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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 10-Q



(Mark One)

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



For the quarterly period ended September 30, 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 333-118753



Language Line, Inc.

(Exact name
of registrant as specified in its charter)



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 20-0997805                         
|(State or other jurisdiction ofincorporation or organization) |  | (IRS EmployerIdentification 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.)



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   þ



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)



Yes ̈No   þ



Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2)



Yes ̈No   þ



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, Inc.
(LLI, 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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LANGUAGE LINE, INC. AND SUBSIDIARIES

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

TABLE OF CONTENTS



|                              |  |                                                                                                                                                                             |  |       
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------
|                              |  |                                                                                                                                                                             |  | Page  
|Part 1. Financial Information |  |                                                                                                                                                                            
|                              |  |                                                                                                                                                                            
|Item 1.                       |  | Financial Statements (Unaudited)                                                                                                                                            |  | 1 - 15
|                              |  | Condensed Consolidated Balance Sheets  December 31, 2004 and September 30, 2005                                                                                            |  |       
|                              |  | Condensed Consolidated Statements of Operations  Three months ended September 30, 2004 and September 30, 2005; Nine
months ended September 30, 2004 and September 30, 2005 |  |       
|                              | 
|                              |  | Condensed Consolidated Statements of Cash Flows  Nine months ended September 30, 2004 and September 30,
2005                                                               |  |       
|                              | 
|                              |  |                                                                                                                                                                            
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                                                                        |  |       
|                              |  |                                                                                                                                                                            
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                       |  | 16    
|                              |  |                                                                                                                                                                            
|Item 3.                       |  | Quantitative and Qualitative Disclosures of Market Risk                                                                                                                     |  | 20    
|                              |  |                                                                                                                                                                            
|Item 4.                       |  | Controls and Procedures                                                                                                                                                     |  | 20    
|                              | 
|Part 2. Other Information     |  |                                                                                                                                                                            
|                              |  |                                                                                                                                                                            
|Item 1.                       |  | Legal Proceedings                                                                                                                                                           |  | 20    
|                              |  |                                                                                                                                                                            
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                 |  | 20    
|                              |  |                                                                                                                                                                            
|Item 3.                       |  | Defaults upon Senior Securities                                                                                                                                             |  | 20    
|                              |  |                                                                                                                                                                            
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                                                                         |  | 20    
|                              |  |                                                                                                                                                                            
|Item 5.                       |  | Other Information                                                                                                                                                           |  | 21    
|                              |  |                                                                                                                                                                            
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                                                                            |  | 21    
|                              | 
|Signatures                    |  | 22                                                                                                                                                                         
|                              | 
|Certifications                |  | Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2                                                                                                                           



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##### Table of Contents



PART 1. FINANCIAL INFORMATION



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



LANGUAGE LINE, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

(Unaudited)



|                                                                                           |  |                  |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------ |  | ---------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                           |  | December 31,2004 |         |   | September 30,2005 |  
|Assets                                                                                     |  |                  |         |   |                   |   |         |  
|Current assets:                                                                            |  |                  |         |   |                   |   |         |  
|Cash                                                                                       |  | $                | 12,164  |   |                   | $ | 15,248  |  
|Accounts receivable, net                                                                   |  |                  | 19,626  |   |                   |   | 21,293  |  
|Prepaid expenses and other current assets                                                  |  |                  | 1,820   |   |                   |   | 2,202   |  
|Deferred taxes on income                                                                   |  |                  | 411     |   |                   |   | 485     |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Total current assets                                                                       |  |                  | 34,021  |   |                   |   | 39,228  |  
|Property and equipment, net                                                                |  |                  | 5,897   |   |                   |   | 5,022   |  
|Goodwill                                                                                   |  |                  | 408,793 |   |                   |   | 408,793 |  
|Intangible assets, net                                                                     |  |                  | 439,793 |   |                   |   | 412,240 |  
|Deferred financing costs, net                                                              |  |                  | 13,035  |   |                   |   | 11,615  |  
|Other assets                                                                               |  |                  | 1,333   |   |                   |   | 172     |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Total assets                                                                               |  | $                | 902,872 |   |                   | $ | 877,070 |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Liabilities and Stockholders Equity                                                       |  |                  |         |   |                   |   |         |  
|Current liabilities:                                                                       |  |                  |         |   |                   |   |         |  
|Accounts payable                                                                           |  | $                | 462     |   |                   | $ | 242     |  
|Accrued interest                                                                           |  |                  | 1,276   |   |                   |   | 9,192   |  
|Accrued payroll and related benefits                                                       |  |                  | 1,740   |   |                   |   | 830     |  
|Accrued cost of interpreters                                                               |  |                  | 1,331   |   |                   |   | 1,472   |  
|Other accrued liabilities                                                                  |  |                  | 1,682   |   |                   |   | 1,879   |  
|Income taxes payable                                                                       |  |                  | 2,504   |   |                   |   | 1,965   |  
|Current portion of long-term debt                                                          |  |                  | 12,947  |   |                   |   | 14,587  |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Total current liabilities                                                                  |  |                  | 21,942  |   |                   |   | 30,167  |  
|Long-term debt                                                                             |  |                  | 266,428 |   |                   |   | 243,366 |  
|Senior subordinated notes                                                                  |  |                  | 160,948 |   |                   |   | 161,220 |  
|Deferred taxes on income                                                                   |  |                  | 174,531 |   |                   |   | 167,343 |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Total liabilities                                                                          |  |                  | 623,849 |   |                   |   | 602,096 |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Stockholders equity:                                                                      |  |                  |         |   |                   |   |         |  
|Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding |  |                  |        |   |                   |   |        |  
|Additional paid-in capital                                                                 |  |                  | 281,207 |   |                   |   | 281,064 |  
|Accumulated deficit                                                                        |  |                  | (523    | ) |                   |   | (4,749  | )
|Deferred stock compensation                                                                |  |                  | (1,661  | ) |                   |   | (1,341  | )
|                                                                                           |  |                  |         |   |                   |   |         |  
|Total stockholders equity                                                                 |  |                  | 279,023 |   |                   |   | 274,974 |  
|                                                                                           |  |                  |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                 |  | $                | 902,872 |   |                   | $ | 877,070 |  
|                                                                                           |  |                  |         |   |                   |   |         |  



See notes to condensed
consolidated financial statements.



1



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LANGUAGE LINE, INC. AND
SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|----------------------------------- |  | ----------------------------------- | ------ | - | ----------------------------------- | - | ------ | ------------------------------ |  | --------------------------------- | ------ |  | ---------------------------------- | ------ | - |  | - | ------- | -
|                                    |  |                                     |        |   |                                     |   |        | Predecessor                    |  |                                   |        |  |                                    |       
|                                    |  | Three monthsendedSeptember 30, 2004 |        |   | Three monthsendedSeptember 30, 2005 |   |        | January 1, 2004toJune 11, 2004 |  | June 12, 2004toSeptember 30, 2004 |        |  | Nine monthsendedSeptember 30, 2005 |       
|Revenues                            |  | $                                   | 36,228 |   |                                     | $ | 36,362 |                                |  | $                                 | 64,692 |  | $                                  | 43,616 |   |  | $ | 107,786 |  
|Cost of services:                   |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Interpreters                        |  |                                     | 10,058 |   |                                     |   | 10,809 |                                |  |                                   | 18,374 |  |                                    | 11,928 |   |  |   | 32,216  |  
|Telecommunications                  |  |                                     | 1,481  |   |                                     |   | 1,365  |                                |  |                                   | 2,882  |  |                                    | 1,737  |   |  |   | 4,098   |  
|Answer points                       |  |                                     | 122    |   |                                     |   | 69     |                                |  |                                   | 256    |  |                                    | 148    |   |  |   | 233     |  
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Total cost of services              |  |                                     | 11,661 |   |                                     |   | 12,243 |                                |  |                                   | 21,512 |  |                                    | 13,813 |   |  |   | 36,547  |  
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Gross margin                        |  |                                     | 24,567 |   |                                     |   | 24,119 |                                |  |                                   | 43,180 |  |                                    | 29,803 |   |  |   | 71,239  |  
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Other expenses:                     |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Selling, general and administrative |  |                                     | 5,558  |   |                                     |   | 5,603  |                                |  |                                   | 10,423 |  |                                    | 6,760  |   |  |   | 18,685  |  
|Interest - net                      |  |                                     | 9,331  |   |                                     |   | 10,318 |                                |  |                                   | 5,982  |  |                                    | 11,499 |   |  |   | 30,319  |  
|Merger related expenses             |  |                                     | 64     |   |                                     |   |       |                                |  |                                   | 9,848  |  |                                    | 64     |   |  |   |        |  
|Depreciation and amortization       |  |                                     | 9,907  |   |                                     |   | 9,797  |                                |  |                                   | 1,735  |  |                                    | 11,911 |   |  |   | 29,427  |  
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Total other expenses                |  |                                     | 24,860 |   |                                     |   | 25,718 |                                |  |                                   | 27,988 |  |                                    | 30,234 |   |  |   | 78,431  |  
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Income (loss) before income taxes   |  |                                     | (293   | ) |                                     |   | (1,599 | )                              |  |                                   | 15,192 |  |                                    | (431   | ) |  |   | (7,192  | )
|Income tax provision (benefit)      |  |                                     | (162   | ) |                                     |   | (675   | )                              |  |                                   | 5,968  |  |                                    | (220   | ) |  |   | (2,966  | )
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  
|Net income (loss)                   |  | $                                   | (131   | ) |                                     | $ | (924   | )                              |  | $                                 | 9,224  |  | $                                  | (211   | ) |  | $ | (4,226  | )
|                                    |  |                                     |        |   |                                     |   |        |                                |  |                                   |        |  |                                    |        |   |  |   |         |  



See notes to condensed
consolidated financial statements.



2



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LANGUAGE LINE, INC. AND
SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------------- | - | -------- | ---------------------------------- |  | - | ------- | -
|                                                                                         |  | Predecessor                    |         |   |                                   |   |          |                                    | 
|                                                                                         |  | January 1, 2004toJune 11, 2004 |         |   | June 12, 2004toSeptember 30, 2004 |   |          | Nine monthsendedSeptember 30, 2005 | 
|Cash flows from operating activities:                                                    |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Net income (loss)                                                                        |  | $                              | 9,224   |   |                                   | $ | (211     | )                                  |  | $ | (4,226  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Depreciation and amortization                                                            |  |                                | 1,735   |   |                                   |   | 11,911   |                                    |  |   | 29,427  |  
|Amortization of deferred financing costs                                                 |  |                                | 1,225   |   |                                   |   | 646      |                                    |  |   | 1,420   |  
|Deferred taxes on income                                                                 |  |                                | 1,300   |   |                                   |   | (2,546   | )                                  |  |   | (7,262  | )
|Tax benefit from stock options exercised                                                 |  |                                | 6,094   |   |                                   |   |         |                                    |  |   |        |  
|Stock based compensation expense                                                         |  |                                |        |   |                                   |   |         |                                    |  |   | 276     |  
|Loss on disposal of property                                                             |  |                                | 19      |   |                                   |   |         |                                    |  |   |        |  
|Loss (gain) from derivative instruments                                                  |  |                                | (1,886  | ) |                                   |   | 27       |                                    |  |   | 4       |  
|Loss on write-off of deferred financing costs                                            |  |                                | 9,555   |   |                                   |   |         |                                    |  |   |        |  
|Accretion of discount on long-term debt                                                  |  |                                |        |   |                                   |   | 101      |                                    |  |   | 273     |  
|Effect of changes in operating assets and liabilities:                                   |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Accounts receivable                                                                      |  |                                | 335     |   |                                   |   | 166      |                                    |  |   | (1,667  | )
|Prepaid expenses and other current assets                                                |  |                                | (150    | ) |                                   |   | 681      |                                    |  |   | (382    | )
|Other assets                                                                             |  |                                | (25     | ) |                                   |   | (92      | )                                  |  |   | 62      |  
|Accounts payable                                                                         |  |                                | (450    | ) |                                   |   | 528      |                                    |  |   | (219    | )
|Income taxes payable/refundable                                                          |  |                                | (5,495  | ) |                                   |   | 4,941    |                                    |  |   | (539    | )
|Accrued liabilities                                                                      |  |                                | (1,457  | ) |                                   |   | 6,673    |                                    |  |   | 7,343   |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Net cash provided by operating activities                                                |  |                                | 20,024  |   |                                   |   | 22,825   |                                    |  |   | 24,510  |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Cash flows from investing activities :                                                   |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Purchase of property                                                                     |  |                                | (860    | ) |                                   |   | (868     | )                                  |  |   | (999    | )
|Advance to Parent                                                                        |  |                                |        |   |                                   |   | (124     | )                                  |  |   |        |  
|Acquisition of Predecessor, net of cash acquired                                         |  |                                |        |   |                                   |   | (716,224 | )                                  |  |   |        |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Net cash used in investing activities                                                    |  |                                | (860    | ) |                                   |   | (717,216 | )                                  |  |   | (999    | )
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Cash flows from financing activities :                                                   |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Long-term debt borrowings                                                                |  |                                |        |   |                                   |   | 452,502  |                                    |  |   |        |  
|Long-term debt repayments                                                                |  |                                | (12,260 | ) |                                   |   | (3,779   | )                                  |  |   | (21,422 | )
|Loan fees and other financing costs                                                      |  |                                |        |   |                                   |   | (14,225  | )                                  |  |   |        |  
|Proceeds from issuance of common stock                                                   |  |                                |        |   |                                   |   | 279,338  |                                    |  |   |        |  
|Capital contribution from Parent                                                         |  |                                |        |   |                                   |   |         |                                    |  |   | 995     |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Net cash provided by (used in) financing activities                                      |  |                                | (12,260 | ) |                                   |   | 713,836  |                                    |  |   | (20,427 | )
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Net increase in cash                                                                     |  |                                | 6,904   |   |                                   |   | 19,445   |                                    |  |   | 3,084   |  
|Cash - beginning of period                                                               |  |                                | 4,571   |   |                                   |   |         |                                    |  |   | 12,164  |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Cash - end of period                                                                     |  | $                              | 11,475  |   |                                   | $ | 19,445   |                                    |  | $ | 15,248  |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Supplemental cash flow disclosures:                                                      |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Cash paid for interest                                                                   |  | $                              | 7,177   |   |                                   | $ | 4,791    |                                    |  | $ | 20,800  |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  
|Cash paid (refunded) for income taxes                                                    |  | $                              | 4,069   |   |                                   | $ | (2,624   | )                                  |  | $ | 4,835   |  
|                                                                                         |  |                                |         |   |                                   |   |          |                                    |  |   |         |  



See notes to condensed
consolidated financial statements.



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##### Table of Contents



LANGUAGE LINE, 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 financial position, results of operations and cash flows of Language Line, Inc. and Subsidiaries (LLI, we, us, or the Company) for the interim periods. Operating
results for the three months and nine months ended September 30, 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, 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 the Company, an indirect
wholly-owned subsidiary of Language Line Holdings, LLC, in a transaction accounted for under the purchase method of accounting (the Merger). LLI is a Delaware corporation formed in April 2004. LLI had no significant operations prior to
the acquisition of Predecessor. LLI is wholly-owned by Language Line Holdings, Inc. which, in turn, is an indirect subsidiary of Language Line Holdings, LLC.



The Company provides over-the-phone interpretation (OPI) 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 United States, United Kingdom 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 period from January 1, 2004 to June 11, 2004, and the accounts of LLI, LLC and LLCs wholly-owned subsidiaries as of December 31, 2004 and September 30, 2005, for the three
months ended September 30, 2004 and 2005, for the period from June 12, 2004 to September 30, 2004, and for the nine months ended September 30, 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.



4



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##### Table of Contents

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 monthsendedSeptember 30, 2004 |      |   | Three monthsendedSeptember 30, 2005 |   |      | January 1, 2004toJune 11, 2004 |  |   | June 12, 2004toSeptember 30, 2004 |   |  | Nine monthsendedSeptember 30, 2005 |     
|Net income (loss), as reported                                                                                                             |  | $                                   | (131 | ) |                                     | $ | (924 | )                              |  | $ | 9,224                             |   |  | $                                  | (211 | ) |  | $ | (4,226 | )
|Add total stock-based employee compensation expense included in reported net income (loss), net of related tax effects                     |  |                                     |     |   |                                     |   | 57   |                                |  |   |                                  |   |  |                                    |     |   |  |   | 171    |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                     |     |   |                                     |   | (57  | )                              |  |   | (101                              | ) |  |                                    |     |   |  |   | (171   | )
|                                                                                                                                           |  |                                     |      |   |                                     |   |      |                                |  |   |                                   |   |  |                                    |      |   |  |   |        |  
|Pro forma net income (loss)                                                                                                                |  | $                                   | (131 | ) |                                     | $ | (924 | )                              |  | $ | 9,123                             |   |  | $                                  | (211 | ) |  | $ | (4,226 | )
|                                                                                                                                           |  |                                     |      |   |                                     |   |      |                                |  |   |                                   |   |  |                                    |      |   |  |   |        |  



|2. | Related Party Transactions
|-- | --------------------------



In 2001, the Predecessor loaned $995,000 to an officer in exchange for a note receivable (Note 1). Note 1 was secured by the partys
primary residence. In 2002, the Predecessor loaned $100,000 to another officer in exchange for a note receivable (Note 2). Note 2 is secured by the Language Line Holdings, LLC common stock. In connection with the Merger, which occurred
on June 11, 2004, both of these loans were modified to extend their maturities. These modifications were made when LLI was a private company not subject to the Sarbanes-Oxley Act of 2002 (the Act). In September, 2004, LLI became
subject to the Act and as a result the loans may not have been compliant with the Act. To address this matter, on April 13, 2005, $1,095,000 was distributed from LLI in the form of a dividend to its parent, LLHI. LLHI then distributed in the
form of a dividend that same amount to its parent, Language Line Holdings III, Inc. (the Parent). Parent then made new loans to the executives in the same amount as the loans held by LLI. The loans held by LLI were simultaneously repaid
in full by the officers. Each of the dividends and loans mentioned above that occurred on April 13, 2005 were effected in non-cash transactions. This action required a waiver from the lenders party to LLIs credit agreement, which was obtained
on April 13, 2005. On May 18, 2005, a capital contribution in the amount of $995,000 was made by the Parent to LLHI when one of the officers repaid his loan to the Parent.



|3. | 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 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 September 30, 2005, statements of operations information for the three months ended September 30, 2004 and 2005, for the period from January 1, 2004 to June 11, 2004, for the period from June 12, 2004 to
September 30, 2004, and for the nine months ended September 30, 2005, and statement of cash flow information for the period from January 1, 2004 to June 11, 2004, for the period from June 12, 2004 to September 30, 2004,
and for the nine months ended September 30, 2005 for LLI (the Registrant), 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.



5



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##### Table of Contents

|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------------------------- |  | ----- | ----- |  | ------------ | --------- | - | ------------ | - | -------- | - |  | - | ------- | -
|Condensed Consolidating Balance Sheet Information of the Registrant as of December 31, 2004 (In thousands) |  | 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                                                                  |  |               | 164     |   |                       |   | 1,540                     |  |       | 116   |  |              | 1,820     |   |              |   |         |   |  |   | 1,820   |  
|Deferred taxes on income                                                                                   |  |               | 411     |   |                       |   |                          |  |       |      |  |              | 411       |   |              |   |         |   |  |   | 411     |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total current assets                                                                                       |  |               | 575     |   |                       |   | 71,565                    |  |       | 679   |  |              | 72,819    |   |              |   | (38,798  | ) |  |   | 34,021  |  
|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                                                                             |  |               | 13,035  |   |                       |   |                          |  |       |      |  |              | 13,035    |   |              |   |         |   |  |   | 13,035  |  
|Investment in subsidiaries                                                                                 |  |               | 739,716 |   |                       |   | 673                       |  |       |      |  |              | 740,389   |   |              |   | (740,389 | ) |  |   |        |  
|Other assets                                                                                               |  |               | 5       |   |                       |   | 1,260                     |  |       | 68    |  |              | 1,333     |   |              |   |         |   |  |   | 1,333   |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total assets                                                                                               |  | $             | 753,331 |   |                       | $ | 925,646                   |  | $     | 3,082 |  | $            | 1,682,059 |   |              | $ | (779,187 | ) |  | $ | 902,872 |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Liabilities, Members Capital and Stockholders Equity                                                     |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Current liabilities:                                                                                       |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Accounts payable                                                                                           |  | $             |        |   |                       | $ | 462                       |  | $     |      |  | $            | 462       |   |              | $ |         |   |  | $ | 462     |  
|Intercompany payable                                                                                       |  |               | 36,772  |   |                       |   |                          |  |       | 2,026 |  |              | 38,798    |   |              |   | (38,798  | ) |  |   |        |  
|Accrued interest                                                                                           |  |               | 1,228   |   |                       |   | 48                        |  |       |      |  |              | 1,276     |   |              |   |         |   |  |   | 1,276   |  
|Accrued payroll and related benefits                                                                       |  |               |        |   |                       |   | 1,689                     |  |       | 51    |  |              | 1,740     |   |              |   |         |   |  |   | 1,740   |  
|Accrued cost of interpreters                                                                               |  |               |        |   |                       |   | 1,122                     |  |       | 209   |  |              | 1,331     |   |              |   |         |   |  |   | 1,331   |  
|Other accrued liabilities                                                                                  |  |               | 183     |   |                       |   | 1,376                     |  |       | 123   |  |              | 1,682     |   |              |   |         |   |  |   | 1,682   |  
|Income taxes payable                                                                                       |  |               | 327     |   |                       |   | 2,177                     |  |       |      |  |              | 2,504     |   |              |   |         |   |  |   | 2,504   |  
|Current portion of long-term debt                                                                          |  |               | 12,000  |   |                       |   | 947                       |  |       |      |  |              | 12,947    |   |              |   |         |   |  |   | 12,947  |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total current liabilities                                                                                  |  |               | 50,510  |   |                       |   | 7,821                     |  |       | 2,409 |  |              | 60,740    |   |              |   | (38,798  | ) |  |   | 21,942  |  
|Long-term debt                                                                                             |  |               | 265,500 |   |                       |   | 928                       |  |       |      |  |              | 266,428   |   |              |   |         |   |  |   | 266,428 |  
|Senior subordinated notes                                                                                  |  |               | 160,948 |   |                       |   |                          |  |       |      |  |              | 160,948   |   |              |   |         |   |  |   | 160,948 |  
|Deferred income taxes                                                                                      |  |               | (4,311  | ) |                       |   | 178,842                   |  |       |      |  |              | 174,531   |   |              |   |         |   |  |   | 174,531 |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total liabilities                                                                                          |  |               | 472,647 |   |                       |   | 187,591                   |  |       | 2,409 |  |              | 662,647   |   |              |   | (38,798  | ) |  |   | 623,849 |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Members capital                                                                                           |  |               |        |   |                       |   | 738,055                   |  |       | 673   |  |              | 738,728   |   |              |   | (738,728 | ) |  |   |        |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Stockholders equity:                                                                                      |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Common stock                                                                                               |  |               |        |   |                       |   |                          |  |       |      |  |              |          |   |              |   |         |   |  |   |        |  
|Additional paid-in-capital                                                                                 |  |               | 281,207 |   |                       |   |                          |  |       |      |  |              | 281,207   |   |              |   |         |   |  |   | 281,207 |  
|Accumulated deficit                                                                                        |  |               | (523    | ) |                       |   |                          |  |       |      |  |              | (523      | ) |              |   |         |   |  |   | (523    | )
|Deferred stock compensation                                                                                |  |               |        |   |                       |   |                          |  |       |      |  |              |          |   |              |   | (1,661   | ) |  |   | (1,661  | )
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total stockholders equity                                                                                 |  |               | 280,684 |   |                       |   |                          |  |       |      |  |              | 280,684   |   |              |   | (1,661   | ) |  |   | 279,023 |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total liabilities, members capital and stockholders equity                                               |  | $             | 753,331 |   |                       | $ | 925,646                   |  | $     | 3,082 |  | $            | 1,682,059 |   |              | $ | (779,187 | ) |  | $ | 902,872 |  
|                                                                                                           |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  



6



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##### Table of Contents

|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------------------------- |  | ----- | ----- |  | ------------ | --------- | - | ------------ | - | -------- | - |  | - | ------- | -
|Condensed Consolidating Balance Sheet Information of the Registrant as of September 30, 2005 (In thousands) |  | CompanyIssuer |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Total |       |  | Eliminations |           |   | Consolidated |  
|Assets                                                                                                      |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Current assets:                                                                                             |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Cash                                                                                                        |  | $             |        |   |                       | $ | 15,145                    |  | $     | 103   |  | $            | 15,248    |   |              | $ |         |   |  | $ | 15,248  |  
|Accounts receivable - net                                                                                   |  |               |        |   |                       |   | 20,813                    |  |       | 480   |  |              | 21,293    |   |              |   |         |   |  |   | 21,293  |  
|Intercompany receivable                                                                                     |  |               |        |   |                       |   | 74,584                    |  |       |      |  |              | 74,584    |   |              |   | (74,584  | ) |  |   |        |  
|Prepaid expenses and other current assets                                                                   |  |               | 163     |   |                       |   | 1,794                     |  |       | 245   |  |              | 2,202     |   |              |   |         |   |  |   | 2,202   |  
|Deferred taxes on income                                                                                    |  |               | 485     |   |                       |   |                          |  |       |      |  |              | 485       |   |              |   |         |   |  |   | 485     |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total current assets                                                                                        |  |               | 648     |   |                       |   | 112,336                   |  |       | 828   |  |              | 113,812   |   |              |   | (74,584  | ) |  |   | 39,228  |  
|Property and equipment - net                                                                                |  |               |        |   |                       |   | 3,297                     |  |       | 1,725 |  |              | 5,022     |   |              |   |         |   |  |   | 5,022   |  
|Goodwill                                                                                                    |  |               |        |   |                       |   | 408,793                   |  |       |      |  |              | 408,793   |   |              |   |         |   |  |   | 408,793 |  
|Intangible assets - net                                                                                     |  |               |        |   |                       |   | 412,240                   |  |       |      |  |              | 412,240   |   |              |   |         |   |  |   | 412,240 |  
|Deferred financing costs - net                                                                              |  |               | 11,615  |   |                       |   |                          |  |       |      |  |              | 11,615    |   |              |   |         |   |  |   | 11,615  |  
|Investment in subsidiaries                                                                                  |  |               | 752,970 |   |                       |   | 1,015                     |  |       |      |  |              | 753,985   |   |              |   | (753,985 | ) |  |   |        |  
|Other assets                                                                                                |  |               |        |   |                       |   | 85                        |  |       | 87    |  |              | 172       |   |              |   |         |   |  |   | 172     |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total assets                                                                                                |  | $             | 765,233 |   |                       | $ | 937,766                   |  | $     | 2,640 |  | $            | 1,705,639 |   |              | $ | (828,569 | ) |  | $ | 877,070 |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Liabilities, Members Capital and Stockholders Equity                                                      |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Current liabilities:                                                                                        |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Accounts payable                                                                                            |  | $             |        |   |                       | $ | 242                       |  | $     |      |  | $            | 242       |   |              | $ |         |   |  | $ | 242     |  
|Intercompany payable                                                                                        |  |               | 73,374  |   |                       |   |                          |  |       | 1,210 |  |              | 74,584    |   |              |   | (74,584  | ) |  |   |        |  
|Accrued interest                                                                                            |  |               | 9,170   |   |                       |   | 22                        |  |       |      |  |              | 9,192     |   |              |   |         |   |  |   | 9,192   |  
|Accrued payroll and related benefits                                                                        |  |               |        |   |                       |   | 820                       |  |       | 10    |  |              | 830       |   |              |   |         |   |  |   | 830     |  
|Accrued cost of interpreters                                                                                |  |               |        |   |                       |   | 1,213                     |  |       | 259   |  |              | 1,472     |   |              |   |         |   |  |   | 1,472   |  
|Other accrued liabilities                                                                                   |  |               |        |   |                       |   | 1,733                     |  |       | 146   |  |              | 1,879     |   |              |   |         |   |  |   | 1,879   |  
|Income taxes payable                                                                                        |  |               | (3,339  | ) |                       |   | 5,304                     |  |       |      |  |              | 1,965     |   |              |   |         |   |  |   | 1,965   |  
|Current portion of long-term debt                                                                           |  |               | 13,640  |   |                       |   | 947                       |  |       |      |  |              | 14,587    |   |              |   |         |   |  |   | 14,587  |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total current liabilities                                                                                   |  |               | 92,845  |   |                       |   | 10,281                    |  |       | 1,625 |  |              | 104,751   |   |              |   | (74,584  | ) |  |   | 30,167  |  
|Long-term debt                                                                                              |  |               | 243,366 |   |                       |   |                          |  |       |      |  |              | 243,366   |   |              |   |         |   |  |   | 243,366 |  
|Senior subordinated notes                                                                                   |  |               | 161,220 |   |                       |   |                          |  |       |      |  |              | 161,220   |   |              |   |         |   |  |   | 161,220 |  
|Deferred income taxes                                                                                       |  |               | (8,513  | ) |                       |   | 175,856                   |  |       |      |  |              | 167,343   |   |              |   |         |   |  |   | 167,343 |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total liabilities                                                                                           |  |               | 488,918 |   |                       |   | 186,137                   |  |       | 1,625 |  |              | 676,680   |   |              |   | (74,584  | ) |  |   | 602,096 |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Members capital                                                                                            |  |               |        |   |                       |   | 751,629                   |  |       | 1,015 |  |              | 752,644   |   |              |   | (752,644 | ) |  |   |        |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Stockholders equity:                                                                                       |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Common stock                                                                                                |  |               |        |   |                       |   |                          |  |       |      |  |              |          |   |              |   |         |   |  |   |        |  
|Additional paid-in-capital                                                                                  |  |               | 281,064 |   |                       |   |                          |  |       |      |  |              | 281,064   |   |              |   |         |   |  |   | 281,064 |  
|Accumulated deficit                                                                                         |  |               | (4,749  | ) |                       |   |                          |  |       |      |  |              | (4,749    | ) |              |   |         |   |  |   | (4,749  | )
|Deferred stock compensation                                                                                 |  |               |        |   |                       |   |                          |  |       |      |  |              |          |   |              |   | (1,341   | ) |  |   | (1,341  | )
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total stockholders equity                                                                                  |  |               | 276,315 |   |                       |   |                          |  |       |      |  |              | 276,315   |   |              |   | (1,341   | ) |  |   | 274,974 |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  
|Total liabilities, members capital and stockholders equity                                                |  | $             | 765,233 |   |                       | $ | 937,766                   |  | $     | 2,640 |  | $            | 1,705,639 |   |              | $ | (828,569 | ) |  | $ | 877,070 |  
|                                                                                                            |  |               |         |   |                       |   |                           |  |       |       |  |              |           |   |              |   |          |   |  |   |         |  



7



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##### Table of Contents

|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------ | - | --------------------- | - | ------ | ------------------------- |  | ----- | ----- |  | ------------ | ------ | - | ------------ | - | ------ | - |  | - | ------ | -
|Condensed Consolidating Statements of Operations Information of the Registrant for the Three Months EndedSeptember 30, 2004 (In thousands) |  | CompanyIssuer |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  | Total |       |  | Eliminations |        |   | Consolidated |  
|Revenues                                                                                                                                   |  | $             |       |   |                       | $ | 36,107 |                           |  | $     | 3,704 |  | $            | 39,811 |   |              | $ | (3,583 | ) |  | $ | 36,228 |  
|Cost of services:                                                                                                                          |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Interpreters                                                                                                                               |  |               |       |   |                       |   | 7,537  |                           |  |       | 2,521 |  |              | 10,058 |   |              |   |       |   |  |   | 10,058 |  
|Telecommunications                                                                                                                         |  |               |       |   |                       |   | 1,457  |                           |  |       | 24    |  |              | 1,481  |   |              |   |       |   |  |   | 1,481  |  
|Answer points                                                                                                                              |  |               |       |   |                       |   | 45     |                           |  |       | 77    |  |              | 122    |   |              |   |       |   |  |   | 122    |  
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Total cost of services                                                                                                                     |  |               |       |   |                       |   | 9,039  |                           |  |       | 2,622 |  |              | 11,661 |   |              |   |       |   |  |   | 11,661 |  
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Gross margin                                                                                                                               |  |               |       |   |                       |   | 27,068 |                           |  |       | 1,082 |  |              | 28,150 |   |              |   | (3,583 | ) |  |   | 24,567 |  
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Other expenses:                                                                                                                            |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Selling, general and administrative                                                                                                        |  |               |       |   |                       |   | 8,429  |                           |  |       | 712   |  |              | 9,141  |   |              |   | (3,583 | ) |  |   | 5,558  |  
|Interest - net                                                                                                                             |  |               | 9,349  |   |                       |   | (18    | )                         |  |       |      |  |              | 9,331  |   |              |   |       |   |  |   | 9,331  |  
|Merger related expenses                                                                                                                    |  |               |       |   |                       |   | 64     |                           |  |       |      |  |              | 64     |   |              |   |       |   |  |   | 64     |  
|Depreciation and amortization                                                                                                              |  |               |       |   |                       |   | 9,707  |                           |  |       | 200   |  |              | 9,907  |   |              |   |       |   |  |   | 9,907  |  
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Total other expenses                                                                                                                       |  |               | 9,349  |   |                       |   | 18,182 |                           |  |       | 912   |  |              | 28,443 |   |              |   | (3,583 | ) |  |   | 24,860 |  
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Income (loss) from operations                                                                                                              |  |               | (9,349 | ) |                       |   | 8,886  |                           |  |       | 170   |  |              | (293   | ) |              |   |       |   |  |   | (293   | )
|Equity earnings from subsidiaries                                                                                                          |  |               | 9,056  |   |                       |   | 170    |                           |  |       |      |  |              | 9,226  |   |              |   | (9,226 | ) |  |   |       |  
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Income (loss) before income taxes                                                                                                          |  |               | (293   | ) |                       |   | 9,056  |                           |  |       | 170   |  |              | 8,933  |   |              |   | (9,226 | ) |  |   | (293   | )
|Income tax provision (benefit)                                                                                                             |  |               | (162   | ) |                       |   | 5,009  |                           |  |       | 95    |  |              | 4,942  |   |              |   | (5,104 | ) |  |   | (162   | )
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  
|Net income (loss)                                                                                                                          |  | $             | (131   | ) |                       | $ | 4,047  |                           |  | $     | 75    |  | $            | 3,991  |   |              | $ | (4,122 | ) |  | $ | (131   | )
|                                                                                                                                           |  |               |        |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |        |   |  |   |        |  



8



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##### Table of Contents

|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | --------------------- | - | ------ | ------------------------- |  | - | ----- | - |  | ------------ | ------ | - | ------------ | - | ------ | - |  | - | ------ | -
|Condensed Consolidating Statements of Operations Information of the Registrant for the Three Months EndedSeptember 30, 2005 (In thousands) |  | CompanyIssuer |         |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Total |   |  | Eliminations |        |   | Consolidated |  
|Revenues                                                                                                                                   |  | $             |        |   |                       | $ | 36,108 |                           |  | $ | 4,770 |   |  | $            | 40,878 |   |              | $ | (4,516 | ) |  | $ | 36,362 |  
|Cost of services:                                                                                                                          |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Interpreters                                                                                                                               |  |               |        |   |                       |   | 7,440  |                           |  |   | 3,369 |   |  |              | 10,809 |   |              |   |       |   |  |   | 10,809 |  
|Telecommunications                                                                                                                         |  |               |        |   |                       |   | 1,347  |                           |  |   | 18    |   |  |              | 1,365  |   |              |   |       |   |  |   | 1,365  |  
|Answer points                                                                                                                              |  |               |        |   |                       |   | 45     |                           |  |   | 24    |   |  |              | 69     |   |              |   |       |   |  |   | 69     |  
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Total cost of services                                                                                                                     |  |               |        |   |                       |   | 8,832  |                           |  |   | 3,411 |   |  |              | 12,243 |   |              |   |       |   |  |   | 12,243 |  
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Gross margin                                                                                                                               |  |               |        |   |                       |   | 27,276 |                           |  |   | 1,359 |   |  |              | 28,635 |   |              |   | (4,516 | ) |  |   | 24,119 |  
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Other expenses:                                                                                                                            |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Selling, general and administrative                                                                                                        |  |               |        |   |                       |   | 9,172  |                           |  |   | 947   |   |  |              | 10,119 |   |              |   | (4,516 | ) |  |   | 5,603  |  
|Interest - net                                                                                                                             |  |               | 10,326  |   |                       |   | (7     | )                         |  |   | (1    | ) |  |              | 10,318 |   |              |   |       |   |  |   | 10,318 |  
|Depreciation and amortization                                                                                                              |  |               |        |   |                       |   | 9,600  |                           |  |   | 197   |   |  |              | 9,797  |   |              |   |       |   |  |   | 9,797  |  
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Total other expenses                                                                                                                       |  |               | 10,326  |   |                       |   | 18,765 |                           |  |   | 1,143 |   |  |              | 30,234 |   |              |   | (4,516 | ) |  |   | 25,718 |  
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Income (loss) from operations                                                                                                              |  |               | (10,326 | ) |                       |   | 8,511  |                           |  |   | 216   |   |  |              | (1,599 | ) |              |   |       |   |  |   | (1,599 | )
|Equity earnings from subsidiaries                                                                                                          |  |               | 8,727   |   |                       |   | 216    |                           |  |   |      |   |  |              | 8,943  |   |              |   | (8,943 | ) |  |   |       |  
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Income (loss) before income taxes                                                                                                          |  |               | (1,599  | ) |                       |   | 8,727  |                           |  |   | 216   |   |  |              | 7,344  |   |              |   | (8,943 | ) |  |   | (1,599 | )
|Income tax provision (benefit)                                                                                                             |  |               | (675    | ) |                       |   | 3,613  |                           |  |   | 89    |   |  |              | 3,027  |   |              |   | (3,702 | ) |  |   | (675   | )
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  
|Net income (loss)                                                                                                                          |  | $             | (924    | ) |                       | $ | 5,114  |                           |  | $ | 127   |   |  | $            | 4,317  |   |              | $ | (5,241 | ) |  | $ | (924   | )
|                                                                                                                                           |  |               |         |   |                       |   |        |                           |  |   |       |   |  |              |        |   |              |   |        |   |  |   |        |  



9



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##### Table of Contents

|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | --------------------- | - | ------------------------- |  | ----- | ----- | ------------ | - | ------ | ------------ | - | ------- | - |  | - | ------
|Condensed Consolidating Statements of Operations Information of the Predecessor for the Period from January 1, 2004 to June 11, 2004 (In thousands) |  | Company Issuer |        | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Total |       | Eliminations |   |        | Consolidated
|Revenues                                                                                                                                            |  | $              |       |                       | $ | 64,427                    |  | $     | 5,239 |              | $ | 69,666 |              | $ | (4,974  | ) |  | $ | 64,692
|Cost of services:                                                                                                                                   |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Interpreters                                                                                                                                        |  |                |       |                       |   | 14,757                    |  |       | 3,617 |              |   | 18,374 |              |   |        |   |  |   | 18,374
|Telecommunications                                                                                                                                  |  |                |       |                       |   | 2,863                     |  |       | 19    |              |   | 2,882  |              |   |        |   |  |   | 2,882 
|Answer points                                                                                                                                       |  |                |       |                       |   | 102                       |  |       | 154   |              |   | 256    |              |   |        |   |  |   | 256   
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Total cost of services                                                                                                                              |  |                |       |                       |   | 17,722                    |  |       | 3,790 |              |   | 21,512 |              |   |        |   |  |   | 21,512
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Gross margin                                                                                                                                        |  |                |       |                       |   | 46,705                    |  |       | 1,449 |              |   | 48,154 |              |   | (4,974  | ) |  |   | 43,180
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Other expenses:                                                                                                                                     |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Selling, general and administrative                                                                                                                 |  |                |       |                       |   | 14,451                    |  |       | 946   |              |   | 15,397 |              |   | (4,974  | ) |  |   | 10,423
|Interest - net                                                                                                                                      |  |                |       |                       |   | 5,982                     |  |       |      |              |   | 5,982  |              |   |        |   |  |   | 5,982 
|Merger related expenses                                                                                                                             |  |                |       |                       |   | 9,848                     |  |       |      |              |   | 9,848  |              |   |        |   |  |   | 9,848 
|Depreciation and amortization                                                                                                                       |  |                |       |                       |   | 1,471                     |  |       | 264   |              |   | 1,735  |              |   |        |   |  |   | 1,735 
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Total other expenses                                                                                                                                |  |                |       |                       |   | 31,752                    |  |       | 1,210 |              |   | 32,962 |              |   | (4,974  | ) |  |   | 27,988
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Income from operations                                                                                                                              |  |                |       |                       |   | 14,953                    |  |       | 239   |              |   | 15,192 |              |   |        |   |  |   | 15,192
|Equity earnings from subsidiaries                                                                                                                   |  |                | 15,192 |                       |   | 239                       |  |       |      |              |   | 15,431 |              |   | (15,431 | ) |  |   |      
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Income before income taxes                                                                                                                          |  |                | 15,192 |                       |   | 15,192                    |  |       | 239   |              |   | 30,623 |              |   | (15,431 | ) |  |   | 15,192
|Income tax provision                                                                                                                                |  |                | 5,968  |                       |   | 5,968                     |  |       | 94    |              |   | 12,030 |              |   | (6,062  | ) |  |   | 5,968 
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       
|Net income                                                                                                                                          |  | $              | 9,224  |                       | $ | 9,224                     |  | $     | 145   |              | $ | 18,593 |              | $ | (9,369  | ) |  | $ | 9,224 
|                                                                                                                                                    |  |                |        |                       |   |                           |  |       |       |              |   |        |              |   |         |   |  |   |       



10



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##### Table of Contents

|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------ | ------------------------- |  | ----- | ----- |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | ------ | -
|Condensed Consolidating Statements of Operations Information of the Registrant for thePeriod from June 12, 2004 to September 30, 2004(In thousands) |  | CompanyIssuer |         |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  | Total |       |  | Eliminations |        |   | Consolidated |  
|Revenues                                                                                                                                            |  | $             |        |   |                       | $ | 43,472 |                           |  | $     | 4,416 |  | $            | 47,888 |   |              | $ | (4,272  | ) |  | $ | 43,616 |  
|Cost of services:                                                                                                                                   |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Interpreters                                                                                                                                        |  |               |        |   |                       |   | 8,986  |                           |  |       | 2,942 |  |              | 11,928 |   |              |   |        |   |  |   | 11,928 |  
|Telecommunications                                                                                                                                  |  |               |        |   |                       |   | 1,711  |                           |  |       | 26    |  |              | 1,737  |   |              |   |        |   |  |   | 1,737  |  
|Answer points                                                                                                                                       |  |               |        |   |                       |   | 55     |                           |  |       | 93    |  |              | 148    |   |              |   |        |   |  |   | 148    |  
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Total cost of services                                                                                                                              |  |               |        |   |                       |   | 10,752 |                           |  |       | 3,061 |  |              | 13,813 |   |              |   |        |   |  |   | 13,813 |  
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Gross margin                                                                                                                                        |  |               |        |   |                       |   | 32,720 |                           |  |       | 1,355 |  |              | 34,075 |   |              |   | (4,272  | ) |  |   | 29,803 |  
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Other expenses:                                                                                                                                     |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Selling, general and administrative                                                                                                                 |  |               |        |   |                       |   | 10,106 |                           |  |       | 926   |  |              | 11,032 |   |              |   | (4,272  | ) |  |   | 6,760  |  
|Interest - net                                                                                                                                      |  |               | 11,523  |   |                       |   | (24    | )                         |  |       |      |  |              | 11,499 |   |              |   |        |   |  |   | 11,499 |  
|Merger related expenses                                                                                                                             |  |               |        |   |                       |   | 64     |                           |  |       |      |  |              | 64     |   |              |   |        |   |  |   | 64     |  
|Depreciation and amortization                                                                                                                       |  |               |        |   |                       |   | 11,682 |                           |  |       | 229   |  |              | 11,911 |   |              |   |        |   |  |   | 11,911 |  
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Total other expenses                                                                                                                                |  |               | 11,523  |   |                       |   | 21,828 |                           |  |       | 1,155 |  |              | 34,506 |   |              |   | (4,272  | ) |  |   | 30,234 |  
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Income (loss) from operations                                                                                                                       |  |               | (11,523 | ) |                       |   | 10,892 |                           |  |       | 200   |  |              | (431   | ) |              |   |        |   |  |   | (431   | )
|Equity earnings from subsidiaries                                                                                                                   |  |               | 11,092  |   |                       |   | 200    |                           |  |       |      |  |              | 11,292 |   |              |   | (11,292 | ) |  |   |       |  
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Income (loss) before income taxes                                                                                                                   |  |               | (431    | ) |                       |   | 11,092 |                           |  |       | 200   |  |              | 10,861 |   |              |   | (11,292 | ) |  |   | (431   | )
|Income tax provision (benefit)                                                                                                                      |  |               | (220    | ) |                       |   | 4,266  |                           |  |       | 77    |  |              | 4,123  |   |              |   | (4,343  | ) |  |   | (220   | )
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  
|Net income (loss)                                                                                                                                   |  | $             | (211    | ) |                       | $ | 6,826  |                           |  | $     | 123   |  | $            | 6,738  |   |              | $ | (6,949  | ) |  | $ | (211   | )
|                                                                                                                                                    |  |               |         |   |                       |   |        |                           |  |       |       |  |              |        |   |              |   |         |   |  |   |        |  



11



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##### Table of Contents

|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------ | - |  | ------------ | ------- | - | ------------ | - | ------- | - |  | - | ------- | -
|Condensed Consolidating Statements of Operations Information of the Registrant for the Nine Months EndedSeptember 30, 2005 (In thousands) |  | CompanyIssuer |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Total  |   |  | Eliminations |         |   | Consolidated |  
|Revenues                                                                                                                                  |  | $             |        |   |                       | $ | 107,156 |                           |  | $ | 13,377 |   |  | $            | 120,533 |   |              | $ | (12,747 | ) |  | $ | 107,786 |  
|Cost of services:                                                                                                                         |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Interpreters                                                                                                                              |  |               |        |   |                       |   | 22,875  |                           |  |   | 9,341  |   |  |              | 32,216  |   |              |   |        |   |  |   | 32,216  |  
|Telecommunications                                                                                                                        |  |               |        |   |                       |   | 4,048   |                           |  |   | 50     |   |  |              | 4,098   |   |              |   |        |   |  |   | 4,098   |  
|Answer points                                                                                                                             |  |               |        |   |                       |   | 141     |                           |  |   | 92     |   |  |              | 233     |   |              |   |        |   |  |   | 233     |  
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Total cost of services                                                                                                                    |  |               |        |   |                       |   | 27,064  |                           |  |   | 9,483  |   |  |              | 36,547  |   |              |   |        |   |  |   | 36,547  |  
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Gross margin                                                                                                                              |  |               |        |   |                       |   | 80,092  |                           |  |   | 3,894  |   |  |              | 83,986  |   |              |   | (12,747 | ) |  |   | 71,239  |  
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Other expenses:                                                                                                                           |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Selling, general and administrative                                                                                                       |  |               |        |   |                       |   | 28,735  |                           |  |   | 2,697  |   |  |              | 31,432  |   |              |   | (12,747 | ) |  |   | 18,685  |  
|Interest - net                                                                                                                            |  |               | 30,438  |   |                       |   | (118    | )                         |  |   | (1     | ) |  |              | 30,319  |   |              |   |        |   |  |   | 30,319  |  
|Depreciation and amortization                                                                                                             |  |               |        |   |                       |   | 28,811  |                           |  |   | 616    |   |  |              | 29,427  |   |              |   |        |   |  |   | 29,427  |  
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Total other expenses                                                                                                                      |  |               | 30,438  |   |                       |   | 57,428  |                           |  |   | 3,312  |   |  |              | 91,178  |   |              |   | (12,747 | ) |  |   | 78,431  |  
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Income (loss) from operations                                                                                                             |  |               | (30,438 | ) |                       |   | 22,664  |                           |  |   | 582    |   |  |              | (7,192  | ) |              |   |        |   |  |   | (7,192  | )
|Equity earnings from subsidiaries                                                                                                         |  |               | 23,246  |   |                       |   | 582     |                           |  |   |       |   |  |              | 23,828  |   |              |   | (23,828 | ) |  |   |        |  
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Income (loss) before income taxes                                                                                                         |  |               | (7,192  | ) |                       |   | 23,246  |                           |  |   | 582    |   |  |              | 16,636  |   |              |   | (23,828 | ) |  |   | (7,192  | )
|Income tax provision (benefit)                                                                                                            |  |               | (2,966  | ) |                       |   | 9,572   |                           |  |   | 240    |   |  |              | 6,846   |   |              |   | (9,812  | ) |  |   | (2,966  | )
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  
|Net income (loss)                                                                                                                         |  | $             | (4,226  | ) |                       | $ | 13,674  |                           |  | $ | 342    |   |  | $            | 9,790   |   |              | $ | (14,016 | ) |  | $ | (4,226  | )
|                                                                                                                                          |  |               |         |   |                       |   |         |                           |  |   |        |   |  |              |         |   |              |   |         |   |  |   |         |  



12



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##### Table of Contents

|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ----- | - |  | ------------ | ------- | - | ------------ | - | ------ | - |  | - | ------- | -
|Condensed Consolidating Statement of Cash Flow Information of the Predecessor for the Periodfrom January 1, 2004 to June 11, 2004(In thousands) |  | CompanyIssuer |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Total |   |  | Eliminations |         |   | Consolidated |  
|Cash flows from operating activities:                                                                                                           |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Net income                                                                                                                                      |  | $             | 9,224  |   |                       | $ | 9,224   |                           |  | $ | 145   |   |  | $            | 18,593  |   |              | $ | (9,369 | ) |  | $ | 9,224   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                                                               |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Depreciation and amortization                                                                                                                   |  |               |       |   |                       |   | 1,471   |                           |  |   | 264   |   |  |              | 1,735   |   |              |   |       |   |  |   | 1,735   |  
|Amortization of deferred financing costs                                                                                                        |  |               |       |   |                       |   | 1,225   |                           |  |   |      |   |  |              | 1,225   |   |              |   |       |   |  |   | 1,225   |  
|Deferred taxes on income                                                                                                                        |  |               |       |   |                       |   | 1,300   |                           |  |   |      |   |  |              | 1,300   |   |              |   |       |   |  |   | 1,300   |  
|Tax benefit from stock options exercised                                                                                                        |  |               | 6,094  |   |                       |   |        |                           |  |   |      |   |  |              | 6,094   |   |              |   |       |   |  |   | 6,094   |  
|Loss on disposal of property                                                                                                                    |  |               |       |   |                       |   | 19      |                           |  |   |      |   |  |              | 19      |   |              |   |       |   |  |   | 19      |  
|Gain from derivative instruments                                                                                                                |  |               |       |   |                       |   | (1,886  | )                         |  |   |      |   |  |              | (1,886  | ) |              |   |       |   |  |   | (1,886  | )
|Loss on write-off of deferred financing costs                                                                                                   |  |               |       |   |                       |   | 9,555   |                           |  |   |      |   |  |              | 9,555   |   |              |   |       |   |  |   | 9,555   |  
|Equity in earnings of subsidiaries                                                                                                              |  |               | (9,224 | ) |                       |   | (145    | )                         |  |   |      |   |  |              | (9,369  | ) |              |   | 9,369  |   |  |   |        |  
|Effect of changes in operating assets and liabilities:                                                                                          |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Accounts receivable                                                                                                                             |  |               |       |   |                       |   | 343     |                           |  |   | (8    | ) |  |              | 335     |   |              |   |       |   |  |   | 335     |  
|Prepaid expenses and other current assets                                                                                                       |  |               |       |   |                       |   | 16      |                           |  |   | (166  | ) |  |              | (150    | ) |              |   |       |   |  |   | (150    | )
|Other assets                                                                                                                                    |  |               |       |   |                       |   | 3       |                           |  |   | (28   | ) |  |              | (25     | ) |              |   |       |   |  |   | (25     | )
|Accounts payable                                                                                                                                |  |               |       |   |                       |   | (450    | )                         |  |   |      |   |  |              | (450    | ) |              |   |       |   |  |   | (450    | )
|Intercompany receivable, net of payable                                                                                                         |  |               |       |   |                       |   | (368    | )                         |  |   | 368   |   |  |              |        |   |              |   |       |   |  |   |        |  
|Income taxes payable/refundable                                                                                                                 |  |               | (6,094 | ) |                       |   | 599     |                           |  |   |      |   |  |              | (5,495  | ) |              |   |       |   |  |   | (5,495  | )
|Accrued liabilities                                                                                                                             |  |               |       |   |                       |   | (1,480  | )                         |  |   | 23    |   |  |              | (1,457  | ) |              |   |       |   |  |   | (1,457  | )
|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Net cash provided by operating activities                                                                                                       |  |               |       |   |                       |   | 19,426  |                           |  |   | 598   |   |  |              | 20,024  |   |              |   |       |   |  |   | 20,024  |  
|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Cash flows from investing activities:                                                                                                           |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Purchase of property                                                                                                                            |  |               |       |   |                       |   | (447    | )                         |  |   | (413  | ) |  |              | (860    | ) |              |   |       |   |  |   | (860    | )
|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Cash flows from financing activities:                                                                                                           |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Long-term debt repayments                                                                                                                       |  |               |       |   |                       |   | (12,260 | )                         |  |   |      |   |  |              | (12,260 | ) |              |   |       |   |  |   | (12,260 | )
|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Net increase in cash                                                                                                                            |  |               |       |   |                       |   | 6,719   |                           |  |   | 185   |   |  |              | 6,904   |   |              |   |       |   |  |   | 6,904   |  
|Cash - beginning of period                                                                                                                      |  |               | 184    |   |                       |   | 4,260   |                           |  |   | 127   |   |  |              | 4,571   |   |              |   |       |   |  |   | 4,571   |  
|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  
|Cash - end of period                                                                                                                            |  | $             | 184    |   |                       | $ | 10,979  |                           |  | $ | 312   |   |  | $            | 11,475  |   |              | $ |       |   |  | $ | 11,475  |  
|                                                                                                                                                |  |               |        |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |        |   |  |   |         |  



13



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##### Table of Contents

|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | --------------------- | - | ------ | ------------------------- |  | - | ----- | - |  | ------------ | -------- | - | ------------ | - | ------ | - |  | - | -------- | -
|Condensed Consolidating Statement of Cash Flow Information of the Registrant for the Periodfrom June 12, 2004 to September 30, 2004(In thousands) |  | CompanyIssuer |          |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Total |   |  | Eliminations |          |   | Consolidated |  
|Cash flows from operating activities:                                                                                                             |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Net income (loss)                                                                                                                                 |  | $             | (211     | ) |                       | $ | 6,826  |                           |  | $ | 123   |   |  | $            | 6,738    |   |              | $ | (6,949 | ) |  | $ | (211     | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                                          |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Depreciation and amortization                                                                                                                     |  |               |         |   |                       |   | 11,682 |                           |  |   | 229   |   |  |              | 11,911   |   |              |   |       |   |  |   | 11,911   |  
|Amortization of deferred financing costs                                                                                                          |  |               | 646      |   |                       |   |       |                           |  |   |      |   |  |              | 646      |   |              |   |       |   |  |   | 646      |  
|Deferred taxes on income                                                                                                                          |  |               | (2,251   | ) |                       |   | (295   | )                         |  |   |      |   |  |              | (2,546   | ) |              |   |       |   |  |   | (2,546   | )
|Loss from derivative instruments                                                                                                                  |  |               | 27       |   |                       |   |       |                           |  |   |      |   |  |              | 27       |   |              |   |       |   |  |   | 27       |  
|Accretion of discount on long-term debt                                                                                                           |  |               | 101      |   |                       |   |       |                           |  |   |      |   |  |              | 101      |   |              |   |       |   |  |   | 101      |  
|Equity in earnings of subsidiaries                                                                                                                |  |               | (6,826   | ) |                       |   | (123   | )                         |  |   |      |   |  |              | (6,949   | ) |              |   | 6,949  |   |  |   |         |  
|Effect of changes in operating assets and liabilities:                                                                                            |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Accounts receivable                                                                                                                               |  |               |         |   |                       |   | 232    |                           |  |   | (66   | ) |  |              | 166      |   |              |   |       |   |  |   | 166      |  
|Prepaid expenses and other current assets                                                                                                         |  |               | (5       | ) |                       |   | 278    |                           |  |   | 408   |   |  |              | 681      |   |              |   |       |   |  |   | 681      |  
|Other assets                                                                                                                                      |  |               | (40      | ) |                       |   | (52    | )                         |  |   |      |   |  |              | (92      | ) |              |   |       |   |  |   | (92      | )
|Accounts payable                                                                                                                                  |  |               |         |   |                       |   | 528    |                           |  |   |      |   |  |              | 528      |   |              |   |       |   |  |   | 528      |  
|Intercompany receivable, net of payable                                                                                                           |  |               | 7,192    |   |                       |   | (7,355 | )                         |  |   | 163   |   |  |              |         |   |              |   |       |   |  |   |         |  
|Income taxes payable/refundable                                                                                                                   |  |               |         |   |                       |   | 4,941  |                           |  |   |      |   |  |              | 4,941    |   |              |   |       |   |  |   | 4,941    |  
|Accrued liabilities                                                                                                                               |  |               | 5,719    |   |                       |   | 878    |                           |  |   | 76    |   |  |              | 6,673    |   |              |   |       |   |  |   | 6,673    |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Net cash provided by operating activities                                                                                                         |  |               | 4,352    |   |                       |   | 17,540 |                           |  |   | 933   |   |  |              | 22,825   |   |              |   |       |   |  |   | 22,825   |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Cash flows from investing activities:                                                                                                             |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Purchase of property                                                                                                                              |  |               |         |   |                       |   | (55    | )                         |  |   | (813  | ) |  |              | (868     | ) |              |   |       |   |  |   | (868     | )
|Acquisition of business, net of cash acquired                                                                                                     |  |               | (715,593 | ) |                       |   | (631   | )                         |  |   |      |   |  |              | (716,224 | ) |              |   |       |   |  |   | (716,224 | )
|Advance to Parent                                                                                                                                 |  |               | (124     | ) |                       |   |       |                           |  |   |      |   |  |              | (124     | ) |              |   |       |   |  |   | (124     | )
|Intercompany lending                                                                                                                              |  |               | (2,500   | ) |                       |   |       |                           |  |   |      |   |  |              | (2,500   | ) |              |   | 2,500  |   |  |   |         |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Net cash used in investing activities                                                                                                             |  |               | (718,217 | ) |                       |   | (686   | )                         |  |   | (813  | ) |  |              | (719,716 | ) |              |   | 2,500  |   |  |   | (717,216 | )
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Cash flows from financing activities:                                                                                                             |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Long-term debt borrowings                                                                                                                         |  |               | 452,502  |   |                       |   |       |                           |  |   |      |   |  |              | 452,502  |   |              |   |       |   |  |   | 452,502  |  
|Long-term debt repayments                                                                                                                         |  |               | (3,750   | ) |                       |   | (29    | )                         |  |   |      |   |  |              | (3,779   | ) |              |   |       |   |  |   | (3,779   | )
|Loan fees and other financing costs                                                                                                               |  |               | (14,225  | ) |                       |   |       |                           |  |   |      |   |  |              | (14,225  | ) |              |   |       |   |  |   | (14,225  | )
|Capital contribution                                                                                                                              |  |               | 279,338  |   |                       |   |       |                           |  |   |      |   |  |              | 279,338  |   |              |   |       |   |  |   | 279,338  |  
|Intercompany long-term debt borrowing                                                                                                             |  |               |         |   |                       |   | 2,500  |                           |  |   |      |   |  |              | 2,500    |   |              |   | (2,500 | ) |  |   |         |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Net cash provided by financing activities                                                                                                         |  |               | 713,865  |   |                       |   | 2,471  |                           |  |   |      |   |  |              | 716,336  |   |              |   | (2,500 | ) |  |   | 713,836  |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Net increase in cash                                                                                                                              |  |               |         |   |                       |   | 19,325 |                           |  |   | 120   |   |  |              | 19,445   |   |              |   |       |   |  |   | 19,445   |  
|Cash - beginning of period                                                                                                                        |  |               |         |   |                       |   |       |                           |  |   |      |   |  |              |         |   |              |   |       |   |  |   |         |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  
|Cash - end of period                                                                                                                              |  | $             |         |   |                       | $ | 19,325 |                           |  | $ | 120   |   |  | $            | 19,445   |   |              | $ |       |   |  | $ | 19,445   |  
|                                                                                                                                                  |  |               |          |   |                       |   |        |                           |  |   |       |   |  |              |          |   |              |   |        |   |  |   |          |  



14



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##### Table of Contents

|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ----- | - |  | ------------ | ------- | - | ------------ | - | ------- | - |  | - | ------- | -
|Condensed Consolidating Statement of Cash Flow Information of the Registrant for the Nine Months Ended September 30, 2005(In thousands) |  | CompanyIssuer |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Total |   |  | Eliminations |         |   | Consolidated |  
|Cash flows from operating activities:                                                                                                   |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Net income (loss)                                                                                                                       |  | $             | (4,226  | ) |                       | $ | 13,674  |                           |  | $ | 342   |   |  | $            | 9,790   |   |              | $ | (14,016 | ) |  | $ | (4,226  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                                |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Depreciation and amortization                                                                                                           |  |               |        |   |                       |   | 28,811  |                           |  |   | 616   |   |  |              | 29,427  |   |              |   |        |   |  |   | 29,427  |  
|Amortization of deferred financing costs                                                                                                |  |               | 1,420   |   |                       |   |        |                           |  |   |      |   |  |              | 1,420   |   |              |   |        |   |  |   | 1,420   |  
|Deferred taxes on income                                                                                                                |  |               | (4,276  | ) |                       |   | (2,986  | )                         |  |   |      |   |  |              | (7,262  | ) |              |   |        |   |  |   | (7,262  | )
|Stock based compensation expense                                                                                                        |  |               |        |   |                       |   | 276     |                           |  |   |      |   |  |              | 276     |   |              |   |        |   |  |   | 276     |  
|Accretion of discount on long-term debt                                                                                                 |  |               | 273     |   |                       |   |        |                           |  |   |      |   |  |              | 273     |   |              |   |        |   |  |   | 273     |  
|Loss from derivative instruments                                                                                                        |  |               | 4       |   |                       |   |        |                           |  |   |      |   |  |              | 4       |   |              |   |        |   |  |   | 4       |  
|Equity in earnings of subsidiaries                                                                                                      |  |               | (13,674 | ) |                       |   | (342    | )                         |  |   |      |   |  |              | (14,016 | ) |              |   | 14,016  |   |  |   |        |  
|Effect of changes in operating assets and liabilities:                                                                                  |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Accounts receivable                                                                                                                     |  |               |        |   |                       |   | (1,569  | )                         |  |   | (98   | ) |  |              | (1,667  | ) |              |   |        |   |  |   | (1,667  | )
|Prepaid expenses and other current assets                                                                                               |  |               |        |   |                       |   | (253    | )                         |  |   | (129  | ) |  |              | (382    | ) |              |   |        |   |  |   | (382    | )
|Other assets                                                                                                                            |  |               |        |   |                       |   | 80      |                           |  |   | (18   | ) |  |              | 62      |   |              |   |        |   |  |   | 62      |  
|Accounts payable                                                                                                                        |  |               |        |   |                       |   | (219    | )                         |  |   |      |   |  |              | (219    | ) |              |   |        |   |  |   | (219    | )
|Intercompany receivable, net of payable                                                                                                 |  |               | 36,880  |   |                       |   | (36,064 | )                         |  |   | (816  | ) |  |              |        |   |              |   |        |   |  |   |        |  
|Income taxes payable/refundable                                                                                                         |  |               | (3,666  | ) |                       |   | 3,127   |                           |  |   |      |   |  |              | (539    | ) |              |   |        |   |  |   | (539    | )
|Accrued liabilities                                                                                                                     |  |               | 7,760   |   |                       |   | (449    | )                         |  |   | 32    |   |  |              | 7,343   |   |              |   |        |   |  |   | 7,343   |  
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Net cash provided by (used in) operating activities                                                                                     |  |               | 20,495  |   |                       |   | 4,086   |                           |  |   | (71   | ) |  |              | 24,510  |   |              |   |        |   |  |   | 24,510  |  
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Cash flows from investing activities:                                                                                                   |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Purchase of property                                                                                                                    |  |               |        |   |                       |   | (992    | )                         |  |   | (7    | ) |  |              | (999    | ) |              |   |        |   |  |   | (999    | )
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Cash flows from financing activities:                                                                                                   |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Long-term debt repayments                                                                                                               |  |               | (20,495 | ) |                       |   | (927    | )                         |  |   |      |   |  |              | (21,422 | ) |              |   |        |   |  |   | (21,422 | )
|Capital contribution from Parent                                                                                                        |  |               |        |   |                       |   | 995     |                           |  |   |      |   |  |              | 995     |   |              |   |        |   |  |   | 995     |  
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Net cash provided by (used in) financing activities                                                                                     |  |               | (20,495 | ) |                       |   | 68      |                           |  |   |      |   |  |              | (20,427 | ) |              |   |        |   |  |   | (20,427 | )
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Net increase (decrease) in cash                                                                                                         |  |               |        |   |                       |   | 3,162   |                           |  |   | (78   | ) |  |              | 3,084   |   |              |   |        |   |  |   | 3,084   |  
|Cash - beginning of period                                                                                                              |  |               |        |   |                       |   | 11,983  |                           |  |   | 181   |   |  |              | 12,164  |   |              |   |        |   |  |   | 12,164  |  
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  
|Cash - end of period                                                                                                                    |  | $             |        |   |                       | $ | 15,145  |                           |  | $ | 103   |   |  | $            | 15,248  |   |              | $ |        |   |  | $ | 15,248  |  
|                                                                                                                                        |  |               |         |   |                       |   |         |                           |  |   |       |   |  |              |         |   |              |   |         |   |  |   |         |  



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|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.



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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 monthsendedSeptember 30, 2004 |    |  | Three monthsendedSeptember 30, 2005 |    |  | January 1, 2004toJune 11, 2004 |   |  | June 12, 2004toSeptember 30, 2004 |    |  | Nine monthsendedSeptember 30, 2005 |   
|Statement of Operations data:       |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Revenues                            |  | 100.0                               | %  |  | 100.0                               | %  |  | 100.0                          | % |  | 100.0                             | %  |  | 100.0                              | % 
|Cost of services:                   |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Interpreters                        |  | 27.8                                | %  |  | 29.7                                | %  |  | 28.4                           | % |  | 27.3                              | %  |  | 29.9                               | % 
|Telecommunications                  |  | 4.1                                 | %  |  | 3.8                                 | %  |  | 4.5                            | % |  | 4.0                               | %  |  | 3.8                                | % 
|Answer points                       |  | 0.3                                 | %  |  | 0.2                                 | %  |  | 0.4                            | % |  | 0.3                               | %  |  | 0.2                                | % 
|                                    |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Total cost of services              |  | 32.2                                | %  |  | 33.7                                | %  |  | 33.3                           | % |  | 31.6                              | %  |  | 33.9                               | % 
|                                    |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Gross margin                        |  | 67.8                                | %  |  | 66.3                                | %  |  | 66.7                           | % |  | 68.4                              | %  |  | 66.1                               | % 
|Other expenses:                     |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Selling, general and administrative |  | 15.3                                | %  |  | 15.4                                | %  |  | 16.1                           | % |  | 15.5                              | %  |  | 17.3                               | % 
|Interest, net                       |  | 25.8                                | %  |  | 28.4                                | %  |  | 9.2                            | % |  | 26.4                              | %  |  | 28.1                               | % 
|Merger related expenses             |  | 0.2                                 | %  |  | 0.0                                 | %  |  | 15.2                           | % |  | 0.1                               | %  |  | 0.0                                | % 
|Depreciation and amortization       |  | 27.3                                | %  |  | 26.9                                | %  |  | 2.7                            | % |  | 27.3                              | %  |  | 27.3                               | % 
|                                    |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Total other expenses                |  | 68.6                                | %  |  | 70.7                                | %  |  | 43.2                           | % |  | 69.3                              | %  |  | 72.7                               | % 
|                                    |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Income (loss) before income taxes   |  | (0.8                                | )% |  | (4.4                                | )% |  | 23.5                           | % |  | (0.9                              | )% |  | (6.6                               | )%
|Income tax provision (benefit)      |  | (0.4                                | )% |  | (1.9                                | )% |  | 9.2                            | % |  | (0.5                              | )% |  | (2.8                               | )%
|                                    |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   
|Net income (loss)                   |  | (0.4                                | )% |  | (2.5                                | )% |  | 14.3                           | % |  | (0.4                              | )% |  | (3.8                               | )%
|                                    |  |                                     |    |  |                                     |    |  |                                |   |  |                                   |    |  |                                    |   



Three Months Ended
September 30, 2005 Compared to the Three Months Ended September 30, 2004.



Revenues for the three months ended September 30, 2005 were $36.4 million as compared to $36.2 million for the three months ended September 30, 2004, representing an increase of $0.2 million or approximately
1.0%. The increase in revenue was driven primarily by an 8.0% increase in OPI billed minutes, offset by a 7.6% decline in the average rate per billed minute.



For the three months ended September 30, 2005, cost of services were $12.2 million as compared to $11.7 million for the comparable period in 2004,
representing an increase of $0.5 million or 4.3%. 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
September 30, 2005 were relatively flat at $5.6 million as compared to $5.6 million for the three months ended September 30, 2004.



Overall, operating margins decreased to 50.9% for the three months ended September 30, 2005 from 52.5% for the three months ended September 30,
2004 due to the factors described above.



Interest expense for
the three months ended September 30, 2005 was $10.3 million as compared to $9.3 million for the three months ended September 30, 2004. The increase in interest expense is primarily due to an increase in the reserve-adjusted LIBOR rate with
respect to the senior secured term loan facility. Borrowings under the senior secured term loan facility bear interest based on a margin over, at our option, the base rate or the reserve-adjusted LIBOR.



Depreciation and amortization for the three months ended September 30,
2005 was relatively flat at $9.8 million as compared to $9.9 million for the three months ended September 30, 2004.



The tax benefit on loss for the three months ended September 30, 2005 was $675,000 as compared to $162,000 for the three months ended
September 30, 2004. The increase in the tax benefit was primarily due to additional interest expense of



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approximately $1.0 million for the three months ended September 30, 2005 when compared to the three months ended September 30, 2004.



As a result of the factors described above, net loss was $924,000 and
$131,000 for the three months ended September 30, 2005 and September 30, 2004, respectively.



Nine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30, 2004.



Revenues for the nine months ended September 30, 2005 were $107.8 million as compared to $108.3 million for the nine months ended September 30,
2004, representing a decrease of less than 1.0%. The decrease in revenue was driven primarily by an 8.5% decline in the average rate per billed minute, offset by an 8.2% increase in OPI billed minutes.



For the nine months ended September 30, 2005, cost of services were
$36.5 million as compared to $35.3 million for the comparable period in 2004, representing an increase of $1.2 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 nine months ended September 30, 2005 were $18.7 million as compared to $17.2 million for the nine months ended September 30, 2004, an increase of $1.5 million or 8.7%. This increase was primarily the result
of an increase in sales initiatives, in addition to increased audit and tax related fees, including Sarbanes-Oxley compliance costs.



Overall, operating margins decreased to 48.8% for the nine months ended September 30, 2005 from 51.5% for the nine months ended September 30,
2004 due to the factors described above.



Interest expense for
the nine months ended September 30, 2005 was $30.3 million as compared to $17.5 million for the nine months ended September 30, 2004. This increase was primarily the result of the additional debt incurred as part of the Merger.



Depreciation and amortization was $29.4 million for the nine months ended
September 30, 2005 as compared to $13.6 million for the nine months ended September 30, 2004, an increase of $15.8 million. This increase is principally attributable to the amortization of intangibles resulting from the Merger.



The tax benefit on loss for the nine months ended September 30, 2005
was $3.0 million as compared to $5.7 million of tax expense on income for the nine months ended September 30, 2004. This change from an expense to a benefit was driven by additional interest, depreciation and amortization expense.



As a result of the factors described above, net loss was $4.2 million for
the nine months ended September 30, 2005 as compared to net income of $9.0 million for the nine months ended September 30, 2004.



Liquidity and Capital Resources



Operating Activities. Net cash provided by operating activities for the nine months ending September 30, 2005 was $24.5 million, compared with
net cash provided by operating activities during the nine months ending September 30, 2004 of $42.8 million. This decrease is mainly attributable to an increase in interest payments related to the long-term debt and the senior subordinated, a
decrease in earnings and the timing of tax payments.



Investing Activities. Net cash used in investing activities was $1.0 million for the nine months ending September 30, 2005, compared to net cash used in investing activities of $718.1 million for the same period in 2004. This
decrease was primarily attributable to the $716.2 million of cash used in 2004 for the acquisition of the Predecessor company, net of cash acquired.



Financing Activities. Net cash used in financing activities during the nine months ending September 30, 2005 was $20.4 million, compared to
net cash provided by financing activities of $701.5 million during the nine months ending September 30, 2004. The decrease when compared to 2004 is primarily the result of $507.5 million of cash provided through debt borrowings and $226.3
million of cash provided resulting from proceeds from the issuance of common stock, all as part of the Merger. In



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addition there was $21.4 million of long-term debt repayments made during the nine months ending September 30, 2005, compared to $16.0 million for the
same period in 2004.



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, 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 September 30, 2005, we had
total indebtedness of $419.2 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 are payable semi-annually in cash.



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



Contractual and Commercial Commitments Summary



The following tables present our long-term contractual cash obligations as of September 30, 2005 (dollars in thousands):



|                  |  |                         |   |                      |   |           |  |                         |         |                             |   |         |  |   |        |  |   |        
|----------------- |  | ----------------------- | - | -------------------- | - | --------- |  | ----------------------- | ------- | --------------------------- | - | ------- |  | - | ------ |  | - | -------
|                  |  | RevolvingCreditFacility |   | NotesPayable toOther |   | TermLoans |  | SeniorSubordinatedNotes |         | Operating andCapital Leases |   | Total  
|Remainder of 2005 |  | $                       |  |                      | $ |          |  | $                       | 2,872   |                             | $ |        |  | $ | 1,047  |  | $ | 3,919  
|2006              |  |                         |  |                      |   | 960       |  |                         | 14,358  |                             |   |        |  |   | 4,068  |  |   | 19,386 
|2007              |  |                         |  |                      |   |          |  |                         | 14,358  |                             |   |        |  |   | 3,805  |  |   | 18,163 
|2008              |  |                         |  |                      |   |          |  |                         | 14,358  |                             |   |        |  |   | 2,375  |  |   | 16,733 
|2009              |  |                         |  |                      |   |          |  |                         | 14,358  |                             |   |        |  |   | 788    |  |   | 15,146 
|Thereafter        |  |                         |  |                      |   |          |  |                         | 196,703 |                             |   | 165,000 |  |   | 672    |  |   | 362,375
|                  |  |                         |   |                      |   |           |  |                         |         |                             |   |         |  |   |        |  |   |        
|Total             |  | $                       |  |                      | $ | 960       |  | $                       | 257,007 |                             | $ | 165,000 |  | $ | 12,755 |  | $ | 435,722
|                  |  |                         |   |                      |   |           |  |                         |         |                             |   |         |  |   |        |  |   |        



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.



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Impairment of Long-Lived Assets - We assess the impairment of long-lived assets at least annually or when
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 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.



|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, 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.



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|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
November 14, 2005.



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




22