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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



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(Mark One)

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



For the quarterly period ended March 31, 2005



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 333-118754



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Language Line Holdings, Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0997806                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)



One Lower Ragsdale
Drive

Monterey, CA 93940

(877) 886-3885

(Address, zip code, and telephone number, including

area code, of registrants principal executive office.)



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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    Yes ̈No  x



Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.



Language Line Holdings II, Inc. owns 100% of the registrants common
stock.



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FORWARD LOOKING STATEMENTS



Statements in this document that are not historical facts are hereby identified as forward looking statements
for the purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the Exchange Act) and Section 27A of the Securities Act of 1933 (the Securities Act). Language Line Holdings, Inc.
(LLHI, we, us, or the Company) cautions readers that such forward looking statements, including without limitation, those relating to the Companys future business prospects, revenue,
working capital, liquidity, capital needs, interest costs and income, wherever they occur in this document or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Companys senior management
and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward looking statements. Such forward looking statements should, therefore, be considered in
light of the factors set forth in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.



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.



The Company disclaims any intent or obligation to update
forward looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.



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##### Table of Contents

LANGUAGE LINE HOLDINGS, 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 -11                               
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Balance Sheets  December 31, 2004 and March 31, 2005                           |  |                                     
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Statements of Operations  Three months ended March 31, 2004 and March 31, 2005 |  |                                     
|                              |  |                                                                                                       
|                              |  | Condensed Consolidated Statements of Cash Flows  Three months ended March 31, 2004 and March 31, 2005 |  |                                     
|                              |  |                                                                                                       
|                              |  | Notes to Condensed Consolidated Financial Statements                                                   |  |                                     
|                              |  |                                                                                                       
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 12                                  
|                              |  |                                                                                                       
|Item 3.                       |  | Quantitative and Qualitative Disclosures of Market Risk                                                |  | 15                                  
|                              |  |                                                                                                       
|Item 4.                       |  | Controls and Procedures                                                                                |  | 16                                  
|                              | 
|Part 2. Other Information     |  |                                                                                                       
|                              |  |                                                                                                       
|Item 1.                       |  | Legal Proceedings                                                                                      |  | 16                                  
|                              |  |                                                                                                       
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 16                                  
|                              |  |                                                                                                       
|Item 3.                       |  | Defaults upon Senior Securities                                                                        |  | 16                                  
|                              |  |                                                                                                       
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                    |  | 16                                  
|                              |  |                                                                                                       
|Item 5.                       |  | Other Information                                                                                      |  | 16                                  
|                              |  |                                                                                                       
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                       |  | 16                                  
|                              | 
|Signatures                    |  | 17                                                                                                    
|                              |  |                                                                                                       
|Certifications                |  |                                                                                                        |  | Exhibit 31.1                        
|                              |  |                                                                                                        |  | Exhibit 31.2Exhibit 32.1Exhibit 32.2



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##### Table of Contents

PART 1. FINANCIAL INFORMATION



Item 1.Financial Statements



LANGUAGE LINE HOLDINGS, 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)



|                                                                                           |  |                   |         |   |                |   |         |  
|------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                                                           |  | December 31, 2004 |         |   | March 31, 2005 |  
|Assets                                                                                     |  |                   |         |   |                |   |         |  
|Current assets:                                                                            |  |                   |         |   |                |   |         |  
|Cash                                                                                       |  | $                 | 12,164  |   |                | $ | 6,225   |  
|Accounts receivable, net                                                                   |  |                   | 19,626  |   |                |   | 19,533  |  
|Prepaid expenses and other current assets                                                  |  |                   | 1,656   |   |                |   | 2,418   |  
|Deferred taxes on income                                                                   |  |                   | 408     |   |                |   | 298     |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Total current assets                                                                       |  |                   | 33,854  |   |                |   | 28,474  |  
|Property and equipment, net                                                                |  |                   | 5,897   |   |                |   | 5,330   |  
|Goodwill                                                                                   |  |                   | 408,793 |   |                |   | 408,793 |  
|Intangible assets, net                                                                     |  |                   | 439,793 |   |                |   | 430,609 |  
|Deferred financing costs, net                                                              |  |                   | 15,018  |   |                |   | 14,486  |  
|Other assets                                                                               |  |                   | 1,333   |   |                |   | 1,334   |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Total assets                                                                               |  | $                 | 904,688 |   |                | $ | 889,026 |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Liabilities and Stockholders Equity                                                       |  |                   |         |   |                |   |         |  
|Current liabilities:                                                                       |  |                   |         |   |                |   |         |  
|Accounts payable                                                                           |  | $                 | 462     |   |                | $ | 822     |  
|Accrued payroll and related benefits                                                       |  |                   | 1,740   |   |                |   | 1,434   |  
|Accrued cost of interpreters                                                               |  |                   | 1,331   |   |                |   | 1,157   |  
|Other accrued liabilities                                                                  |  |                   | 2,958   |   |                |   | 7,601   |  
|Income taxes payable                                                                       |  |                   | 2,451   |   |                |   | 564     |  
|Current portion of long-term debt                                                          |  |                   | 12,947  |   |                |   | 13,691  |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Total current liabilities                                                                  |  |                   | 21,889  |   |                |   | 25,269  |  
|Long-term debt                                                                             |  |                   | 266,428 |   |                |   | 250,916 |  
|Senior subordinated notes                                                                  |  |                   | 160,948 |   |                |   | 161,037 |  
|Senior discount notes                                                                      |  |                   | 59,321  |   |                |   | 61,404  |  
|Deferred taxes on income                                                                   |  |                   | 173,332 |   |                |   | 170,618 |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Total liabilities                                                                          |  |                   | 681,918 |   |                |   | 669,244 |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Stockholders equity:                                                                      |  |                   |         |   |                |   |         |  
|Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding |  |                   |        |   |                |   |        |  
|Additional paid-in capital                                                                 |  |                   | 228,158 |   |                |   | 228,158 |  
|Accumulated deficit                                                                        |  |                   | (3,727  | ) |                |   | (6,807  | )
|Deferred stock compensation                                                                |  |                   | (1,661  | ) |                |   | (1,569  | )
|                                                                                           |  |                   |         |   |                |   |         |  
|Total stockholders equity                                                                 |  |                   | 222,770 |   |                |   | 219,782 |  
|                                                                                           |  |                   |         |   |                |   |         |  
|Total liabilities and stockholders equity                                                 |  | $                 | 904,688 |   |                | $ | 889,026 |  
|                                                                                           |  |                   |         |   |                |   |         |  



See notes to condensed
consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



|                                    |  |                                   |        |                                   |   |        |  
|----------------------------------- |  | --------------------------------- | ------ | --------------------------------- | - | ------ | -
|                                    |  | Predecessor                       |        |                                   |  
|                                    |  | Three months ended March 31, 2004 |        | Three months ended March 31, 2005 |  
|Revenues                            |  | $                                 | 36,093 |                                   | $ | 35,922 |  
|Cost of services:                   |  |                                   |        |                                   |   |        |  
|Interpreters                        |  |                                   | 10,117 |                                   |   | 10,726 |  
|Telecommunications                  |  |                                   | 1,569  |                                   |   | 1,389  |  
|Answer points                       |  |                                   | 141    |                                   |   | 87     |  
|                                    |  |                                   |        |                                   |   |        |  
|Total cost of services              |  |                                   | 11,827 |                                   |   | 12,202 |  
|                                    |  |                                   |        |                                   |   |        |  
|Gross margin                        |  |                                   | 24,266 |                                   |   | 23,720 |  
|                                    |  |                                   |        |                                   |   |        |  
|Other expenses:                     |  |                                   |        |                                   |   |        |  
|Selling, general and administrative |  |                                   | 6,053  |                                   |   | 6,553  |  
|Interest - net                      |  |                                   | 3,646  |                                   |   | 12,067 |  
|Depreciation and amortization       |  |                                   | 956    |                                   |   | 9,834  |  
|                                    |  |                                   |        |                                   |   |        |  
|Total other expenses                |  |                                   | 10,655 |                                   |   | 28,454 |  
|                                    |  |                                   |        |                                   |   |        |  
|Income (loss) before income taxes   |  |                                   | 13,611 |                                   |   | (4,734 | )
|Income tax provision (benefit)      |  |                                   | 5,338  |                                   |   | (1,654 | )
|                                    |  |                                   |        |                                   |   |        |  
|Net income (loss)                   |  | $                                 | 8,273  |                                   | $ | (3,080 | )
|                                    |  |                                   |        |                                   |   |        |  



See notes to condensed
consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                         |  |                                   |         |   |                                   |   |         |  
|---------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | --------------------------------- | - | ------- | -
|                                                                                         |  | Predecessor                       |         |   |                                   |  
|                                                                                         |  | Three months ended March 31, 2004 |         |   | Three months ended March 31, 2005 |  
|Cash flows from operating activities:                                                    |  |                                   |         |   |                                   |   |         |  
|Net income (loss)                                                                        |  | $                                 | 8,273   |   |                                   | $ | (3,080  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                   |         |   |                                   |   |         |  
|Depreciation and amortization                                                            |  |                                   | 956     |   |                                   |   | 9,834   |  
|Amortization of deferred financing costs                                                 |  |                                   | 717     |   |                                   |   | 532     |  
|Deferred taxes on income                                                                 |  |                                   | 1,932   |   |                                   |   | (2,604  | )
|Stock based compensation expense                                                         |  |                                   |        |   |                                   |   | 92      |  
|Loss on disposal of property                                                             |  |                                   | 19      |   |                                   |   |        |  
|Loss (gain) from derivative instruments                                                  |  |                                   | (1,051  | ) |                                   |   |        |  
|Accretion of discount on long-term debt                                                  |  |                                   |        |   |                                   |   | 2,172   |  
|Effect of changes in operating assets and liabilities:                                   |  |                                   |         |   |                                   |   |         |  
|Accounts receivable                                                                      |  |                                   | 299     |   |                                   |   | 93      |  
|Prepaid expenses and other current assets                                                |  |                                   | (152    | ) |                                   |   | (762    | )
|Other assets                                                                             |  |                                   | 2       |   |                                   |   | (1      | )
|Accounts payable                                                                         |  |                                   | 117     |   |                                   |   | 360     |  
|Income taxes payable/refundable                                                          |  |                                   | 2,659   |   |                                   |   | (1,887  | )
|Accrued payroll and other liabilities                                                    |  |                                   | (1,321  | ) |                                   |   | 4,162   |  
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Net cash provided by operating activities                                                |  |                                   | 12,450  |   |                                   |   | 8,911   |  
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Cash flows from investing activities:                                                    |  |                                   |         |   |                                   |   |         |  
|Purchase of property                                                                     |  |                                   | (291    | ) |                                   |   | (82     | )
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Cash flows from financing activities:                                                    |  |                                   |         |   |                                   |   |         |  
|Long-term debt repayments                                                                |  |                                   | (11,422 | ) |                                   |   | (14,768 | )
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Net increase (decrease) in cash                                                          |  |                                   | 737     |   |                                   |   | (5,939  | )
|Cash - beginning of period                                                               |  |                                   | 4,571   |   |                                   |   | 12,164  |  
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Cash - end of period                                                                     |  | $                                 | 5,308   |   |                                   | $ | 6,225   |  
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Supplemental cash flow disclosures:                                                      |  |                                   |         |   |                                   |   |         |  
|Cash paid for interest                                                                   |  | $                                 | 3,693   |   |                                   | $ | 4,893   |  
|                                                                                         |  |                                   |         |   |                                   |   |         |  
|Cash paid for income taxes                                                               |  | $                                 | 747     |   |                                   | $ | 2,838   |  
|                                                                                         |  |                                   |         |   |                                   |   |         |  



See notes to condensed
consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

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

Notes to Condensed Consolidated Financial Statements

(Unaudited)



1.
Organization and Significant Accounting Policies



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 presentation 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, 2005 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, 2004 of Language Line Holdings, Inc., which are included in the Form 10-K filed with the SEC on April 15, 2005.



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. We
believe that the notes to the condensed consolidated financial statements contain disclosures adequate to make the information presented not misleading.



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. Language Line Acquisition, Inc. is a Delaware corporation formed in April 2004 and also had no significant operations prior to LLIs acquisition of Predecessor. Subsequent to the
Merger, Language Line Acquisition, Inc., an indirect wholly-owned subsidiary of Language Line Holdings, LLC, was renamed Language Line Holdings, Inc. (LLHI or the Company).



The Company provides over-the-phone interpretation services,
from English into over 150 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



Principles of Consolidation - The condensed consolidated financial statements include the accounts of the Predecessor,
LLC and LLCs wholly-owned subsidiaries for the three months ended March 31, 2004, and the accounts of LLHI, LLI, LLC and LLCs wholly-owned subsidiaries as of December 31, 2004 and March 31, 2005, and for the three months ended March 31,
2005. All significant intercompany accounts and transactions have been eliminated in consolidation.



Stock-Based Compensation -The Predecessor did, and the Company continues to account for stock-based compensation using the
intrinsic value method in accordance with the provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, elected under Statement of Financial Accounting Standards (SFAS)
No. 123, as amended.



The following table
illustrates the effect on net income if the Predecessor and the Company had applied the fair value recognition provisions of SFAS No. 123 and in accordance with SFAS No. 148, Accounting of Stock-Based Compensation  Transition and
Disclosure, An amendment of FASB Statement No. 123, to stock-based employee compensation (in thousands):



|                                                                                                                                           |  |                                  |       |   |                                  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ----- | - | -------------------------------- | - | ------ | -
|                                                                                                                                           |  | Predecessor                      |       |   | Three MonthsEnded March 31, 2005 |  
|                                                                                                                                           |  | Three MonthsEnded March 31, 2004 |       |  
|Net income (loss), as reported                                                                                                             |  | $                                | 8,273 |   |                                  | $ | (3,080 | )
|Add total stock-based employee compensation expense included in reported net income, net of related tax effects                            |  |                                  |      |   |                                  |   | 57     |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                  | (7    | ) |                                  |   | (57    | )
|                                                                                                                                           |  |                                  |       |   |                                  |   |        |  
|Pro forma net income (loss)                                                                                                                |  | $                                | 8,266 |   |                                  | $ | (3,080 | )
|                                                                                                                                           |  |                                  |       |   |                                  |   |        |  



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2. Guarantor and Non-Guarantor Subsidiaries



LLIs $165 million of Senior Subordinated Notes due 2012 (the Notes) are guaranteed by each of LLIs
domestic subsidiaries. The Notes are fully and unconditionally guaranteed on a joint and several basis by LLIs wholly-owned direct and indirect domestic subsidiaries (the Guarantor Subsidiaries). The Notes are not guaranteed by
LLHI. The Notes are guaranteed by each Guarantor Subsidiary on an unsecured senior subordinated basis.



The indenture governing the Notes contains covenants limiting, among other things, LLIs liability and the ability of LLIs Guarantor
Subsidiaries to incur additional indebtedness, make restricted payments, make investments, create certain liens, sell assets, restrict payments by the subsidiaries to LLI, guarantee indebtedness, enter into transactions with affiliates and merge or
consolidate or transfer and sell assets.



The following
information sets forth, on a condensed consolidating basis, balance sheet information as of December 31, 2004 and March 31, 2005, statements of operations and comprehensive income (loss) information for the three months ended March 31, 2004 and
2005, and statement of cash flow information for the three months ended March 31, 2004 and 2005 for LLHI (the Registrant), LLI, the Guarantor Subsidiaries and foreign subsidiaries of LLI that are not guaranteeing the Notes (the
Non-Guarantor Subsidiaries). Income tax expense (benefit) is allocated among entities based upon taxable income (loss) by jurisdiction within each group.



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##### Table of Contents

Condensed Consolidating Balance Sheet

Information of the Registrant as of

December 31, 2004 (In thousands)



|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|------------------------------------------------------------ |  | ---- | ------- | - | ------------- | - | ------- | --------------------- |  | ------------------------- | ------- | ----- | - | ----- | ------------ | - | --------- | ------------ |  | - | ---------- | - |  | - | ------- | -
|                                                             |  | LLHI |         |   | CompanyIssuer |   |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Total |   |       | Eliminations |   |           | Consolidated | 
|Assets                                                       |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current assets:                                              |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Cash                                                         |  | $    |        |   |               | $ |        |                       |  | $                         | 11,983  |       | $ | 181   |              | $ | 12,164    |              |  | $ |           |   |  | $ | 12,164  |  
|Accounts receivable - net                                    |  |      |        |   |               |   |        |                       |  |                           | 19,244  |       |   | 382   |              |   | 19,626    |              |  |   |           |   |  |   | 19,626  |  
|Intercompany receivable                                      |  |      |        |   |               |   |        |                       |  |                           | 38,798  |       |   |      |              |   | 38,798    |              |  |   | (38,798    | ) |  |   |        |  
|Prepaid expenses and other current assets                    |  |      |        |   |               |   |        |                       |  |                           | 1,540   |       |   | 116   |              |   | 1,656     |              |  |   |           |   |  |   | 1,656   |  
|Refundable income taxes                                      |  |      | 53      |   |               |   |        |                       |  |                           |        |       |   |      |              |   | 53        |              |  |   | (53        | ) |  |   |        |  
|Deferred taxes on income                                     |  |      |        |   |               |   | 411     |                       |  |                           |        |       |   |      |              |   | 411       |              |  |   | (3         | ) |  |   | 408     |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current assets                                         |  |      | 53      |   |               |   | 411     |                       |  |                           | 71,565  |       |   | 679   |              |   | 72,708    |              |  |   | (38,854    | ) |  |   | 33,854  |  
|Property and equipment - net                                 |  |      |        |   |               |   |        |                       |  |                           | 3,562   |       |   | 2,335 |              |   | 5,897     |              |  |   |           |   |  |   | 5,897   |  
|Goodwill                                                     |  |      |        |   |               |   |        |                       |  |                           | 408,793 |       |   |      |              |   | 408,793   |              |  |   |           |   |  |   | 408,793 |  
|Intangible assets - net                                      |  |      |        |   |               |   |        |                       |  |                           | 439,793 |       |   |      |              |   | 439,793   |              |  |   |           |   |  |   | 439,793 |  
|Deferred financing costs - net                               |  |      | 1,983   |   |               |   | 13,035  |                       |  |                           |        |       |   |      |              |   | 15,018    |              |  |   |           |   |  |   | 15,018  |  
|Investment in subsidiaries                                   |  |      | 280,684 |   |               |   | 739,716 |                       |  |                           | 673     |       |   |      |              |   | 1,021,073 |              |  |   | (1,021,073 | ) |  |   |        |  
|Other assets                                                 |  |      |        |   |               |   | 5       |                       |  |                           | 1,260   |       |   | 68    |              |   | 1,333     |              |  |   |           |   |  |   | 1,333   |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total assets                                                 |  | $    | 282,720 |   |               | $ | 753,167 |                       |  | $                         | 925,646 |       | $ | 3,082 |              | $ | 1,964,615 |              |  | $ | (1,059,927 | ) |  | $ | 904,688 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Liabilities, Members Capital and Stockholders Equity       |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current liabilities                                          |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Accounts payable                                             |  | $    |        |   |               | $ |        |                       |  | $                         | 462     |       | $ |      |              | $ | 462       |              |  | $ |           |   |  | $ | 462     |  
|Intercompany payable                                         |  |      | 164     |   |               |   | 36,608  |                       |  |                           |        |       |   | 2,026 |              |   | 38,798    |              |  |   | (38,798    | ) |  |   |        |  
|Accrued payroll and related benefits                         |  |      |        |   |               |   |        |                       |  |                           | 1,689   |       |   | 51    |              |   | 1,740     |              |  |   |           |   |  |   | 1,740   |  
|Accured cost of interpreters                                 |  |      |        |   |               |   |        |                       |  |                           | 1,122   |       |   | 209   |              |   | 1,331     |              |  |   |           |   |  |   | 1,331   |  
|Other accrued liabilities                                    |  |      |        |   |               |   | 1,411   |                       |  |                           | 1,424   |       |   | 123   |              |   | 2,958     |              |  |   |           |   |  |   | 2,958   |  
|Income taxes payable                                         |  |      |        |   |               |   | 327     |                       |  |                           | 2,177   |       |   |      |              |   | 2,504     |              |  |   | (53        | ) |  |   | 2,451   |  
|Current portion of long-term debt                            |  |      |        |   |               |   | 12,000  |                       |  |                           | 947     |       |   |      |              |   | 12,947    |              |  |   |           |   |  |   | 12,947  |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current liabilities                                    |  |      | 164     |   |               |   | 50,346  |                       |  |                           | 7,821   |       |   | 2,409 |              |   | 60,740    |              |  |   | (38,851    | ) |  |   | 21,889  |  
|Long-term debt                                               |  |      |        |   |               |   | 265,500 |                       |  |                           | 928     |       |   |      |              |   | 266,428   |              |  |   |           |   |  |   | 266,428 |  
|Senior discount notes                                        |  |      | 59,321  |   |               |   |        |                       |  |                           |        |       |   |      |              |   | 59,321    |              |  |   |           |   |  |   | 59,321  |  
|Senior subordinated notes                                    |  |      |        |   |               |   | 160,948 |                       |  |                           |        |       |   |      |              |   | 160,948   |              |  |   |           |   |  |   | 160,948 |  
|Deferred income taxes                                        |  |      | (1,196  | ) |               |   | (4,311  | )                     |  |                           | 178,842 |       |   |      |              |   | 173,335   |              |  |   | (3         | ) |  |   | 173,332 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities                                            |  |      | 58,289  |   |               |   | 472,483 |                       |  |                           | 187,591 |       |   | 2,409 |              |   | 720,772   |              |  |   | (38,854    | ) |  |   | 681,918 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Members capital                                             |  |      |        |   |               |   |        |                       |  |                           | 738,055 |       |   | 673   |              |   | 738,728   |              |  |   | (738,728   | ) |  |   |        |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Stockholders equity:                                        |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Common stock                                                 |  |      |        |   |               |   |        |                       |  |                           |        |       |   |      |              |   |          |              |  |   |           |   |  |   |        |  
|Additional paid-in-capital                                   |  |      | 228,158 |   |               |   | 281,207 |                       |  |                           |        |       |   |      |              |   | 509,365   |              |  |   | (281,207   | ) |  |   | 228,158 |  
|Accumulated deficit                                          |  |      | (3,727  | ) |               |   | (523    | )                     |  |                           |        |       |   |      |              |   | (4,250    | )            |  |   | 523        |   |  |   | (3,727  | )
|Deferred stock compensation                                  |  |      |        |   |               |   |        |                       |  |                           |        |       |   |      |              |   |          |              |  |   | (1,661     | ) |  |   | (1,661  | )
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total stockholders equity                                   |  |      | 224,431 |   |               |   | 280,684 |                       |  |                           |        |       |   |      |              |   | 505,115   |              |  |   | (282,345   | ) |  |   | 222,770 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities, members capital and stockholders equity |  | $    | 282,720 |   |               | $ | 753,167 |                       |  | $                         | 925,646 |       | $ | 3,082 |              | $ | 1,964,615 |              |  | $ | (1,059,927 | ) |  | $ | 904,688 |  
|                                                             |  |      |         |   |               |   |         |                       |  |                           |         |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  



6



---

##### Table of Contents

Condensed Consolidating Balance Sheet

Information of the Registrant as of

March 31, 2005 (In thousands)



|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|------------------------------------------------------------ |  | ---- | ------- | - | ------------- | - | ------- | --------------------- |  | - | ------------------------- | - | ----- | - | ----- | ------------ | - | --------- | ------------ |  | - | ---------- | - |  | - | ------- | -
|                                                             |  | LLHI |         |   | CompanyIssuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   | Total |   |       | Eliminations |   |           | Consolidated | 
|Assets                                                       |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current assets:                                              |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Cash                                                         |  | $    |        |   |               | $ |        |                       |  | $ | 5,992                     |   |       | $ | 233   |              | $ | 6,225     |              |  | $ |           |   |  | $ | 6,225   |  
|Accounts receivable - net                                    |  |      |        |   |               |   |        |                       |  |   | 19,148                    |   |       |   | 385   |              |   | 19,533    |              |  |   |           |   |  |   | 19,533  |  
|Intercompany receivable                                      |  |      |        |   |               |   |        |                       |  |   | 54,231                    |   |       |   |      |              |   | 54,231    |              |  |   | (54,231    | ) |  |   |        |  
|Prepaid expenses and other current assets                    |  |      |        |   |               |   |        |                       |  |   | 1,667                     |   |       |   | 751   |              |   | 2,418     |              |  |   |           |   |  |   | 2,418   |  
|Refundable income taxes                                      |  |      | 74      |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   | 74        |              |  |   | (74        | ) |  |   |        |  
|Deferred taxes on income                                     |  |      | (2      | ) |               |   | 300     |                       |  |   |                          |   |       |   |      |              |   | 298       |              |  |   |           |   |  |   | 298     |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current assets                                         |  |      | 72      |   |               |   | 300     |                       |  |   | 81,038                    |   |       |   | 1,369 |              |   | 82,779    |              |  |   | (54,305    | ) |  |   | 28,474  |  
|Property and equipment - net                                 |  |      |        |   |               |   |        |                       |  |   | 3,221                     |   |       |   | 2,109 |              |   | 5,330     |              |  |   |           |   |  |   | 5,330   |  
|Goodwill                                                     |  |      |        |   |               |   |        |                       |  |   | 408,793                   |   |       |   |      |              |   | 408,793   |              |  |   |           |   |  |   | 408,793 |  
|Intangible assets - net                                      |  |      |        |   |               |   |        |                       |  |   | 430,609                   |   |       |   |      |              |   | 430,609   |              |  |   |           |   |  |   | 430,609 |  
|Deferred financing costs - net                               |  |      | 1,925   |   |               |   | 12,561  |                       |  |   |                          |   |       |   |      |              |   | 14,486    |              |  |   |           |   |  |   | 14,486  |  
|Investment in subsidiaries                                   |  |      | 279,145 |   |               |   | 743,969 |                       |  |   | 772                       |   |       |   |      |              |   | 1,023,886 |              |  |   | (1,023,886 | ) |  |   |        |  
|Other assets                                                 |  |      |        |   |               |   | 5       |                       |  |   | 1,252                     |   |       |   | 77    |              |   | 1,334     |              |  |   |           |   |  |   | 1,334   |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total assets                                                 |  | $    | 281,142 |   |               | $ | 756,835 |                       |  | $ | 925,685                   |   |       | $ | 3,555 |              | $ | 1,967,217 |              |  | $ | (1,078,191 | ) |  | $ | 889,026 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Liabilities, Members Capital and Stockholders Equity       |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Current liabilities                                          |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Accounts payable                                             |  | $    |        |   |               | $ |        |                       |  | $ | 822                       |   |       | $ |      |              | $ | 822       |              |  | $ |           |   |  | $ | 822     |  
|Intercompany payable                                         |  |      | 164     |   |               |   | 51,572  |                       |  |   |                          |   |       |   | 2,495 |              |   | 54,231    |              |  |   | (54,231    | ) |  |   |        |  
|Accrued payroll and related benefits                         |  |      |        |   |               |   |        |                       |  |   | 1,402                     |   |       |   | 32    |              |   | 1,434     |              |  |   |           |   |  |   | 1,434   |  
|Accured cost of interpreters                                 |  |      |        |   |               |   |        |                       |  |   | 1,014                     |   |       |   | 143   |              |   | 1,157     |              |  |   |           |   |  |   | 1,157   |  
|Other accrued liabilities                                    |  |      |        |   |               |   | 5,678   |                       |  |   | 1,810                     |   |       |   | 113   |              |   | 7,601     |              |  |   |           |   |  |   | 7,601   |  
|Income taxes payable                                         |  |      |        |   |               |   | 3,101   |                       |  |   | (2,463                    | ) |       |   |      |              |   | 638       |              |  |   | (74        | ) |  |   | 564     |  
|Current portion of long-term debt                            |  |      |        |   |               |   | 12,750  |                       |  |   | 941                       |   |       |   |      |              |   | 13,691    |              |  |   |           |   |  |   | 13,691  |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total current liabilities                                    |  |      | 164     |   |               |   | 73,101  |                       |  |   | 3,526                     |   |       |   | 2,783 |              |   | 79,574    |              |  |   | (54,305    | ) |  |   | 25,269  |  
|Long-term debt                                               |  |      |        |   |               |   | 249,999 |                       |  |   | 917                       |   |       |   |      |              |   | 250,916   |              |  |   |           |   |  |   | 250,916 |  
|Senior subordinated notes                                    |  |      |        |   |               |   | 161,037 |                       |  |   |                          |   |       |   |      |              |   | 161,037   |              |  |   |           |   |  |   | 161,037 |  
|Senior discount notes                                        |  |      | 61,404  |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   | 61,404    |              |  |   |           |   |  |   | 61,404  |  
|Deferred income taxes                                        |  |      | (1,777  | ) |               |   | (6,447  | )                     |  |   | 178,842                   |   |       |   |      |              |   | 170,618   |              |  |   |           |   |  |   | 170,618 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities                                            |  |      | 59,791  |   |               |   | 477,690 |                       |  |   | 183,285                   |   |       |   | 2,783 |              |   | 723,549   |              |  |   | (54,305    | ) |  |   | 669,244 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Members capital                                             |  |      |        |   |               |   |        |                       |  |   | 742,400                   |   |       |   | 772   |              |   | 743,172   |              |  |   | (743,172   | ) |  |   |        |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Stockholders equity:                                        |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Common stock                                                 |  |      |        |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   |          |              |  |   |           |   |  |   |        |  
|Additional paid-in-capital                                   |  |      | 228,158 |   |               |   | 281,207 |                       |  |   |                          |   |       |   |      |              |   | 509,365   |              |  |   | (281,207   | ) |  |   | 228,158 |  
|Accumulated deficit                                          |  |      | (6,807  | ) |               |   | (2,062  | )                     |  |   |                          |   |       |   |      |              |   | (8,869    | )            |  |   | 2,062      |   |  |   | (6,807  | )
|Deferred stock compensation                                  |  |      |        |   |               |   |        |                       |  |   |                          |   |       |   |      |              |   |          |              |  |   | (1,569     | ) |  |   | (1,569  | )
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total stockholders equity                                   |  |      | 221,351 |   |               |   | 279,145 |                       |  |   |                          |   |       |   |      |              |   | 500,496   |              |  |   | (280,714   | ) |  |   | 219,782 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  
|Total liabilities, members capital and stockholders equity |  | $    | 281,142 |   |               | $ | 756,835 |                       |  | $ | 925,685                   |   |       | $ | 3,555 |              | $ | 1,967,217 |              |  | $ | (1,078,191 | ) |  | $ | 889,026 |  
|                                                             |  |      |         |   |               |   |         |                       |  |   |                           |   |       |   |       |              |   |           |              |  |   |            |   |  |   |         |  



7



---

##### Table of Contents

Condensed Consolidating Statements of

Operations and Comprehensive Income

Information of the Predecessor for the

Three Months Ended March 31, 2004

(In thousands)



|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|----------------------------------- |  | -------------- | ------ | ---------------------- | - | -------------------------- |  | ----- | ----- | ------------ | - | ------ | ------------ | - | ------- | - |  | - | ------
|                                    |  | Company Issuer |        | Guarantor Subsidiaries |   | Non-Guarantor Subsidiaries |  | Total |       | Eliminations |   |        | Consolidated
|Revenues                            |  | $              |       |                        | $ | 35,929                     |  | $     | 2,810 |              | $ | 38,739 |              | $ | (2,646  | ) |  | $ | 36,093
|Cost of services:                   |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Interpreter                         |  |                |       |                        |   | 8,265                      |  |       | 1,852 |              |   | 10,117 |              |   |        |   |  |   | 10,117
|Telecommunications                  |  |                |       |                        |   | 1,558                      |  |       | 11    |              |   | 1,569  |              |   |        |   |  |   | 1,569 
|Answer points                       |  |                |       |                        |   | 56                         |  |       | 85    |              |   | 141    |              |   |        |   |  |   | 141   
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Total cost of services              |  |                |       |                        |   | 9,879                      |  |       | 1,948 |              |   | 11,827 |              |   |        |   |  |   | 11,827
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Gross margin                        |  |                |       |                        |   | 26,050                     |  |       | 862   |              |   | 26,912 |              |   | (2,646  | ) |  |   | 24,266
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Other expenses:                     |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Selling, general and administrative |  |                |       |                        |   | 8,114                      |  |       | 585   |              |   | 8,699  |              |   | (2,646  | ) |  |   | 6,053 
|Interest - net                      |  |                |       |                        |   | 3,646                      |  |       |      |              |   | 3,646  |              |   |        |   |  |   | 3,646 
|Depreciation and amortization       |  |                |       |                        |   | 808                        |  |       | 148   |              |   | 956    |              |   |        |   |  |   | 956   
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Total other expenses                |  |                |       |                        |   | 12,568                     |  |       | 733   |              |   | 13,301 |              |   | (2,646  | ) |  |   | 10,655
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Income from operations              |  |                |       |                        |   | 13,482                     |  |       | 129   |              |   | 13,611 |              |   |        |   |  |   | 13,611
|Equity earnings from subsidiaries   |  |                | 13,611 |                        |   | 129                        |  |       |      |              |   | 13,740 |              |   | (13,740 | ) |  |   |      
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Income before income taxes          |  |                | 13,611 |                        |   | 13,611                     |  |       | 129   |              |   | 27,351 |              |   | (13,740 | ) |  |   | 13,611
|Income tax provision                |  |                | 5,338  |                        |   | 5,338                      |  |       | 50    |              |   | 10,726 |              |   | (5,388  | ) |  |   | 5,338 
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       
|Net income and comprehensive income |  | $              | 8,273  |                        | $ | 8,273                      |  | $     | 79    |              | $ | 16,625 |              | $ | (8,352  | ) |  | $ | 8,273 
|                                    |  |                |        |                        |   |                            |  |       |       |              |   |        |              |   |         |   |  |   |       



8



---

##### Table of Contents

Condensed Consolidating Statements of

Operations and Comprehensive Income

(Loss) Information of the Registrant for

the Three Months Ended March 31, 2005

(In thousands)



|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | ---- | ------ | - | -------------- | - | ------ | ---------------------- |  | -------------------------- | ------ | ----- | - | ----- | ------------ | - | ------ | ------------ |  | - | ------ | - |  | - | ------ | -
|                                                  |  | LLHI |        |   | Company Issuer |   |        | Guarantor Subsidiaries |  | Non-Guarantor Subsidiaries |        | Total |   |       | Eliminations |   |        | Consolidated | 
|Revenues                                          |  | $    |       |   |                | $ |       |                        |  | $                          | 35,751 |       | $ | 4,176 |              | $ | 39,927 |              |  | $ | (4,005 | ) |  | $ | 35,922 |  
|Cost of services:                                 |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Interpreter                                       |  |      |       |   |                |   |       |                        |  |                            | 7,850  |       |   | 2,876 |              |   | 10,726 |              |  |   |       |   |  |   | 10,726 |  
|Telecommunications                                |  |      |       |   |                |   |       |                        |  |                            | 1,375  |       |   | 14    |              |   | 1,389  |              |  |   |       |   |  |   | 1,389  |  
|Answer points                                     |  |      |       |   |                |   |       |                        |  |                            | 48     |       |   | 39    |              |   | 87     |              |  |   |       |   |  |   | 87     |  
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Total cost of services                            |  |      |       |   |                |   |       |                        |  |                            | 9,273  |       |   | 2,929 |              |   | 12,202 |              |  |   |       |   |  |   | 12,202 |  
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Gross margin                                      |  |      |       |   |                |   |       |                        |  |                            | 26,478 |       |   | 1,247 |              |   | 27,725 |              |  |   | (4,005 | ) |  |   | 23,720 |  
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Other expenses:                                   |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Selling, general and administrative               |  |      |       |   |                |   |       |                        |  |                            | 9,705  |       |   | 853   |              |   | 10,558 |              |  |   | (4,005 | ) |  |   | 6,553  |  
|Interest - net                                    |  |      | 2,141  |   |                |   | 9,907  |                        |  |                            | 19     |       |   |      |              |   | 12,067 |              |  |   |       |   |  |   | 12,067 |  
|Depreciation and amortization                     |  |      |       |   |                |   |       |                        |  |                            | 9,608  |       |   | 226   |              |   | 9,834  |              |  |   |       |   |  |   | 9,834  |  
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Total other expenses                              |  |      | 2,141  |   |                |   | 9,907  |                        |  |                            | 19,332 |       |   | 1,079 |              |   | 32,459 |              |  |   | (4,005 | ) |  |   | 28,454 |  
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Income (loss) from operations                     |  |      | (2,141 | ) |                |   | (9,907 | )                      |  |                            | 7,146  |       |   | 168   |              |   | (4,734 | )            |  |   |       |   |  |   | (4,734 | )
|Equity earnings (losses) from subsidiaries        |  |      | (2,593 | ) |                |   | 7,314  |                        |  |                            | 168    |       |   |      |              |   | 4,889  |              |  |   | (4,889 | ) |  |   |       |  
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Income (loss) before income taxes                 |  |      | (4,734 | ) |                |   | (2,593 | )                      |  |                            | 7,314  |       |   | 168   |              |   | 155    |              |  |   | (4,889 | ) |  |   | (4,734 | )
|Income tax provision (benefit)                    |  |      | (1,654 | ) |                |   | (1,054 | )                      |  |                            | 2,969  |       |   | 69    |              |   | 330    |              |  |   | (1,984 | ) |  |   | (1,654 | )
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  
|Net income (loss) and comprehensive income (loss) |  | $    | (3,080 | ) |                | $ | (1,539 | )                      |  | $                          | 4,345  |       | $ | 99    |              | $ | (175   | )            |  | $ | (2,905 | ) |  | $ | (3,080 | )
|                                                  |  |      |        |   |                |   |        |                        |  |                            |        |       |   |       |              |   |        |              |  |   |        |   |  |   |        |  



9



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##### Table of Contents

Condensed Consolidating Statement of

Cash Flow Information of the Predecessor

for the Three Months Ended March 31, 2004

(In thousands)



|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------- | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ----- | - |  | ------------ | ------- | - | ------------ | - | ------ | - |  | - | ------- | -
|                                                                                  |  | CompanyIssuer |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Total |   |  | Eliminations |         |   | Consolidated |  
|Cash flows from operating activities                                              |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Net income                                                                        |  | $             | 8,273  |   |                       | $ | 8,273   |                           |  | $ | 79    |   |  | $            | 16,625  |   |              | $ | (8,352 | ) |  | $ | 8,273   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Depreciation and amortization                                                     |  |               |       |   |                       |   | 808     |                           |  |   | 148   |   |  |              | 956     |   |              |   |       |   |  |   | 956     |  
|Amortization of deferred financing costs                                          |  |               |       |   |                       |   | 717     |                           |  |   |      |   |  |              | 717     |   |              |   |       |   |  |   | 717     |  
|Deferred taxes on income                                                          |  |               |       |   |                       |   | 1,932   |                           |  |   |      |   |  |              | 1,932   |   |              |   |       |   |  |   | 1,932   |  
|Loss on disposal of property                                                      |  |               |       |   |                       |   | 19      |                           |  |   |      |   |  |              | 19      |   |              |   |       |   |  |   | 19      |  
|Loss (gain) from derivative instruments                                           |  |               |       |   |                       |   | (1,051  | )                         |  |   |      |   |  |              | (1,051  | ) |              |   |       |   |  |   | (1,051  | )
|Equity in earnings of subsidiaries                                                |  |               | (8,273 | ) |                       |   | (79     | )                         |  |   |      |   |  |              | (8,352  | ) |              |   | 8,352  |   |  |   |        |  
|Effect of changes in operating assets and liabilities:                            |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Accounts receivable                                                               |  |               |       |   |                       |   | 310     |                           |  |   | (11   | ) |  |              | 299     |   |              |   |       |   |  |   | 299     |  
|Prepaid expenses and other current assets                                         |  |               |       |   |                       |   | (63     | )                         |  |   | (89   | ) |  |              | (152    | ) |              |   |       |   |  |   | (152    | )
|Other assets                                                                      |  |               |       |   |                       |   | 2       |                           |  |   |      |   |  |              | 2       |   |              |   |       |   |  |   | 2       |  
|Accounts payable                                                                  |  |               |       |   |                       |   | 117     |                           |  |   |      |   |  |              | 117     |   |              |   |       |   |  |   | 117     |  
|Intercompany receivable, net of payable                                           |  |               | 8      |   |                       |   | 145     |                           |  |   | (265  | ) |  |              | (112    | ) |              |   | 112    |   |  |   |        |  
|Income taxes payable/refundable                                                   |  |               |       |   |                       |   | 2,659   |                           |  |   |      |   |  |              | 2,659   |   |              |   |       |   |  |   | 2,659   |  
|Accrued liabilities                                                               |  |               | (8     | ) |                       |   | (1,307  | )                         |  |   | 106   |   |  |              | (1,209  | ) |              |   | (112   | ) |  |   | (1,321  | )
|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Net cash provided by operating activities                                         |  |               |       |   |                       |   | 12,482  |                           |  |   | (32   | ) |  |              | 12,450  |   |              |   |       |   |  |   | 12,450  |  
|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Cash flows from investing activities-                                             |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Purchase of property                                                              |  |               |       |   |                       |   | (289    | )                         |  |   | (2    | ) |  |              | (291    | ) |              |   |       |   |  |   | (291    | )
|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Cash flows from financing activities-                                             |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Long-term debt repayments                                                         |  |               |       |   |                       |   | (11,422 | )                         |  |   |      |   |  |              | (11,422 | ) |              |   |       |   |  |   | (11,422 | )
|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Net increase (decrease) in cash                                                   |  |               |       |   |                       |   | 771     |                           |  |   | (34   | ) |  |              | 737     |   |              |   |       |   |  |   | 737     |  
|Cash - beginning of period                                                        |  |               | 184    |   |                       |   | 4,260   |                           |  |   | 127   |   |  |              | 4,571   |   |              |   |       |   |  |   | 4,571   |  
|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Cash - end of period                                                              |  | $             | 184    |   |                       | $ | 5,031   |                           |  | $ | 93    |   |  | $            | 5,308   |   |              | $ |       |   |  | $ | 5,308   |  
|                                                                                  |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  



10



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##### Table of Contents

Condensed Consolidating Statement of

Cash Flow Information of the Registrant

for the Three Months Ended March 31, 2005

(In thousands)



|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | -------------- | - | ------- | ---------------------- |  | - | -------------------------- | - |  | ----- | ---- | - | ------------ | - | ------- | ------------ |  | - | ------ | - |  | - | ------- | -
|                                                                                  |  | LLHI |        |   | Company Issuer |   |         | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Total |      |   | Eliminations |   |         | Consolidated | 
|Cash flows from operating activities                                              |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Net income (loss)                                                                 |  | $    | (3,080 | ) |                | $ | (1,539  | )                      |  | $ | 4,345                      |   |  | $     | 99   |   |              | $ | (175    | )            |  | $ | (2,905 | ) |  | $ | (3,080  | )
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Depreciation and amortization                                                     |  |      |       |   |                |   |        |                        |  |   | 9,608                      |   |  |       | 226  |   |              |   | 9,834   |              |  |   |       |   |  |   | 9,834   |  
|Amortization of deferred financing costs                                          |  |      | 58     |   |                |   | 474     |                        |  |   |                           |   |  |       |     |   |              |   | 532     |              |  |   |       |   |  |   | 532     |  
|Deferred taxes on income                                                          |  |      | (579   | ) |                |   | (2,025  | )                      |  |   |                           |   |  |       |     |   |              |   | (2,604  | )            |  |   |       |   |  |   | (2,604  | )
|Stock based compensation expense                                                  |  |      |       |   |                |   |        |                        |  |   | 92                         |   |  |       |     |   |              |   | 92      |              |  |   |       |   |  |   | 92      |  
|Accretion of discount on long-term debt                                           |  |      | 2,083  |   |                |   | 89      |                        |  |   |                           |   |  |       |     |   |              |   | 2,172   |              |  |   |       |   |  |   | 2,172   |  
|Equity in earnings (losses) of subsidiaries                                       |  |      | 1,539  |   |                |   | (4,345  | )                      |  |   | (99                        | ) |  |       |     |   |              |   | (2,905  | )            |  |   | 2,905  |   |  |   |        |  
|Effect of changes in operating assets and liabilities:                            |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Accounts receivable                                                               |  |      |       |   |                |   |        |                        |  |   | 96                         |   |  |       | (3   | ) |              |   | 93      |              |  |   |       |   |  |   | 93      |  
|Prepaid expenses and other current assets                                         |  |      |       |   |                |   |        |                        |  |   | (127                       | ) |  |       | (635 | ) |              |   | (762    | )            |  |   |       |   |  |   | (762    | )
|Other assets                                                                      |  |      |       |   |                |   |        |                        |  |   | 9                          |   |  |       | (10  | ) |              |   | (1      | )            |  |   |       |   |  |   | (1      | )
|Accounts payable                                                                  |  |      |       |   |                |   |        |                        |  |   | 360                        |   |  |       |     |   |              |   | 360     |              |  |   |       |   |  |   | 360     |  
|Intercompany receivable, net of payable                                           |  |      |       |   |                |   | 15,057  |                        |  |   | (15,528                    | ) |  |       | 471  |   |              |   |        |              |  |   |       |   |  |   |        |  
|Income taxes payable/refundable                                                   |  |      | (21    | ) |                |   | 2,774   |                        |  |   | (4,640                     | ) |  |       |     |   |              |   | (1,887  | )            |  |   |       |   |  |   | (1,887  | )
|Accrued liabilities                                                               |  |      |       |   |                |   | 4,267   |                        |  |   | (9                         | ) |  |       | (96  | ) |              |   | 4,162   |              |  |   |       |   |  |   | 4,162   |  
|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Net cash provided by operating activities                                         |  |      |       |   |                |   | 14,752  |                        |  |   | (5,893                     | ) |  |       | 52   |   |              |   | 8,911   |              |  |   |       |   |  |   | 8,911   |  
|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Cash flows from investing activities-                                             |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Purchase of property                                                              |  |      |       |   |                |   |        |                        |  |   | (82                        | ) |  |       |     |   |              |   | (82     | )            |  |   |       |   |  |   | (82     | )
|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Cash flows from financing activities-                                             |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Long-term debt repayments                                                         |  |      |       |   |                |   | (14,752 | )                      |  |   | (16                        | ) |  |       |     |   |              |   | (14,768 | )            |  |   |       |   |  |   | (14,768 | )
|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Net increase (decrease) in cash                                                   |  |      |       |   |                |   |        |                        |  |   | (5,991                     | ) |  |       | 52   |   |              |   | (5,939  | )            |  |   |       |   |  |   | (5,939  | )
|Cash - beginning of period                                                        |  |      |       |   |                |   |        |                        |  |   | 11,983                     |   |  |       | 181  |   |              |   | 12,164  |              |  |   |       |   |  |   | 12,164  |  
|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  
|Cash - end of period                                                              |  | $    |       |   |                | $ |        |                        |  | $ | 5,992                      |   |  | $     | 233  |   |              | $ | 6,225   |              |  | $ |       |   |  | $ | 6,225   |  
|                                                                                  |  |      |        |   |                |   |         |                        |  |   |                            |   |  |       |      |   |              |   |         |              |  |   |        |   |  |   |         |  



11



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##### Table of Contents

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 are the leading global provider of over-the-phone interpretation (OPI) services from English into more than
150 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 proficiency (LEP) speakers throughout the world. In 2004, we helped more than 19 million people communicate across linguistic and cultural barriers, providing over 90 million billed minutes of
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.



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 the product of actual billed minutes of service and the customers contractual rate per billed minute of service. In addition, the Company generates revenue from membership and enrollment fees, as well as fees for other
OPI-related services, such as document translation.



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, answer points and telecommunications costs.



Occupancy, as expressed in percentage terms, represents the
time that an interpreter is providing interpretation services (e.g., billed minutes) out of the time that an interpreter is scheduled to provide services.



12



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##### Table of Contents

Results of Operations



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



|                                    |  |                                   |   |  |                                   |   
|----------------------------------- |  | --------------------------------- | - |  | --------------------------------- | --
|                                    |  | Predecessor                       |   |  |                                   |   
|                                    |  | Three Months Ended March 31, 2004 |   |  | Three Months Ended March 31, 2005 |   
|Statement of Operations data:       |  |                                   |   |  |                                   |   
|Revenues                            |  | 100.0                             | % |  | 100.0                             | % 
|Cost of services:                   |  |                                   |   |  |                                   |   
|Interpreters                        |  | 28.0                              | % |  | 29.9                              | % 
|Telecommunications                  |  | 4.3                               | % |  | 3.9                               | % 
|Answer points                       |  | 0.4                               | % |  | 0.2                               | % 
|                                    |  |                                   |   |  |                                   |   
|Total cost of services              |  | 32.7                              | % |  | 34.0                              | % 
|                                    |  |                                   |   |  |                                   |   
|Gross margin                        |  | 67.3                              | % |  | 66.0                              | % 
|Other expenses:                     |  |                                   |   |  |                                   |   
|Selling, general and administrative |  | 16.8                              | % |  | 18.2                              | % 
|Interest, net                       |  | 10.1                              | % |  | 33.6                              | % 
|Depreciation and amortization       |  | 2.6                               | % |  | 27.4                              | % 
|                                    |  |                                   |   |  |                                   |   
|Total other expenses                |  | 29.5                              | % |  | 79.2                              | % 
|                                    |  |                                   |   |  |                                   |   
|Income (loss) before income taxes   |  | 37.8                              | % |  | (13.2                             | )%
|Income tax provision (benefit)      |  | 14.8                              | % |  | (4.6                              | )%
|                                    |  |                                   |   |  |                                   |   
|Net income (loss)                   |  | 23.0                              | % |  | (8.6                              | )%
|                                    |  |                                   |   |  |                                   |   



Three Months Ended March 31, 2004
Compared to the Three Months Ended March 31, 2005.



Revenues for the three months ended March 31, 2005 were $35.9 million as compared to $36.1 million for the three months ended March 31, 2004, a decrease of $0.2 million or 0.5%. The majority of the decrease in revenue is driven by an 8.2%
decline in the average rate per billed minute, offset by an 8.4% increase in OPI billed minutes.



For the three months ended March 31, 2005, cost of services were $12.2 million as compared to $11.8 million for the comparable period in 2004, an increase
of $0.4 million or 3.4%. This increase was primarily due to increased interpretation minutes offset by efficiencies gained from continued business process improvements.



Selling, general and administrative expenses for the three months ended March 31, 2005 were $6.6 million as compared to $6.1
million for the three months ended March 31, 2004, an increase of $0.5 million or 8.2%. This increase was primarily the result of an increase in audit and tax related fees, including Sarbanes-Oxley compliance costs.



Overall, operating margins decreased to 47.8% for the three months ended
March 31, 2005 from 50.5% for the three months ended March 31, 2004 due to the factors described above.



Interest expense for the three months ended March 31, 2005 was $12.1 million as compared to $3.6 million for the three months ended March 31, 2004. This
increase was the result of the additional debt incurred as part of the Merger.



Depreciation and amortization was $9.8 million for the three months ended March 31, 2005 as compared to $0.9 million for the three months ended March 31, 2004, an increase of $8.9 million. This increase is principally
attributable to the amortization of intangibles resulting from the Merger.



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The tax benefit on loss for the three months ended March 31, 2005 was $1.7 million as compared to $5.3
million of tax expense on income for the three months ended March 31, 2004. This decrease was driven by additional interest, depreciation and amortization expense.



As a result of the factors described above, net loss was $3.1 million for the three months ended March 31, 2005 as compared
to net income of $8.3 million for the three months ended March 31, 2004.



Liquidity and Capital Resources



Operating
Activities. Net cash provided by operating activities for the three months ending March 31, 2005 was $8.9 million compared with net cash provided by operating activities during the three months ending March 31, 2004 of $12.5 million. This
decrease is mainly attributable to the timing of tax payments and an increase in interest payments related to the senior secured debt.



Investing Activities. Net cash used in investing activities was $82,000 for the three months ending March 31, 2005, compared to $291,000 for the
same period in 2004. This decrease was attributable to lower capital expenditure spending.



Financing Activities. Net cash used in financing activities during the three months ending March 31, 2005 was $14.8 million, compared to $11.4 million during the three months ending March 31, 2004. The increase
of $3.4 million is the result of additional principal payments made on our senior secured debt.



Our principal sources of liquidity are cash flow from operations and borrowings under our senior secured credit facilities. We believe that these funds
will provide us with sufficient liquidity and capital resources for us to meet our current and future financial obligations for the next twelve months, including our scheduled principal and interest payments, as well as to provide funds for working
capital, capital expenditures, and other needs. Our principal uses of cash are debt service requirements, capital expenditures, and working capital requirements.



Debt Service. As of March 31, 2005, we had total indebtedness of $487.0 million and $40.0 million of borrowings
available under our senior secured credit facilities subject to customary conditions.



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 leverage ratio as defined in the senior credit facilities. The senior credit
facilities are secured by first priority interests in, and mortgages on, substantially all of our tangible and intangible assets and first priority pledges of all the equity interests owned by us in our existing and future domestic subsidiaries.



The senior subordinated notes mature in 2012 and are
guaranteed by each of our existing domestic subsidiaries on a senior subordinated basis. Interest on the notes will be payable semi-annually in cash.



The senior discount notes mature in 2013. The senior discount notes are unsecured senior obligations, rank equally with all of our future senior
indebtedness and rank senior to all subordinated indebtedness. The senior discount notes are subordinated to all of our subsidiaries existing future obligations. No cash interest will accrue on the senior discount notes prior to June 15, 2009.
Thereafter, cash interest on the senior discount notes will accrue at a rate of 141/8% per annum and be payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2009.



Capital Expenditures. We anticipate that we will spend approximately $2.0 million on capital expenditures in 2005 and $3.0 million in 2006.



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Contractual and Commercial Commitments Summary



The following tables present our long-term contractual cash obligations as of March 31, 2005 (dollars in thousands):



|                  |  |                         |   |                      |   |            |  |                         |         |                     |   |                             |  |       |         |  |   |        |  |   |        
|----------------- |  | ----------------------- | - | -------------------- | - | ---------- |  | ----------------------- | ------- | ------------------- | - | --------------------------- |  | ----- | ------- |  | - | ------ |  | - | -------
|                  |  | RevolvingCreditFacility |   | NotesPayable toOther |   | Term Loans |  | SeniorSubordinatedNotes |         | SeniorDiscountNotes |   | Operating andCapital Leases |  | Total
|Remainder of 2005 |  | $                       |  |                      | $ | 960        |  | $                       | 9,000   |                     | $ |                            |  | $     |        |  | $ | 3,252  |  | $ | 13,212 
|2006              |  |                         |  |                      |   | 960        |  |                         | 15,000  |                     |   |                            |  |       |        |  |   | 3,429  |  |   | 19,389 
|2007              |  |                         |  |                      |   |           |  |                         | 15,000  |                     |   |                            |  |       |        |  |   | 3,184  |  |   | 18,184 
|2008              |  |                         |  |                      |   |           |  |                         | 15,000  |                     |   |                            |  |       |        |  |   | 1,736  |  |   | 16,736 
|2009              |  |                         |  |                      |   |           |  |                         | 15,000  |                     |   |                            |  |       |        |  |   | 132    |  |   | 15,132 
|Thereafter        |  |                         |  |                      |   |           |  |                         | 193,749 |                     |   | 165,000                     |  |       | 108,993 |  |   |       |  |   | 467,742
|                  |  |                         |   |                      |   |            |  |                         |         |                     |   |                             |  |       |         |  |   |        |  |   |        
|Total             |  | $                       |  |                      | $ | 1,920      |  | $                       | 262,749 |                     | $ | 165,000                     |  | $     | 108,993 |  | $ | 11,733 |  | $ | 550,395
|                  |  |                         |   |                      |   |            |  |                         |         |                     |   |                             |  |       |         |  |   |        |  |   |        



Critical Accounting Policies



In preparing the consolidated financial statements, GAAP
requires management to select and apply accounting policies that involve estimates and judgment. The following accounting policies may require a higher degree of judgment or involve amounts that could have a material impact on the consolidated
financial statements.



Allowance for Doubtful Accounts
- We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make payments. We determine the allowance based upon an evaluation of individual accounts, aging of the portfolio, issues
raised by customers that may suggest non-payment, historical experience and/or the current economic environment. We might not continue to experience the same loss rates that we have in the past. If the financial condition of individual customers or
the general worldwide economy were to vary materially from the estimates and assumptions made by us, the allowance may require adjustment in the future. We evaluate the adequacy of the allowance on a regular basis, modifying, as necessary, its
assumptions, updating its record of historical experience and adjusting reserves as appropriate.



Impairment of Long-Lived Assets - We assess the impairment of long-lived assets at least annually or when or changes in circumstances indicate that the carrying value of the assets or the
asset grouping may not be recoverable. Customer relationships, internally developed technology, tradenames and trademarks, and goodwill are our most significant long-lived assets and are tested annually. Impairment is measured by the difference
between the carrying amount and the respective fair values, based on the best information available, including market prices or a discounted cash flow analysis. Estimates are made on the useful lives or economic values of assets and could change
base on changes in the economy or industry trends.



Claims and Legal
Proceedings



In the normal course of business, we are
party of various claims and legal proceedings. We record a reserve for these matters when an adverse outcome is probable and we can reasonably estimate our potential liability. We are not currently involved in any material legal proceedings.



Item 3.Quantitative and Qualitative Disclosure About Market Risk



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



We may use derivative financial instruments, where appropriate, to manage our interest rate risks. However, as a matter of policy we will not enter into derivative or other financial investments for trading or speculative purposes. We do
not have any speculative or leveraged derivative transactions. Most of our revenue is denominated in U.S. dollars; thus our financial results are not subject to any material foreign currency exchange risks.



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Item 4.Controls and Procedures.



The Companys Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report, have concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the
Company in the reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC.



There have not been any changes in the Companys internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.



PART 2. OTHER INFORMATION



Item 1.Legal Proceedings



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



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



None.



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
| | --- | --------



|     |  |                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification by Dennis G. Dracup pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                     
|     | 
|31.2 |  | Certification by Matthew T. Gibbs II 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, 2005.



LANGUAGE LINE HOLDINGS, INC./s/ Dennis G. DracupDennis G. DracupChief Executive Officer and Director/s/ Matthew T. Gibbs IIMatthew T. Gibbs IIChief Financial Officer and Director




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