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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2008.

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: 333-118753





Language Line, Inc.

(Exact name of
registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0997805                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)

One Lower Ragsdale Drive

Monterey, California 93940

(Address, including zip code, of registrants
principal executive offices)

(877) 886-3885

(Registrants telephone number, including area code)





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
    Yes   ̈    No  x

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   ̈

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a small reporting company. See definition of  large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                             
|-------------------------- |  | ----------------------------
| ̈  Large accelerated filer |  |  ̈  Accelerated filer        
|x  Non-accelerated filer   |  |  ̈  Smaller reporting company

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

As of March 31, 2008, there were 1,000 shares of the registrants common stock, $.01 par value, which is the only class of common stock of the registrant. There is no market for the registrants common
stock, all of which is held by Language Line Holdings, LLC.









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FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that involve expectations, plans or intentions (such as those relating to future business or financial results, new features or services, or management
strategies). These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties, so actual results may vary materially. You can identify
these forward-looking statements by words such as may, will, should, expect, anticipate, believe, estimate, intend, plan and other similar
expressions. You should consider our forward-looking statements in light of the factors set forth in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations and the risks and uncertainties that
could cause Language Line, Inc.s (LLI, we, us, or the Company) actual results to differ materially from those which are managements current expectations or forecasts. These risks and
uncertainties include, but are not limited to, industry based factors such as the level of competition in the outsourced over-the-phone interpretation services market, continued demand from the primary industries the Company serves, the availability
of telephone services, as well as factors more specific to the Company such as restrictions imposed by the Companys debt including financial covenants and limitations on the Companys ability to incur additional indebtedness, the
Companys future capital requirements, and risk associated with economic conditions generally. The forward looking statements contained in this report are made under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations. Moreover, the Company, through its senior management, may from time to time make forward looking statements about matters described herein or other matters concerning the Company. We
assume no obligation to update any forward-looking statements.



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LANGUAGE LINE, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings, LLC)

TABLE OF CONTENTS



|                              |  |                                                                                                        |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | --
|                              |  | Page                                                                                                  
|Part 1. Financial Information |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Financial Statements (Unaudited)                                                                       |  | 1 
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Balance Sheets  March 31, 2008 and December 31, 2007                           |  | 1 
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Statements of Operations  Three Months ended March 31, 2008 and March 31, 2007 |  | 2 
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Statements of Cash Flows  Three Months ended March 31, 2008 and March 31, 2007 |  | 3 
|                              |  |                                                                                                       
|                              |  | Notes to Condensed Consolidated Financial Statements                                                   |  | 4 
|                              |  |                                                                                                       
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 7 
|                              |  |                                                                                                       
|Item 3.                       |  | Quantitative and Qualitative Disclosures of Market Risk                                                |  | 11
|                              |  |                                                                                                       
|Item 4.                       |  | Controls and Procedures                                                                                |  | 11
|                              | 
|Part 2. Other Information     |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Legal Proceedings                                                                                      |  | 11
|                              |  |                                                                                                       
|Item 1A.                      |  | Risk Factors                                                                                           |  | 11
|                              |  |                                                                                                       
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 11
|                              |  |                                                                                                       
|Item 3.                       |  | Defaults Upon Senior Securities                                                                        |  | 12
|                              |  |                                                                                                       
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                    |  | 12
|                              |  |                                                                                                       
|Item 5.                       |  | Other Information                                                                                      |  | 12
|                              |  |                                                                                                       
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                       |  | 12
|                              | 
|Signatures                    |  | 13                                                                                                    
|                              | 
|Certifications                |  | Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2                                                      



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PART 1. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

LANGUAGE LINE, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings, LLC)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

(Unaudited)



|                                                                                           |  |               |         |                  |   |        
|------------------------------------------------------------------------------------------ |  | ------------- | ------- | ---------------- | - | -------
|                                                                                           |  | March 31,2008 |         | December 31,2007
|Assets                                                                                     |  |               |         |                  |   |        
|Current assets:                                                                            |  |               |         |                  |   |        
|Cash and cash equivalents                                                                  |  | $             | 22,551  |                  | $ | 13,898 
|Accounts receivable, net                                                                   |  |               | 27,067  |                  |   | 28,696 
|Prepaid expenses and other current assets                                                  |  |               | 3,355   |                  |   | 2,128  
|Deferred taxes on income                                                                   |  |               | 971     |                  |   | 1,385  
|                                                                                           |  |               |         |                  |   |        
|Total current assets                                                                       |  |               | 53,944  |                  |   | 46,107 
|Property and equipment, net                                                                |  |               | 5,624   |                  |   | 5,913  
|Goodwill                                                                                   |  |               | 408,793 |                  |   | 408,793
|Intangible assets, net                                                                     |  |               | 333,557 |                  |   | 340,222
|Deferred financing costs, net                                                              |  |               | 8,674   |                  |   | 9,288  
|Other assets                                                                               |  |               | 241     |                  |   | 241    
|                                                                                           |  |               |         |                  |   |        
|Total assets                                                                               |  | $             | 810,833 |                  | $ | 810,564
|                                                                                           |  |               |         |                  |   |        
|Liabilities and Stockholders Equity                                                       |  |               |         |                  |   |        
|Current liabilities:                                                                       |  |               |         |                  |   |        
|Accounts payable                                                                           |  | $             | 1,845   |                  | $ | 1,603  
|Accrued interest                                                                           |  |               | 5,389   |                  |   | 2,339  
|Accrued compensation and interpreter costs                                                 |  |               | 6,353   |                  |   | 5,930  
|Other accrued liabilities                                                                  |  |               | 2,312   |                  |   | 2,339  
|Dividends payable                                                                          |  |               |        |                  |   | 1,000  
|Income taxes payable                                                                       |  |               | 2,630   |                  |   | 624    
|Current portion of long-term debt                                                          |  |               | 12,332  |                  |   | 17,730 
|                                                                                           |  |               |         |                  |   |        
|Total current liabilities                                                                  |  |               | 30,861  |                  |   | 31,565 
|Other liabilities                                                                          |  |               | 3,492   |                  |   | 3,463  
|Long-term debt                                                                             |  |               | 198,592 |                  |   | 201,451
|Senior subordinated notes                                                                  |  |               | 162,309 |                  |   | 162,185
|Deferred taxes on income                                                                   |  |               | 148,412 |                  |   | 149,452
|                                                                                           |  |               |         |                  |   |        
|Total liabilities                                                                          |  |               | 543,666 |                  |   | 548,116
|                                                                                           |  |               |         |                  |   |        
|Stockholders equity:                                                                      |  |               |         |                  |   |        
|Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding |  |               |        |                  |   |       
|Additional paid-in capital                                                                 |  |               | 259,693 |                  |   | 259,587
|Accumulated earnings                                                                       |  |               | 7,474   |                  |   | 2,861  
|                                                                                           |  |               |         |                  |   |        
|Total stockholders equity                                                                 |  |               | 267,167 |                  |   | 262,448
|                                                                                           |  |               |         |                  |   |        
|Total liabilities and stockholders equity                                                 |  | $             | 810,833 |                  | $ | 810,564
|                                                                                           |  |               |         |                  |   |        

See notes to condensed consolidated financial statements.



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LANGUAGE LINE, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



|                                                             |  |                                  |        |                                  |   |       
|------------------------------------------------------------ |  | -------------------------------- | ------ | -------------------------------- | - | ------
|                                                             |  | Three months endedMarch 31, 2008 |        | Three months endedMarch 31, 2007
|Revenues                                                     |  | $                                | 48,897 |                                  | $ | 45,266
|Cost of services (exclusive of items shown separately below) |  |                                  | 16,326 |                                  |   | 15,573
|Other expenses:                                              |  |                                  |        |                                  |   |       
|Selling, general and administrative                          |  |                                  | 8,567  |                                  |   | 8,041 
|Interest                                                     |  |                                  | 9,365  |                                  |   | 10,392
|Depreciation and amortization                                |  |                                  | 7,369  |                                  |   | 8,488 
|                                                             |  |                                  |        |                                  |   |       
|Total other expenses                                         |  |                                  | 25,301 |                                  |   | 26,921
|                                                             |  |                                  |        |                                  |   |       
|Other income:                                                |  |                                  |        |                                  |   |       
|Interest                                                     |  |                                  | 254    |                                  |   | 302   
|Other                                                        |  |                                  | 335    |                                  |   |      
|                                                             |  |                                  |        |                                  |   |       
|Total other income                                           |  |                                  | 589    |                                  |   | 302   
|                                                             |  |                                  |        |                                  |   |       
|Income before taxes on income                                |  |                                  | 7,859  |                                  |   | 3,074 
|Taxes on income                                              |  |                                  | 3,246  |                                  |   | 1,164 
|                                                             |  |                                  |        |                                  |   |       
|Net income                                                   |  | $                                | 4,613  |                                  | $ | 1,910 
|                                                             |  |                                  |        |                                  |   |       

See notes to condensed consolidated financial statements.



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LANGUAGE LINE, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                  |  |                                  |        |   |                                  |   |        |  
|--------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | -------------------------------- | - | ------ | -
|                                                                                  |  | Three months endedMarch 31, 2008 |        |   | Three months endedMarch 31, 2007 |  
|Cash flows from operating activities:                                             |  |                                  |        |   |                                  |   |        |  
|Net income                                                                        |  | $                                | 4,613  |   |                                  | $ | 1,910  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                  |        |   |                                  |   |        |  
|Depreciation and amortization                                                     |  |                                  | 7,369  |   |                                  |   | 8,488  |  
|Amortization of deferred financing costs                                          |  |                                  | 614    |   |                                  |   | 613    |  
|Deferred taxes on income                                                          |  |                                  | (626   | ) |                                  |   | (1,656 | )
|Stock based compensation expense                                                  |  |                                  | 106    |   |                                  |   | 103    |  
|Accretion of discount on long-term debt                                           |  |                                  | 124    |   |                                  |   | 111    |  
|Effect of changes in operating assets and liabilities:                            |  |                                  |        |   |                                  |   |        |  
|Accounts receivable                                                               |  |                                  | 1,629  |   |                                  |   | (1,555 | )
|Prepaid expenses and other current assets                                         |  |                                  | (1,227 | ) |                                  |   | (177   | )
|Other assets                                                                      |  |                                  |       |   |                                  |   | 42     |  
|Accounts payable                                                                  |  |                                  | 242    |   |                                  |   | (129   | )
|Income taxes payable                                                              |  |                                  | 2,006  |   |                                  |   | (1,459 | )
|Accrued interest and other liabilities                                            |  |                                  | 3,475  |   |                                  |   | 5,449  |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Net cash provided by operating activities                                         |  |                                  | 18,325 |   |                                  |   | 11,740 |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Cash flows from investing activities:                                             |  |                                  |        |   |                                  |   |        |  
|Purchase of property and equipment                                                |  |                                  | (327   | ) |                                  |   | (707   | )
|Acquisition of intangible asset                                                   |  |                                  | (88    | ) |                                  |   | (175   | )
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Net cash used in investing activities                                             |  |                                  | (415   | ) |                                  |   | (882   | )
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Cash flows from financing activities :                                            |  |                                  |        |   |                                  |   |        |  
|Long-term debt repayments                                                         |  |                                  | (8,257 | ) |                                  |   | (7,779 | )
|Dividend paid to parent company                                                   |  |                                  | (1,000 | ) |                                  |   |       |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Net cash used in financing activities                                             |  |                                  | (9,257 | ) |                                  |   | (7,779 | )
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Net increase in cash and cash equivalents                                         |  |                                  | 8,653  |   |                                  |   | 3,079  |  
|Cash and cash equivalents - beginning of period                                   |  |                                  | 13,898 |   |                                  |   | 20,236 |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Cash and cash equivalents - end of period                                         |  | $                                | 22,551 |   |                                  | $ | 23,315 |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Supplemental cash flow disclosures:                                               |  |                                  |        |   |                                  |   |        |  
|Cash paid for interest                                                            |  | $                                | 5,519  |   |                                  | $ | 7,696  |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  
|Cash paid for income taxes                                                        |  | $                                | 1,836  |   |                                  | $ | 98     |  
|                                                                                  |  |                                  |        |   |                                  |   |        |  

See notes to condensed consolidated financial statements.



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LANGUAGE LINE, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line Holdings, LLC)

Notes to Condensed Consolidated Financial Statements

(Unaudited)



|1. | The Company and Summary of Significant Accounting Policies
|-- | ----------------------------------------------------------

Basis of Presentation

The accompanying unaudited condensed consolidated financial information has been prepared in
accordance with the Securities and Exchange Commission (SEC) regulations for interim financial reporting. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting only of normal
recurring adjustments, that are considered necessary for a fair statement of the Companys financial position, results of operations and cash flows for the interim periods. Operating results for the three months ended March 31, 2008 and
March 31, 2007 are not necessarily indicative of results that may be expected for the entire year. This financial information should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended
December 31, 2007 of Language Line, Inc., which are included in the Form 10-K filed with the SEC on March 26, 2008.

In
accordance with the rules and regulations of the SEC, unaudited condensed consolidated financial statements may omit or condense certain information and disclosures normally required for a complete set of financial statements prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP). Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations.

Organization

Language Line Holdings, Inc. (the Predecessor) was a Delaware corporation formed in December 1999 as a holding company for Language Line, LLC (LLC) and its subsidiaries. LLC was incorporated
during February 1999 as a Delaware limited liability company. The Predecessor was acquired on June 11, 2004 by Language Line, Inc. (LLI) in a transaction accounted for under the purchase method of accounting (the
Merger). LLI, a wholly-owned subsidiary of Language Line Acquisition, Inc., is a Delaware corporation formed in April 2004. LLI had no significant operations prior to the acquisition of Predecessor. Subsequent to the Merger, Language
Line Acquisition, Inc., an indirect wholly-owned subsidiary of Language Line Holdings, LLC (Holdings), was renamed Language Line Holdings, Inc. (LLHI).

The Company provides over-the-phone interpretation services, from English into over 170 different languages, 24 hours a day, seven days a week. Such
services are provided mainly to the non-English speaking business population in the U.S. and Canada covering various industries such as insurance, healthcare, financial, utilities and government, providing a cost effective alternative to staffing
in-house multilingual capabilities or using face-to-face interpretation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Such management estimates include the allowance for doubtful accounts receivables, the useful life of intangible
assets, impairment of goodwill and intangible assets, income taxes, and claims and legal proceedings. Actual results could differ from those estimates.



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Principles of Consolidation

The condensed consolidated financial statements include the accounts of LLI, LLC and LLCs wholly-owned subsidiaries as of March 31, 2008 and December 31, 2007, and for the three months ended
March 31, 2008 and 2007. All significant intercompany accounts and transactions have been eliminated in consolidation.

Goodwill and Other
Intangible Assets

The Company accounts for goodwill and other intangible
assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill resulting from a business combination be tested for impairment annually at the reporting unit level or whenever events or
changes in circumstances indicate that goodwill might be impaired. The Company completed the annual test of impairment for goodwill as of December 31, 2007, October 1, 2007, October 1, 2006 and 2005, respectively. These
tests resulted in no impairment being recognized. The change in the annual test of impairment for goodwill to December 31strepresents a change
in accounting principle and was a preferable change as the Companys annual budgeting process takes place during the later part of the fourth fiscal quarter, and such information is utilized in the valuation process. Other intangible assets are
generally amortized on a straight-line basis over their useful life which is based on historic experience and plans for utilization of the assets by the Company subsequent to the business combination.

Income Taxes

Income taxes are accounted for
using an asset and liability approach. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and
operating loss and tax credit carry forwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized.

Recent Accounting Pronouncements

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115(SFAS 159). SFAS No.) 159 permits an entity to elect fair value as the
initial and subsequent measurement attribute for many financial assets and liabilities. Entities electing the fair value option would be required to recognize changes in fair value in earnings. Entities electing the fair value option are required to
distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The adjustment to reflect the difference between the fair value and the carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date
of initial adoption. We elected not to adopt the fair value option for any financial assets and liabilities.

In December 2007, the
Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141 (Revised 2007), Business Combinations (FAS 141(R)). FAS 141(R) establishes
principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree, as well as the
goodwill acquired. Significant changes from current practice resulting from FAS 141(R) include the expansion of the definitions of a business and a business combination. For all business combinations (whether partial,
full or step acquisitions), the acquirer will record 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration will be recognized at its fair value on the acquisition
date and, for certain arrangements, changes in fair value will be recognized in earnings until settlement; and acquisition-related transaction and restructuring costs will be expensed rather than treated as part of the cost of the acquisition.
FAS 141(R) also establishes disclosure requirements to enable users to evaluate the nature and financial effects of the business combination. FAS 141(R) applies prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is not permitted. We are currently evaluating the potential impact of this statement.



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In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements  An amendment of ARB No. 51 (FAS 160). FAS 160 amends Accounting Research Bulletin 51 Consolidated Financial Statements to establish accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is a third-party ownership interest in the
consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, FAS 160 requires consolidated statement of income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. FAS 160 also requires disclosure on the face of the consolidated statement of income of the amounts of consolidated net income attributable to the parent and to the noncontrolling
interest. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently evaluating the potential impact of this statement.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurement (SFAS 157), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosure requirements about fair value measurements. SFAS 157 applies to other accounting pronouncements
that require or permit fair value measurements. The fair value measurement of financial assets and financial liabilities is effective for us beginning in fiscal year 2008. Two FASB Staff Positions (FSP) on this statement were
subsequently issued. FSP No. 157-1, issued on February 14, 2007, excluded SFAS No. 13, Accounting for Leases (SFAS 13), and other accounting pronouncements that address fair value measurements for purposes of lease
classification or measurement under SFAS 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination, which are required to be measured at fair value under SFAS No. 141, Business
Combinations (SFAS 141), or SFAS No. 141 (Revised 2007), Business Combinations (SFAS 141(R)), regardless of whether those assets and liabilities are related to leases. This FSP was effective upon our initial
adoption of SFAS 157. FSP No. 157-2, issued on February 12, 2007, delayed the effective date of this statement for non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a
nonrecurring basis. This FSP will be effective for us in fiscal year 2009. Accordingly, our adoption of this standard on January 1, 2008 is limited to financial assets and liabilities, and did not have a material impact on our consolidated financial
position, results of operations or cash flows. We are currently evaluating the anticipated effect of this statement on the non-financial assets and non-financial liabilities of our consolidated financial statements.



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2. Guarantor Subsidiaries

The Companys outstanding public debt (the Senior Subordinated Notes) is jointly and severally, fully and unconditionally guaranteed by the Company and its subsidiaries (the Guarantor
Subsidiaries). The Company or Parent Company has no independent assets or operations. The subsidiaries are 100% owned by the Company. At March 31, 2008, a total of approximately $162.3 million of Senior Subordinated Notes were
outstanding. The Guarantor Subsidiaries are direct or indirect wholly-owned subsidiaries of the Company. Separate financial statements of the Company and each of the Guarantor Subsidiaries are not presented because the guarantees are full and
unconditional and the Guarantor Subsidiaries are jointly and severally liable.

There are no current restrictions on the ability of the
Guarantor Subsidiaries to make payments under the guarantees referred to above. The obligations of each guarantor under its guarantee are limited to the maximum amount permitted under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act, or any similar Federal or state law (e.g. laws requiring adequate capital to pay dividends) respecting fraudulent conveyance or fraudulent transfer.

3. Contingencies

The Company is party to certain legal actions arising in the ordinary course of
business. Although the ultimate outcome is not presently determinable, management believes that the resolution of such matters will not have a material adverse effect on the Companys financial position, results of operations, or cash flows.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following Managements Discussion and Analysis of our Financial Condition and Results of Operations should be read in conjunction with the
condensed consolidated financial statements and notes thereto included as part of this Form 10-Q. This report contains forward-looking statements that are based upon current expectations. We sometimes identify forward-looking statements with such
words as may, will, expect, anticipate, estimate, seek, intend, believe or similar words concerning future events. The forward-looking statements
contained herein, include, without limitation, statements concerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, research and development expenses, general and administrative expenses, capital
resources, additional financings or borrowings and additional losses and are subject to risks and uncertainties including, but not limited to, those discussed below and elsewhere in this Form 10-Q that could cause actual results to differ materially
from the results contemplated by these forward-looking statements. We also urge you to carefully review the risk factors set forth in other documents we file from time to time with the SEC.

Introduction

We believe we are the leading global
provider of Over-the-phone interpretation (OPI) services from English into more than 170 different languages, 24 hours a day, seven days a week. Our specially-trained, proprietary base of interpreters perform value-added OPI services
which facilitate critical business transactions and delivery of emergency and government services between our customers and limited English proficient (LEP) speakers throughout the world. In 2007, we helped more than 28 million
people communicate across linguistic and cultural barriers by providing OPI services to our customers. We offer our customers a high-quality, cost-effective alternative to staffing in-house multilingual employees or using face-to-face
interpretation. Through our OPI services, we improve our customers revenue potential, customer service and competitiveness by enhancing their ability to effectively serve the growing population of current and prospective LEP speakers.



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Overview of Operations

Our operating revenues are derived primarily from per minute fees charged to our customers for our interpretation services. Generally, customers are charged based on actual billed minutes of service and the
customers contractual rate per billed minute of service. In addition, the Company generates revenue from complementary services such as document translation, Video Interpretation services, American Sign Language, and face-to-face
interpretation. We recognize revenues when the services have been performed.

Expenses consist primarily of costs of services, selling,
general and administrative expenses, depreciation and amortization and interest expense. Costs of services primarily include the cost of our interpreters, call agents and telecommunications costs.

Results of Operations

The following table sets forth
the percentages of revenue that certain items of operating data constitute for the periods indicated:



|                                    |  |                                  |   |  |                                  |  
|----------------------------------- |  | -------------------------------- | - |  | -------------------------------- | -
|                                    |  | Three Months EndedMarch 31, 2008 |   |  | Three Months EndedMarch 31, 2007 |  
|Statement of Operations data:       |  |                                  |   |  |                                  |  
|Revenues                            |  | 100.0                            | % |  | 100.0                            | %
|Cost of services                    |  | 33.4                             | % |  | 34.4                             | %
|Other expenses:                     |  |                                  |   |  |                                  |  
|Selling, general and administrative |  | 17.5                             | % |  | 17.8                             | %
|Interest                            |  | 19.2                             | % |  | 22.9                             | %
|Depreciation and amortization       |  | 15.1                             | % |  | 18.8                             | %
|                                    |  |                                  |   |  |                                  |  
|Total other expenses                |  | 51.8                             | % |  | 59.5                             | %
|                                    |  |                                  |   |  |                                  |  
|Other income:                       |  |                                  |   |  |                                  |  
|Interest                            |  | 0.5                              | % |  | 0.7                              | %
|Other                               |  | 0.7                              | % |  | 0.0                              | %
|                                    |  |                                  |   |  |                                  |  
|Total other income                  |  | 1.2                              | % |  | 0.7                              | %
|                                    |  |                                  |   |  |                                  |  
|Income before taxes on income       |  | 16.0                             | % |  | 6.8                              | %
|Tax on income                       |  | 6.6                              | % |  | 2.6                              | %
|                                    |  |                                  |   |  |                                  |  
|Net income                          |  | 9.4                              | % |  | 4.2                              | %
|                                    |  |                                  |   |  |                                  |  

Three Months Ended March 31, 2008 Compared to the Three Months Ended March 31, 2007

Revenues for the three months ended March 31, 2008 were $48.9 million as compared to $45.3 million for the three months ended March 31, 2007,
an increase of $3.6 million or 7.9%. The increase in revenue is primarily driven by a 10.0% increase in OPI billed minutes, which is partially offset by a 1.8% decline in the average rate per billed minute.

Cost of services consists primarily of costs associated with interpretation services and customer support. Significant cost components include
compensation of interpreters and telecommunication charges. For the three months ended March 31, 2008, cost of services were $16.3 million as compared to $15.6 million for the three months ended March 31, 2007, an increase of $0.7 million
or 4.5%. This increase was primarily due to increased interpretation minutes partially offset by a lower cost per minute.

Selling, general
and administrative expenses for the three months ended March 31, 2008 were $8.6 million as compared to $8.0 million for the three months ended March 31, 2007, an increase of $0.6 million or 7.5%. This increase was primarily due to higher
administration wages and recruiting costs of $0.3 million, costs related to the implementation of Sarbanes-Oxley of $.1 million, and lower exchange rate gains of $0.1 million.



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Interest expense for the three months ended March 31, 2008 was $9.4 million as compared to $10.4
million for the three months ended March 31, 2007, a decrease of $1.0 million or 9.6%. This was primarily due to a decrease in the interest rate on our senior secured debt combined with a lower average principal balance during the period for
our senior secured debt.

Depreciation and amortization was $7.4 million for the three months ended March 31, 2008 compared to $8.5
million for the three months ended March 31, 2007, a decrease of $1.1 million or 12.9%. This decrease was primarily due to an intangible asset which became fully amortized during 2007.

Interest income for the three months ended March 31, 2008 was $0.3 million, unchanged from $0.3 million for the three months ended March 31,
2007. For the three months ended March 31, 2008, a higher average cash balance was offset by a lower effective interest rate compared to the three months ended March 31, 2007.

Other income for the three months ended March 31, 2008 was $0.3 million. This amount represents fees charged on accounts receivable balances in
excess of 30 days.

The tax expense on income for the three months ended March 31, 2008 was $3.2 million as compared to $1.2 million
for the three months ended March 31, 2007, a change of $2.0 million. This change in tax expense is primarily due to a $4.8 million change in pretax results of operations (income before income taxes of $7.9 million for the three months
ended March 31, 2008 compared to $3.1 million for the three months ended March 31, 2007). The effective tax rate for the three months ended March 31, 2008 was 41% as compared to 38% for the three months ended
March 31, 2007.

As a result of the factors described above, net income was $4.6 million for the three months ended
March 31, 2008 as compared to $1.9 million for the three months ended March 31, 2007.

Liquidity and Capital Resources

Operating Activities. Net cash provided by operating activities for the three months ended March 31, 2008 was $18.3 million. This reflects net
income of $4.6 million, non-cash charges of $8.2 million, an increase in accrued interest and other liabilities of $3.5 million, and an increase of $2.0 million in income taxes payable, which is partially offset by an increase in other assets.
Non-cash charges include depreciation and amortization, amortization of deferred financing costs, accretion of discount on long-term debt, and stock based compensation. Net cash provided by operating activities for the three months ended
March 31, 2007 was $11.7 million. This reflects a net income of $1.9 million, non-cash charges of $9.3 million, an increase in accrued interest and other liabilities of $5.4 million, which is partially offset by a decrease in deferred taxes of
$1.7 million, an increase in accounts receivable of $1.6 million, and a decrease in income taxes payable of $1.5 million.

Investing
Activities. Net cash used in investing activities was $0.4 million for the three months ended March 31, 2008. This reflects capital expenditures of $0.4 million for the period. Net cash used in investing activities was $0.9 million for the
three months ended March 31, 2007. This reflects capital expenditures of $0.9 million for the period.

Financing Activities.
Net cash used in financing activities for the three months ended March 31, 2008 was $9.3 million. This reflects payments made on our senior secured debt of $8.3 million and a dividend distribution in the amount of $1.0 million to Language Line
Holding II, Inc. an affiliated non-consolidated entity under the ultimate parent, Language Line Holdings, LLC. Net cash used in financing activities for the three months ended March 31, 2007 was $7.8 million. This reflects payments made on our
senior secured debt. At March 31, 2008 the maximum amount available under the revolving credit facility was $40.0 million, and no balance is outstanding.



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Debt Service. As of March 31, 2008, we had total indebtedness of $373.2 million and $40.0 million of
borrowings available under our revolver credit facility, as defined in our loan agreement of which $0 is outstanding.

The senior secured credit facilities
consist of a six-year $40.0 million revolving credit facility and a seven-year amortizing $285.0 million term loan facility. Borrowings under the senior credit facilities generally bear interest based on a margin over, at our option, the base rate
or the reserve-adjusted LIBOR. The applicable margin for revolving credit loans will vary based upon our senior leverage ratio as defined in the senior credit facilities. The senior credit facilities are collateralized by first priority interests
in, and mortgages on, substantially all of our tangible and intangible assets and first priority pledges of all the equity interest owned by us in our existing and future domestic subsidiaries.

On June 11, 2004 Language Line, Inc. issued $165 million of 11 1/8% Senior Subordinated Notes (the Notes) for net proceeds of $160.8 million.
Interest is payable on June 15 and December 15 of each year. The Notes will mature on June 15, 2012. LLI may redeem some or all of the notes at any time on or after June 15, 2008 at the redemption prices set forth. In addition,
before June 15, 2007, LLI may redeem up to 35% of the notes with the net proceeds of one or more equity offerings. The notes are unsecured and are subordinated to all existing and future senior indebtedness. Each of LLIs domestic
subsidiaries guarantee the notes on a senior subordinated basis.

Capital Expenditures. We expect to spend approximately $3.0 million on capital
expenditures in 2008. We plan to fund these expenditures through net cash flows from operations.

Our principal sources of liquidity are cash flow from
operations and borrowings available under our revolver credit facility. We believe that these funds will be sufficient to meet our debt service, capital expenditures and working capital requirements for the next twelve months. Subject to
restrictions in our senior secured credit facilities and the indentures governing the notes, we may incur more debt for working capital, capital expenditures, acquisitions and for other purposes. In addition, we may require additional financing if
our plans materially change in an adverse manner or prove to be materially inaccurate. There can be no assurance that such financing, if permitted under the terms of our debt agreements, will be available on terms acceptable to us or at all.

Contractual and Commercial Commitments Summary

The following tables present our long-term contractual cash obligations as of March 31, 2008 (dollars in thousands):



|                                                         |  |       |         |      |   |        |  |      |        |      |   |        |  |            |         |       |   |         |  |   |   |  |   |      
|-------------------------------------------------------- |  | ----- | ------- | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | ---------- | ------- | ----- | - | ------- |  | - | - |  | - | -----
|                                                         |  | Total |         | 2008 |   | 2009   |  | 2010 |        | 2011 |   | 2012   |  | Thereafter |         | Other
|Senior secured credit facilities                         |  | $     | 210,924 |      | $ | 9,249  |  | $    | 12,332 |      | $ | 12,332 |  | $          | 177,011 |       | $ |        |  | $ |  |  | $ |     
|Senior subordinated notes offered by Language Line, Inc. |  |       | 165,000 |      |   |       |  |      |       |      |   |       |  |            |        |       |   | 165,000 |  |   |  |  |   |     
|Interest payments                                        |  |       | 128,319 |      |   | 29,751 |  |      | 32,761 |      |   | 31,859 |  |            | 24,770  |       |   | 9,178   |  |   |  |  |   |     
|Unrecognized tax benefits                                |  |       | 3,492   |      |   |       |  |      |       |      |   |       |  |            |        |       |   |        |  |   |  |  |   | 3,492
|Operating leases                                         |  |       | 4,323   |      |   | 2,082  |  |      | 1,204  |      |   | 891    |  |            | 146     |       |   |        |  |   |  |  |   |     
|                                                         |  |       |         |      |   |        |  |      |        |      |   |        |  |            |         |       |   |         |  |   |   |  |   |      
|Total cash contractual obligations                       |  | $     | 512,058 |      | $ | 41,082 |  | $    | 46,297 |      | $ | 45,082 |  | $          | 201,927 |       | $ | 174,178 |  | $ |  |  | $ | 3,492
|                                                         |  |       |         |      |   |        |  |      |        |      |   |        |  |            |         |       |   |         |  |   |   |  |   |      

Interest payments with respect to the senior secured credit facilities assume a variable rate of
5.95%, which represents the most recent rate applicable to these facilities. The senior subordinated notes offered by Language Line, Inc. is 11 1/8% fixed rate notes

Critical Accounting Policies

Financial statement preparation requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities. The accompanying consolidated unaudited financial statements are prepared using the same critical
accounting policies discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.



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|Item 3. | Quantitative and Qualitative Disclosure About Market Risk
|------- | ---------------------------------------------------------

We are exposed to certain market risks as part of our ongoing business operations. Primary exposure will include changes in interest rates, as borrowings under our senior secured credit facilities bear interest at
floating rates based on LIBOR or the base rate, in each case plus an applicable borrowing margin. We will manage our interest rate risk by balancing our amount of fixed-rate and floating-rate debt. For fixed-rate debt, interest rate changes do not
affect our earnings or cash flows. Conversely, for floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant.

As of March 31, 2008, we had $165.0 million principal amount of fixed-rate debt and $250.9 million of available floating-rate debt (of which we
borrowed $210.9 million). Based on the amounts outstanding under the revolver credit facility and the term loan, a hypothetical increase of one percentage point would cause an increase to interest expense of approximately $2.1 million on an annual
basis on the floating rate debt.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest
expense and other operating expenses and reducing our funds available for capital investment, operations or other purposes. In addition, a substantial portion of our cash flow must be used to service debt, which may affect our ability to make future
acquisitions or capital expenditures. We may from time to time use interest rate protection agreements to minimize our exposure to interest rate fluctuation. However, there can be no assurance that hedges will achieve the desired effect. We may
experience economic loss and a negative impact on earnings or net assets as a result of interest rate fluctuations.



|Item 4. | Controls and Procedures.
|------- | ------------------------



| | (a) | Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules
13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and our Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls
and procedures were effective.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART 2. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

Language
Line, Inc. is not currently involved in any material legal proceedings.



|Item 1A. | Risk Factors
|-------- | ------------

There have been
no material changes in our risk factors from those disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None



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|Item 3. | Defaults upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None.



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



| | (a) | Exhibits
| | --- | --------



|     |  |                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|18.1 |  | Preferability Letter from the Companys Independent Registered Accounting Firm.                                                                  
|     | 
|31.1 |  | Certification by Dennis G. Dracup pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                     
|     | 
|31.2 |  | Certification by Michael Schmidt pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                      
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Executive Officer.
|     | 
|32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Financial Officer.



|(b) | Reports of Form 8-K
|--- | -------------------

None.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Monterey, California on May 12, 2008.



LANGUAGE LINE, INC./s/ Dennis G. DracupDennis G. DracupChief Executive Officer and Director/s/ Michael SchmidtMichael SchmidtChief Financial Officer and, Secretary




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EXPLANATORY NOTE

Language Line, Inc. is filing with this Quarterly Report on Form 10-Q for the three months ended March 31, 2008, a preferability letter provided from our Independent Registered Public Accounting Firm regarding
the Companys change to the date of its annual goodwill impairment test. This change occurred during the three months ended December 31, 2007 and the preferability letter was inadvertently omitted in the Companys 10-K filing for the
fiscal year ended December 31, 2007.