissory note
     (the "BHI Note"). Such note bears interest for the first five years at 5.2%
     per annum, and, thereafter, at a renegotiated fixed rate approximating
     LIBOR plus a margin based on the Company's then existing leverage. Interest
     is payable semiannually in cash while principal repayment is deferred until
     maturity. In the event of a change in control, the BHI Note provides for
     redemption by the Company, at the option of BHI, at price equal to 101% of
     the note's principal amount.

     The Company used the proceeds from the sale of the Convertible Debentures,
     as well as proceeds from the BHI Note issuance, to repay in full all
     outstanding indebtedness pursuant to the Bank Facility and existing notes
     payable to Benesse, and for general corporate purposes. The Company
     incurred approximately $2.8 million in deferred finance costs associated
     with the issuance of the Convertible Debentures and BHI Note.

At June 30, 1999, the Company's liquid assets of $28.2 million consisted of cash
and temporary investments. The Company does not currently have any material
commitments for capital expenditures, except as disclosed below under "The Year
2000 Issue". In the future, the Company anticipates capital expenditures to
continue to be in line with recent historical trends due to the refurbishment of
the Company's language centers, the expansion of the Company's GlobalNET
segment, and technological expansion. The Company plans to meet its debt service
requirements and future working capital needs through funds generated from
operations.


                                       30
<PAGE>

The Year 2000 Issue

Introduction

The Year 2000 issue is the result of certain computerized systems' use of a two
rather than four digit year (e.g., 95 vs. 1995). As a result of the ambiguous
century in such systems, the introduction of twenty-first century dates may
cause systems to function abnormally or not at all.

Recognizing the need to ensure operations will not be adversely affected by Year
2000 failures, the Company established a committee to address any possible
exposure. This committee is responsible for carrying out the Company's awareness
program, assessing key financial and operational systems, for assessing external
relationships with customers and vendors, and for developing and implementing
detailed divisional action plans.

The Company has divided the Year 2000 issue into three areas: (i)
Infrastructure; (ii) Internal Use Financial and Operational Software; and (iii)
Key Third Party Customer and Vendor Relationships. For each area, the committee
is responsible for carrying out the following steps: Inventory, Assessment,
Remediation and Testing, and Contingency Plan Development and Implementation.

The infrastructure area contains all hardware, embedded systems, and software,
except financial and operational software. Non-compliant internal use financial
software is currently being replaced in conjunction with the deployment of
PeopleSoft systems. Such PeopleSoft systems are warranted to be Year 2000
compliant and have been successfully tested as such. Key third party
relationships include external interfaces between the Company and its suppliers,
service providers, and customers that are deemed material to the continued
operation of the Company.

State of Readiness

Overall, the Company's Year 2000 project is currently proceeding on schedule and
is expected to be fully completed by September 29, 1999.

As of April 1998, the committee had completed a worldwide systems inventory and
assessment for the infrastructure and internal use financial and operational
systems areas. To minimize complicating factors, the Company chose to replace
rather than upgrade most non-compliant systems without commercially available
remediation paths at the time of assessment. The Company is employing both
internal and external resources in its remediation efforts.

Remediation and testing of systems began in July 1998 and is scheduled to
continue through September 29, 1999. Testing is scheduled to occur in line with
remediation efforts; as systems are upgraded or replaced, compliance testing of
the system will begin. Based on current progress, the Company reasonably expects
that all internal remediation efforts in this area will be completed on or
before the scheduled completion date. Further, the Company believes it is
unlikely that its efforts to remediate non-compliant financial and operational
software would extend beyond the scheduled completion date.


                                       31
<PAGE>

The Company has conducted a formal communications program with all key vendors
and customers to identify and assess their states of readiness. Based on the
results of this process, the committee is assessing the likelihood of a failure
in a third party's own Year 2000 remediation program and the resulting impact to
the Company. Communications with key third parties are continuing to minimize
the exposure to the Company and its ability to conduct normal business. The
Company completed its initial assessment of external vendor relationships in
November 1998.

Due to the fact that many third parties' programs are not yet fully completed,
the Company expects communications to continue through September 1999. Third
parties that do not provide convincing evidence that they will successfully
achieve compliance by September 1999 will be subject to replacement.

Risk

The Company expects to achieve internal compliance and does not believe that any
reasonably likely risk of material failure exists. Based on management estimates
and the uncertainty surrounding the Company's ability to guarantee the
compliance of third parties, the Company expects that the most likely worst case
is that some third parties fail to successfully and completely remediate all
Year 2000 issues. Third party failures could range from the loss of a utility or
service such as electricity or telecommunications to a loss of revenue due to a
customer's inability to conduct normal business based on the failure of the
customer's or vendor's own systems or those of its own critical third party
relationships.

Third parties deemed material to the Company fall primarily into the following
categories: banks, accounting bureaus, telecommunications providers, utilities,
and customers. Although management estimates that it is reasonably likely that
some third parties may experience failures, the Company does not believe that
the aggregate effect of such failures will have a material effect on the
Company's consolidated future results. This estimate is based on the nature of
the Company's services, its widespread geographic dispersion, and the diversity
of its customer base.

Although third party failures are beyond the reasonable control of the Company,
the Company is making every effort to reduce any negative effect by closely
communicating with third parties to follow the progress of their remediation
programs and minimize the risks associated with a third party's failure to
achieve compliance.

Contingency Plans

To further minimize any risk associated with any internal or third party failure
to achieve compliance, the Company is continuing the development of contingency
plans as necessary for those critical systems and third party relationships that
have the potential to materially interrupt the Company's ability to conduct
normal business. Based on management assessments, decisions to implement
contingency plans related to the remediation and deployment of internally
developed software have been effected as necessary. All contingency plans deemed
necessary are expected to be fully implemented by the end of the third quarter
of 1999.

Costs to Address the Year 2000 Issue

The Company currently estimates the cost for Year 2000 compliance with respect
to its information and production systems to be approximately $4.9 million,
consisting of: $3.6


                                       32
<PAGE>

million for replacements of financial accounting and operational systems with
the remainder dedicated to infrastructure and third party relationship
remediation.

Recent Accounting Pronouncements

During June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). The new standard requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. The accounting for gains or losses resulting from changes in the
values of those derivatives would depend on the use of the derivative and
whether it qualifies for hedge accounting. Based on the Company's current
activities, the new standard is not expected to have a material impact on the
Company's financial position or results of operations. SFAS 133 will be
effective for the calendar year beginning January 1, 2001.

On September 28, 1998, the Securities and Exchange Commission ("SEC") issued a
press release stating that it "will formulate and augment new and existing
accounting rules and interpretations covering revenue recognition, restructuring
reserves, materiality and disclosure" for all publicly-traded companies. Until
such time as the SEC staff issues such interpretative guidelines, it is unclear
what, if any, impact such interpretative guidelines will have on the Company's
current accounting policy. However, the potential changes in accounting practice
being considered by the SEC staff could have a material impact on the manner in
which the Company recognizes revenue.

Special Note Regarding Forward Looking Statements

Certain statements in this Quarterly Report on Form 10-Q, including information
appearing under the captions "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). The Company desires to take advantage of certain "Safe Harbor"
provisions of the Reform Act and is including this special note to enable the
Company to do so. Forward-Looking Statements involve known and unknown risks,
uncertainties, and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ materially from
the future results, performance (financial or operating) or achievements
expressed or implied by such Forward-Looking Statements. Such risks,
uncertainties and other factors include, among others: the Company's success in
selling new franchises; the economic conditions in the Asian region; the Year
2000 issues, including the success with which the Company's customers and
suppliers address their Year 2000 exposures; as well as more general factors
affecting future cash flows and their effects on the Company's ability to meet
its debt service requirements and future working capital needs, including
fluctuations in foreign currency exchange rates; demand for the Company's
products and services; the impact of competition; the effect of changing
economic and political conditions; the level of success and timing in
implementing corporate strategies and new technologies; changes in governmental
and tax laws and regulations, tax audits and other factors (known or unknown)
which may affect the Company. As a result, no assurance can be given as to
future results, levels of activity and achievements.


                                       33
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company's major market risk exposure is foreign currency fluctuations.
Geographically, the majority of the Company's subsidiaries are located outside
the United States, with operations conducted in their respective local
currencies. For example, for the three years ended December 31, 1998, the
percentage of total revenues denominated in currencies other than U.S. dollars
averaged 68%, in foreign currencies including the Japanese yen, German mark,
Irish punt, Brazilian real, Mexican peso, British pound and French and Swiss
francs. As discussed under "Management's Discussion and Analysis - Liquidity and
Capital Resources", the Company maintains currency coupon swap agreements with a
financial institution to hedge the Company's net investments in certain foreign
subsidiaries. These agreements require the Company to exchange foreign
currency-denominated interest payments for U.S. dollar-denominated interest
receipts on a semi-annual basis. Significant terms of currency swap agreements
outstanding at June 30, 1999 were as follows:

<TABLE>
<CAPTION>
                                Interest Payment to       Interest Receipts from
                               Financial Institution      Financial Institution
                     -----------------------------------  ------------------------
                                                          Notional            Fair Value
Effective                                       Interest   Amount   Interest  at 6/30/99
   Date    Maturity    Notional Amount (000's)    Rate     (000's)    Rate      (000's)
   ----    --------  -------------------------    ----    --------    ----      ------
<S>        <C>       <C>            <C>           <C>     <C>         <C>       <C>
  1/1/99   12/30/02   Japanese Yen  12,311,005    5.50%   $95,694     6.27%     $(646)
  1/1/99   12/31/02   German Mark       99,546    6.12%   $55,821     6.27%     $ 353
  1/4/99   12/31/02   Swiss Franc       16,131    5.72%   $11,164     6.27%     $ 182
  1/4/99   12/31/02   British Pound      4,841    6.56%   $ 7,974     6.27%     $  (7)
</TABLE>

The fair values of the coupon swap agreements represent the amounts that could
be settled based on estimates obtained from a dealer. The value of these swaps
will be affected by future interest rates and exchange rates.

On March 11, 1999 ("the Issue Date"), the Company issued the Convertible
Debentures, consisting of the Apollo and Benesse Debentures (see Management's
Discussion and Analysis - Liquidity and Capital Resources).

o    The Apollo and Benesse Debentures each independently provide for optional
     redemption by the Company, in whole but not in part, anytime following 60
     trading days after the third anniversary of the Issue Date. If the average
     closing price of the Company's common stock for the 30 trading days
     following the third anniversary of the Issue Date exceeds $39.66 per share,
     the Company may redeem at par. Otherwise, if the Convertible Debentures are
     redeemed, the Company shall pay a redemption premium, expressed as a
     percentage of outstanding principal, as follows: a) 4% for redemptions
     occurring in the fourth year after issue; b) 2% for redemptions occurring
     in the fifth year after issue; and c) 0% for redemptions occurring
     thereafter. All such redemptions are subject to the holders' rights to
     first convert into common stock of the Company.

o    The Convertible Debentures also allow Apollo and BHI to elect to exchange
     their convertible debentures, in whole, into non-convertible, 7-year fixed
     rate debt (the "Fixed Rate Debentures"). Such election may only be made if
     the average closing price of the Company's common stock during the 30
     trading days immediately preceding the third anniversary of the Issue Date
     does not exceed $33.05. Furthermore, BHI may only effect an exchange if
     Apollo does so. Upon the determination, by an independent financial
     institution, of fixed interest rates that accurately price the Fixed Rate
     Debentures at par under specified circumstances at the time of the
     exchange, Apollo and BHI shall


                                       34
<PAGE>

     irrevocably decide whether to proceed with their exchanges. If only Apollo
     proceeds with such an exchange, the Company, no later than 150 days from
     the third anniversary of the Issue Date, must either a) redeem all of the
     Apollo Debentures at par, or b) deliver the Fixed Rate Debentures to
     Apollo. If both Apollo and BHI proceed with their exchanges, the Company,
     within the same 150 day period, shall either a) redeem both the Apollo and
     Benesse Debentures, or b) deliver the Fixed Rate Debentures to both Apollo
     and BHI.

o    Principal amounts outstanding under the Fixed Rate Debentures would not be
     payable until maturity, while interest payments would be made
     semi-annually. The Fixed Rate Debentures interest rate is subject to a cap
     of a) the applicable U.S. treasury rate + 5% (not to exceed 13%) if only
     Apollo receives Fixed Rate Debentures, or b) the applicable U.S. treasury
     rate + 7% (not to exceed 14%) if both Apollo and BHI receives Fixed Rate
     Debentures. The Fixed Rate Debentures may be redeemed by the Company after
     the third anniversary of their issue upon payment of principal amounts of
     the Fixed Rate Debentures and the following redemption premiums, expressed
     as a percentage of the outstanding principal amount: a) one half of the per
     annum interest rate for redemptions occurring in the fourth year after
     issue; b) one quarter of the per annum interest rate for redemptions
     occurring in the fifth year after issue; and c) no premium for redemptions
     occurring thereafter.

o    Prior to the third anniversary of the Issue Date, if Benesse sells 80% or
     more of the shares of Berlitz common stock owned directly or indirectly by
     it on the Issue Date, the Company shall be required to make an offer to
     repurchase for cash: i) the Apollo Debentures at a value equal to 110% of
     the principal amount then outstanding; and ii) the Benesse Debentures at a
     value equal to 101% of the principal amount then outstanding. In addition,
     if at any time on or after the Issue Date a change of control, as defined
     in the Investment Agreements, occurs but Benesse sells less than 80% of its
     shares, or if Benesse sells 80% of its shares on or after the third
     anniversary of the Issue Date, the Company shall be required to make an
     offer to repurchase for cash the Convertible Debentures (but not the Fixed
     Rate Debentures) at a value equal to 101% of the principal amount of the
     Convertible Debentures.

o    The fair value of the Convertible Debentures was last estimated at the end
     of March, 1999. As of that date the Convertible Debentures had a estimated
     fair value of $142.6 million. The estimate was based on current interest
     rates and the Company's stock price volatility. The Company does not
     believe that this estimate has materially changed at June 30, 1999.

The Company's derivatives are for non-trading purposes. The Company historically
has only entered into derivative contracts as required by its lenders and it has
no present intentions to change this policy. Furthermore, the Company employed
the following procedures to monitor and minimize the market and credit risk
associated with its current derivative contracts entered into pursuant to its
Bank Facility:

a)   bids and proposals were obtained from only major financial institutions;
b)   prior to entering into its derivative contracts, the Company conferred with
     independent advisors to assess the reasonableness of the contracts and
     obtained Board of Director approval;
c)   the Company entered into simple agreements; and
d)   the Company provides status updates regarding its derivatives, including
     market value updates, to its Board of Directors on a regular basis.


                                       35
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                           PART II. OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The 1999 Annual meeting of shareholders was held on June 8, 1999 for the
following purposes:

        1.   To elect two directors to serve one-year terms until the 2000
             annual meeting of shareholders and to elect six directors to serve
             two-year terms until the 2001 annual meeting of shareholders;

        2.   To ratify the selection by the Board of Directors of the Company of
             Deloitte & Touche LLP, independent accountants, to audit the
             Company's consolidated financial statements for 1999; and

        3.   To approve the adoption of the Company's 1999 Long Term Executive
             Incentive Compensation Plan.

Votes representing 8,718,429 shares were cast for, and 61,353 shares were cast
against or shares abstained from voting on the election of each director. Votes
representing 8,779,496 shares were cast for, 105 shares were cast against, and
181 shares abstained from voting on the ratification of Deloitte & Touche LLP to
audit the Company's 1999 financial statements. Votes representing 8,566,643
shares were cast for, 120,309 shares were cast against, and 194 shares abstained
from voting on the approval of the Company's 1999 Long Term Executive Incentive
Compensation Plan.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

All exhibits listed below are filed with this Quarterly Report on Form 10-Q.

Exhibit No.

    27         Financial Data Schedule, for the quarterly period ended June 30,
               1999.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended June 30, 1999.


                                       36
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Exchange Act the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                               BERLITZ INTERNATIONAL, INC.
                                                      (Registrant)


Date: August 16, 1999                          By: /s/ HENRY D. JAMES
                                                  ------------------------------
                                                  Henry D. James
                                                  Executive Vice President and
                                                  Chief Financial Officer


                                       37