UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

~~(Mark~~þ ~~One~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

xFor ~~QUARTERLY~~the ~~REPORT~~quarterly ~~PURSUANT~~period TOended ~~SECTION~~March 31, ~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~2009.

For the quarterly period ended March 31, 2007.

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to .

Commission file number: 333-118753

Language Line, Inc.

(Exact name of registrant as specified in its charter)


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

One Lower Ragsdale Drive

Monterey, CACalifornia 93940

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

(877) 886-3885

(~~Address,~~Registrant’s ~~zip code, and~~ telephone number, including area code)

~~area~~Indicate ~~code,~~by ofcheck mark if the registrant’s ~~principal~~is ~~executive~~a ~~office.)~~well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark ~~whether~~if the registrant ~~(1) has~~is ~~filed~~not ~~all reports~~ required to befile ~~filed~~reports bypursuant to Section 13 ~~and~~ or Section 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~~Act. Yes ¨ No x

Indicate by check mark whether the registrant: is(1) has afiled ~~large~~all ~~accelerated~~reports ~~filer,~~required anto ~~accelerated~~be ~~filer,~~filed by Section 13 or a15(d) ~~non-accelerated~~of ~~filer.~~the ~~See~~Securities ~~definition~~Exchange Act of ~~“accelerated~~ ~~filer~~1934 ~~and~~during ~~large~~the ~~accelerated~~preceding ~~filer”~~12 inmonths ~~Rule~~(or ~~12b-2~~for ofsuch shorter period that the ~~Exchange~~registrant ~~Act.~~was ~~(Check~~required ~~one~~to file such reports):, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

~~Large~~Indicate ~~accelerated~~by check mark whether ~~filer~~the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Item 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ ~~Accelerated filer~~No ¨ ~~Non-accelerated~~ ~~filer x~~

Indicate by check mark whether the registrant is a ~~shell~~large accelerated filer, an accelerated filer, or a non-accelerated filer or a small reporting company. ~~(as~~See ~~defined~~definition of “ large accelerated filer, accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): ~~Yes ¨ No x~~

~~Indicate~~¨ ~~the~~Large ~~number~~accelerated offiler ~~shares~~¨ ~~outstanding~~Accelerated offiler ~~each~~x ~~of the~~Non-accelerated ~~registrant’s~~filer ~~classes~~¨ ofSmaller ~~common~~reporting ~~stock, as of the latest practicable date.~~ company

~~Language~~Indicate ~~Line~~by ~~Holdings,~~check ~~LLC~~mark ~~owns~~if ~~100%~~the registrant is a shell company (as defined in Rule 12b-2 of the ~~registrant’s~~Exchange ~~common stock~~Act). Yes ¨ No x

As of March 31, 2009, there were 1,000 shares of the registrant’s common stock, $.01 par value, which is the only class of common stock of the registrant. There is no market for the registrant’s common stock, all of which is held by Language Line Holdings, LLC.

FORWARD LOOKING STATEMENTS

~~Statements~~This inQuarterly ~~this~~Report ~~document~~on ~~that~~Form ~~are~~10-Q ~~not~~contains ~~historical~~statements ~~facts~~that ~~are~~involve ~~hereby~~expectations, ~~identified~~plans or intentions (such as those relating to future business or financial results, new features or services, or management strategies). These statements are “forward -looking” statements” ~~for~~within the ~~purposes~~meaning of the ~~safe~~Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties, so actual results may vary materially. You can identify ~~harbor~~these ~~provided~~forward-looking statements by ~~Section 21E~~words ofsuch ~~the~~as ~~Securities~~“may,” ~~Exchange~~“will,” ~~Act~~“should,” of“expect,” ~~1934~~“anticipate,” ~~(the~~“believe,” “~~Exchange~~estimate,” ~~Act~~“intend,”) “plan” and ~~Section 27A~~other similar expressions. You should consider our forward-looking statements in light of the ~~Securities~~factors ~~Act~~set forth in “Item 2. Management’s Discussion and Analysis of ~~1933~~Financial ~~(the~~Condition ~~“Securities~~and ~~Act~~Results of Operations”). and the risks and uncertainties that could cause Language Line, Inc.’s (“LLI,” “we,” “us,” or the “Company”) ~~cautions~~actual ~~readers~~results ~~that~~to ~~such~~differ ~~“forward~~materially ~~looking~~from ~~statements”,~~those ~~including~~which ~~without~~are ~~limitation,~~management’s ~~those~~current ~~relating~~expectations toor ~~the~~forecasts. ~~Company’s~~These ~~future~~risks ~~business~~and uncertainties ~~prospects~~include, ~~revenue,~~but ~~working~~are ~~capital,~~not ~~liquidity,~~limited ~~capital needs~~to, ~~interest~~industry ~~costs~~based ~~and~~factors ~~income,~~such ~~wherever~~as ~~they~~the ~~occur~~level of competition in ~~this~~the ~~document~~outsourced orover-the-phone ininterpretation ~~other~~services ~~statements~~market, ~~attributable~~continued todemand from the primary industries the Company serves, ~~are~~the ~~necessarily~~availability of ~~estimates~~telephone ~~reflecting~~services, as well as factors more specific to the ~~judgment~~Company ofsuch as restrictions imposed by the Company’s ~~senior~~debt ~~management~~including ~~and~~financial ~~involve~~covenants aand ~~number~~limitations ofon ~~risks~~the ~~and uncertainties~~Company’s ~~that~~ability ~~could~~to ~~cause~~incur ~~actual~~additional ~~results~~indebtedness, tothe Company’s ~~differ~~future ~~materially~~capital ~~from~~requirements, ~~those~~and ~~suggested~~risk byassociated ~~the~~with ~~“forward~~economic ~~looking~~conditions ~~statements”~~generally. ~~Such~~The “forward looking statements” ~~should,~~contained ~~therefore,~~in bethis ~~considered~~report inare ~~light~~made ofunder the ~~factors~~caption ~~set forth in~~ “~~Item 2.~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Moreover, the Company, through its senior management, may from time to time make “forward looking statements” about matters described herein or other matters concerning the Company. We assume no obligation to update any forward-looking statements.

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.

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 ~~- 6~~
	Condensed Consolidated Balance Sheets – March 31, 2007 and December 31, 2006
	Condensed Consolidated Balance Sheets – March 31, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Operations – Three months ended March 31, 2007 and March 31, 2006
	Condensed Consolidated Statements of Operations – Three Months ended March 31, 2009 and March 31, 2008	2
	Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2007 and March 31, 2006
	Condensed Consolidated Statements of Cash Flows –Three Months ended March 31, 2009 and March 31, 2008	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	78
Item 3.	Quantitative and Qualitative Disclosures ofabout Market Risk	1013
Item 4T.	Controls and Procedures	1114
Part 2. Other Information
Item 1.	Legal Proceedings	1114
Item 1A.	Risk Factors	1114
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1214
Item 3.	Defaults Upon Senior Securities	1214
Item 4.	Submission of Matters to a Vote of Security Holders	1214
Item 5.	Other Information	1214
Item 6.	Exhibits and Reports on Form 8-K	1215
Signatures		1316
Certifications		Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2

PART 1. FINANCIAL INFORMATION

Item 1.

Financial Statements

LANGUAGE LINE, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

(Unaudited)

	March 31,2007				December 31,2006
	March 31,2009			December 31,2008
Assets
Current assets:
Cash and cash equivalents	$	2332,~~315~~969		$	$15,046	~~20,236~~
Accounts receivable, net		2536,~~876~~891			33,394	~~24,321~~
Prepaid expenses and other current assets		14,~~802~~889			6,075	~~1,625~~
Deferred taxes on income		880				1,018
Income taxes receivable		—			2,105
Total current assets		51,873				47,200
Due from Coto Holdings, LLC (Note 4)		2,917			2,387
Property and equipment, net		5,522				5,385
Deferred taxes on income		2,636			2,974
Goodwill		408,793				408,793
Total current assets		80,302			61,981
Intangible assets, net		361,396				369,139
Property and equipment, net		8,280			8,547
Deferred financing costs, net		11,127				11,740
Goodwill		408,793			408,793
Other assets		323				365
Intangible assets, net		306,534			313,290
Total assets	$	839,034			$	842,622
Deferred financing costs, net		6,223			6,836
Liabilities and Stockholders’ Equity
Other assets		263			244
Current liabilities:
Total assets	$	810,395		$	799,691
Accounts payable	$	2,222			$	2,351
Liabilities and Stockholders’ Equity
Accrued interest		5,409				3,485
Current liabilities:
Accrued payroll and related benefits		1,730				2,339
Accounts payable	$	1,808		$	1,866
Accrued cost of interpreters		581				675
Accrued interest		5,378			791
Other accrued liabilities		2,372				2,325
Accrued compensation and interpreter costs		8,889			7,059
Income taxes payable		7,320				3,246
Other accrued liabilities		4,108			4,265
Current portion of long-term debt		12,630				17,251
Income taxes payable		4,596			—
Total current liabilities		32,264				31,672
Due to Language Line Holdings, Inc. and Language Line Holdings, II Inc.		1,761			2,641
Long-term debt		216,023				219,181
Current portion of long-term debt		12,071			16,339
Senior subordinated notes		161,836				161,725
Total current liabilities		38,611			32,961
Deferred taxes on income		153,917				155,660
Other liabilities		753			737
Total liabilities		564,040				568,238
Long-term debt		182,327			185,336
Stockholders’ equity:
Senior subordinated notes		162,838			162,699
Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding		—				—
Deferred taxes on income		139,600			144,839
Additional paid-in capital		280,289				280,186
Total liabilities		524,129			526,572
Accumulated deficit		(5,295	)			(5,802	)
Stockholders’ equity:
Total stockholders’ equity		274,994				274,384
Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding		—			—
Total liabilities and stockholders’ equity	$	839,034			$	842,622
Additional paid-in capital		243,045			242,931
Retained earnings		43,221			30,188
Total stockholders’ equity		286,266			273,119
Total liabilities and stockholders’ equity	$	810,395		$	799,691

See notes to condensed consolidated financial statements.

LANGUAGE LINE, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

	Three months ended March 31, 2007		Three months ended March 31, 2006
	Three months endedMarch 31, 2009		Three months endedMarch 30, 2008
Revenues	$	4560,~~266~~021	$	4048,~~046~~897
Cost of services		1518,~~573~~690		1416,~~097~~326
Other expenses:
Selling, general and administrative		811,~~041~~745		78,~~185~~567
Interest		107,~~392~~764		109,~~710~~365
Depreciation and amortization		87,~~488~~331		97,~~766~~369
Total other expenses		26,~~921~~840		2725,~~661~~301
Other income:
Interest		~~302~~—		83254
Total other income		302		83
Other		103		335
Income (loss) before taxes on income		3,074		(1,629	)
Total other income		103		589
Taxes (benefit) on income (loss)		2,567		(624	)
Income before taxes		14,594		7,859
Net income (loss)	$	507	$	(1,005	)
Taxes on income		1,561		3,246
Net income	$	13,033	$	4,613

See notes to condensed consolidated financial statements.

LANGUAGE LINE, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three months ended March 31, 2007			Three months ended March 31, 2006
	Three months endedMarch 31, 2009			Three months endedMarch 31, 2008
Cash flows from operating activities:					(Revised)
Net income (loss)	$	507		$	(1,005	)
Net income	$	13,033		$	4,613
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		87,~~488~~331			97,~~766~~369
Amortization of deferred financing costs		613			~~486~~614
Deferred taxes on income		(14,~~605~~900	)		(~~2,183~~626	)
Provision for losses on accounts receivable		(184	)		180
Stock based compensation expense		114			106
Stock based compensation expense		103			95
Accretion of discount on long-term debt		139			124
Accretion of discount on long-term debt		111			99
Effect of changes in operating assets and liabilities:
Accounts receivable		(13,~~371~~497	)		(1,~~297~~629	)
Prepaid expenses and other current assets		~~(177~~1,186	)		~~381~~(383	)
Other assets		42			(232	)
Due from Coto Holdings, LLC		(530	)		(844	)
Accounts payable		(129	)		(752	)
Due to Language Line Holdings, Inc. and Language Line Holdings, II, Inc.		(880	)		920
Income taxes payable		4,074			1,425
Other assets		(19	)		—
Accrued interest and other liabilities		1,268			5,185
Accounts payable		(58	)		242
Net cash provided by operating activities		11,740			12,148
Income taxes receivable/payable		6,701			1,086
Cash flows from investing activities :
Accrued interest and other liabilities		7,231			3,475
Purchase of property		(707	)		(1,009	)
Other liabilities
Acquisition of intangible asset		(175	)
Net cash provided by operating activities		26,464			18,325
Net cash used in investing activities		(882	)		(1,009	)
Cash flows from investing activities:
Cash flows from financing activities :
Purchase of property and equipment		(1,264	)		(327	)
Long-term debt repayments		(7,779	)		(7,153	)
Acquisition of intangible asset		—			(88	)
Repurchase of restricted stock units		—			(1	)
Net cash used in investing activities		(1,264	)		(415	)
Net cash used in financing activities		(7,779	)		(7,154	)
Cash flows from financing activities:
Net increase in cash and cash equivalents		3,079			3,985
Long-term debt repayments		(7,277	)		(8,257	)
Cash and cash equivalents—beginning of period		20,236			13,991
Dividend paid to parent company		—			(1,000	)
Cash and cash equivalents—end of period	$	23,315		$	17,976
Net cash used in financing activities		(7,277	)		(9,257	)
Net increase in cash and cash equivalents		17,923			8,653
Cash and cash equivalents- beginning of period		15,046			13,898
Cash and cash equivalents- end of period	$	32,969		$	22,551
Supplemental cash flow disclosures:
Cash paid for interest	$	72,~~696~~375		$	5,~~495~~519
Cash paid for income taxes	$	98625		$	~~134~~1,836

See notes to condensed consolidated financial statements.

LANGUAGE LINE, INC. AND SUBSIDIARIES

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

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. ~~Organization~~The Company and Summary of Significant Accounting Policies

~~The~~Basis 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,~~Presentation the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, that are considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the interim periods. Operating results for the three months ended March 31, 2007 and March 31, 2006 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, 2006 of Language Line, Inc., which are included in the Form 10-K filed with the SEC on March 16, 2007.

InThe accompanying unaudited condensed consolidated financial information has been prepared in accordance with the ~~rules~~Securities and Exchange Commission (“SEC”) regulations offor interim financial reporting. In the ~~SEC~~opinion of management, ~~unaudited~~ the condensed consolidated financial statements ~~may~~include ~~omit~~all oradjustments, ~~condense~~consisting ~~certain~~only ~~information~~of ~~and~~normal recurring ~~disclosures~~adjustments ~~normally~~that ~~required~~are considered necessary for a ~~complete~~fair ~~set~~statement of the Company’s financial ~~statements~~position, ~~prepared~~results inof ~~accordance~~operations ~~with~~and ~~accounting~~cash ~~principles~~flows ~~generally~~for ~~accepted~~the ininterim periods. Operating results for the three months ended March 31, 2009 and ~~United~~March 31, ~~States~~2008 are not necessarily indicative of ~~America~~results ~~(“GAAP”).~~that ~~Accordingly,~~may ~~certain~~be ~~information~~expected ~~and~~for ~~disclosures~~the ~~normally~~entire ~~included~~year. inThis financial ~~statements~~information ~~prepared~~should be read in ~~accordance~~conjunction with ~~GAAP~~the ~~have~~audited ~~been~~consolidated ~~condensed~~financial orstatements ~~omitted~~and ~~pursuant~~notes tothereto ~~such~~for ~~rules~~the ~~and~~year ~~regulations. We~~ended ~~believe~~December 31, ~~that~~2008 ~~the~~of ~~notes~~Language toLine, ~~the~~Inc., ~~condensed~~which ~~consolidated~~are ~~financial~~included ~~statements~~in ~~contain~~the ~~disclosures~~Form ~~adequate~~10-K tofiled ~~make~~with the ~~information~~SEC ~~presented~~on ~~not~~March 26, ~~misleading~~2009.

~~Organization—Language~~In accordance ~~Line~~with ~~Holdings, Inc. (~~the ~~“Predecessor”)~~rules ~~was~~and aregulations ~~Delaware~~of ~~corporation~~the ~~formed~~SEC, inunaudited ~~December~~condensed ~~1999~~consolidated asfinancial astatements ~~holding~~may ~~company~~omit ~~for~~or ~~Language~~condense ~~Line,~~certain ~~LLC~~information ~~(“LLC”)~~ and ~~its subsidiaries.~~disclosures ~~LLC~~normally ~~was~~required ~~incorporated~~for ~~during~~a ~~February~~complete ~~1999~~set asof afinancial ~~Delaware~~statements ~~limited~~prepared ~~liability~~in ~~company.~~accordance with ~~The~~accounting ~~Predecessor~~principles ~~was~~generally ~~acquired~~accepted onin ~~June 11,~~the ~~2004~~United byStates ~~Language~~of ~~Line,~~America ~~Inc.~~ (“~~LLI~~GAAP”). inAccordingly, acertain ~~transaction~~information ~~accounted~~and ~~for~~disclosures ~~under~~normally ~~the~~included ~~purchase~~in ~~method~~financial ~~of accounting~~statements ~~(the~~prepared ~~“Merger”).~~in ~~LLI,~~accordance awith ~~wholly-owned~~GAAP ~~subsidiary~~have ofbeen ~~Language~~condensed ~~Line~~or omitted ~~Acquisition,~~pursuant ~~Inc~~to such rules and regulations., isThe ayear-end ~~Delaware~~balance ~~corporation~~sheet ~~formed~~data inwas ~~April~~derived ~~2004.~~from ~~LLI~~audited ~~had~~financial nostatements, ~~significant~~but ~~operations~~does ~~prior~~not toinclude ~~the~~all ~~acquisition~~disclosures ofrequired ~~Predecessor~~by GAAP.

~~The~~Organization Company provides over-the-phone interpretation services, from English into over 150 different languages 24 hours a day, seven days a week. Such services are provided mainly to the non-English speaking business population in the U.S. and Canada covering various industries such as insurance, healthcare, financial, utilities and government, providing a cost effective alternative to staffing in-house multilingual capabilities or using face-to-face interpretation.

~~Principles~~Language ofLine ~~Consolidation—~~Holdings, ~~The~~Inc. ~~condensed~~(the “Predecessor”) was a Delaware ~~consolidated~~corporation ~~financial~~formed ~~statements~~in ~~include~~December ~~the~~1999 ~~accounts~~as ofa ~~LLI~~holding company for Language Line, LLC (“LLC”) and its subsidiaries. LLC’s ~~wholly-owned~~was ~~subsidiaries~~incorporated during February 1999 as ofa ~~March 31,~~Delaware ~~2007~~limited ~~and~~liability ~~December~~company. The Predecessor was acquired on June 3111, 2004 ~~2006~~by Language Line, ~~and~~Inc. (“LLI” or the “Company”) in a transaction accounted for under the ~~three~~purchase ~~months~~method ~~ended~~of ~~March 31~~accounting (the “Merger”). LLI, ~~2007~~a ~~and~~wholly-owned ~~2006~~subsidiary of Language Line Acquisition, Inc., ~~All~~is ~~significant~~a ~~intercompany~~Delaware ~~accounts~~corporation ~~and~~formed ~~transactions~~in ~~have~~April ~~been~~2004. ~~eliminated~~LLI inhad ~~consolidation~~no significant operations prior to the acquisition of Predecessor. Subsequent to the Merger, Language Line Acquisition, Inc., an indirect wholly-owned subsidiary of Language Line Holdings, LLC (“Holdings”), was renamed Language Line Holdings, Inc. (“LLHI”).

~~Fiscal Year—~~The Company’s ~~fiscal year~~primary ~~end~~revenue source is ~~December~~to provide over-the-phone interpretation services, from English into over 170 31different languages, 24 hours a day, seven days a week. Such services are provided mainly to the non-English speaking business population in the U.S. and Canada covering various industries such as insurance, healthcare, financial, utilities and government, providing a cost effective alternative to staffing in-house multilingual capabilities or using face-to-face interpretation. The Company also performs translation of written media for over 80 different languages.

~~Cash~~Use ~~equivalents—Cash~~of ~~equivalents~~Estimates ~~are~~in ~~short-term,~~the ~~highly~~Preparation ~~liquid investments with original or remaining maturities~~ of ~~three~~Financial ~~months~~Statements ~~or less when purchased.~~

~~Reclassification—Interest~~The ~~income~~preparation ~~and~~of ~~expense~~financial ~~have~~statements ~~been reclassified~~in conformity with accounting principles generally accepted in the United States of America requires management to make beestimates ~~presented~~and onassumptions athat ~~gross~~affect ~~basis~~the reported amounts of assets, liabilities, revenues and expenses. Such management estimates include the allowance for doubtful accounts receivables, the ~~periods~~useful ~~ended~~life ~~March 31~~of intangible assets, ~~2006~~impairment toof goodwill ~~conform~~and tointangible ~~the~~assets, ~~March 31~~income taxes, ~~2007~~and ~~presentation~~claims and legal proceedings. Actual results could differ from those estimates.

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

~~The~~Principles ~~Company adopted the provisions~~ of ~~Financial~~Consolidation Standards Accounting Board Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. No adjustments were made to the liability for unrecognized income tax benefits or our accumulated deficit as a result of the implementation of FIN 48. At the adoption date of January 1, 2007, we had $3,216,000 of unrecognized tax benefits, all of which would affect our effective tax rate if recognized. At March 31, 2007, we have $5,494,000 of unrecognized tax benefits.

WeThe ~~recognize~~condensed ~~interest~~consolidated ~~and~~financial ~~penalties~~statements ~~related~~include tothe ~~uncertain~~accounts ~~tax~~of ~~positions~~LLI, inLLC ~~income~~and ~~tax expense.~~LLC’s Aswholly-owned subsidiaries as of March 31, ~~2007,~~2009 ~~we have approximately $706,000 of accrued interest~~ and ~~$426~~December 31,~~000~~ ~~of accrued penalties related to uncertain tax positions. The Company files income tax returns in U.S. federal jurisdiction along with various state and foreign jurisdictions~~2008, and isthe ~~subject~~results toof ~~ongoing~~operations ~~audits~~for ~~from various taxing authorities in~~ the three ~~jurisdictions~~months inended ~~which it does business. With certain exceptions~~March 31, ~~the~~2009 ~~Company~~and ~~is no longer subject to examinations from taxing authorities for years prior to 2003~~2008. ~~The~~All ~~Franchise~~significant ~~Tax~~intercompany ~~Board~~accounts ofand ~~the~~transactions ~~State~~have ofbeen ~~California~~eliminated isin ~~currently examining the Company’s California income tax returns for 2003 and 2004~~consolidation.

WeGoodwill ~~expect~~and ~~that,~~Other ~~within~~Intangible ~~the~~Assets next twelve months, we will make settlement payments on tax positions relating to state tax apportionments. As a result of this settlement payment, the total unrecognized tax benefit is expected to decrease by $499,000.

The ~~effective~~Company ~~tax~~accounts ~~rate~~ for ~~the~~goodwill ~~three~~and ~~months~~other ~~ended~~intangible ~~March~~assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 31142, ~~2007~~Goodwill ~~was~~and ~~83%~~Other asIntangible ~~compared~~Assets. toThis ~~38%~~statement requires that goodwill resulting from a business combination be tested for impairment annually at the ~~three~~reporting ~~months~~unit ~~ended~~level ~~March 31,~~or ~~2006~~whenever events or changes in circumstances indicate that goodwill might be impaired. The ~~increase~~Company incompleted the ~~effective~~annual ~~rate~~test isof ~~primarily~~impairment afor ~~result~~goodwill aas $2of December 31, 2008.3 ~~million~~These ~~increase~~tests resulted in ~~the~~no ~~liability~~impairment ~~for~~being recognized. ~~unrecognized~~Other ~~tax~~intangible ~~benefits,~~assets ~~representing~~are generally amortized on a ~~change~~straight-line inbasis ~~estimate~~over ~~given~~their ~~new~~useful ~~information~~life ~~related~~which tois ~~tax~~based ~~positions of~~on ~~prior~~historic ~~years,~~experience ~~recorded~~and inplans for utilization of the ~~three~~assets ~~months~~by ~~ended~~the ~~March 31,~~Company ~~2007.~~subsequent to the business combination.

~~Comprehensive~~ Income~~—SFAS~~ ~~No. 130, Reporting~~Taxes Comprehensive Income, requires that the Company report comprehensive income, which includes net income (loss) as well as other changes in assets and liabilities recorded directly to equity, in its financial statements. There were no components of comprehensive income other than net income (loss) for all periods presented.

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

Recent Accounting Pronouncements

In ~~June~~December ~~2006~~2007, the Financial Accounting Standards Board (the “FASB”) issued ~~FASB~~SFAS ~~Interpretation~~ No. 48141 (Revised 2007), “~~Accounting~~Business Combinations” (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for ~~Uncertainty~~how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in ~~Income~~the ~~Taxes~~acquiree, anas ~~interpretation~~well ofas ~~FASB~~the ~~Statement~~goodwill Noacquired. Significant changes from current practice resulting from SFAS ~~109~~141(R) include the expansion of the definitions of a “business” (and a “~~FIN~~business ~~48”)~~combination.” ~~FIN~~For 48all ~~prescribes~~business ~~guidance~~combinations ~~for~~(whether partial, full or step acquisitions), the ~~recognition~~acquirer will record 100% of all assets and ~~measurement~~liabilities of athe ~~tax~~acquired ~~position~~business, ~~taken~~including orgoodwill, ~~expected~~generally toat their fair values; contingent consideration will be ~~taken~~recognized inat aits ~~tax~~fair ~~return.~~value ~~Recognition~~on ofthe anacquisition ~~asset or~~date ~~liability~~and, isfor ~~required~~certain ifarrangements, itchanges isin ~~more~~fair ~~likely~~value ~~than~~will ~~not~~be ~~that~~recognized ain ~~tax~~earnings ~~position~~until settlement; and acquisition-related transaction and restructuring costs will be ~~sustained~~expensed ~~upon~~rather ~~examination,~~than ~~including~~treated ~~resolution~~as part of ~~any~~the ~~related~~cost ~~appeals~~of orthe ~~litigation processes~~acquisition. ~~The~~SFAS 141(R) ~~provisions~~also ofestablishes ~~FIN~~disclosure 48requirements ~~were~~to ~~effective~~enable ~~for~~users usto onevaluate ~~January 1, 2007,~~the ~~with~~nature ~~the~~and ~~cumulative~~financial ~~effect~~effects of the ~~change~~business incombination. ~~accounting~~SFAS 141(R) ~~principle,~~applies prospectively ifto ~~any,~~business ~~recorded~~combinations asfor anwhich ~~adjustment~~the toacquisition ~~opening~~date ~~retained~~is ~~earnings.~~on ~~The~~or ~~adoption~~after the beginning of ~~FIN48~~the first annual reporting period beginning on ofor ~~January~~after December 115, ~~2007~~2008. ~~did~~Earlier adoption is not permitted. SFAS 141(R) will likely have an impact ~~effect~~ on the Company’s consolidated financial statements when effective in the event a business combination occurs. The nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisition consummated ~~Company~~after the effective date.

In ~~June~~September 2006, the ~~Financial Accounting Standards Board (“~~FASB”) ~~ratified~~issued ~~the~~SFAS ~~Emerging Issues Task Force~~ No. ~~06-3 (“EITF 06-3”)~~157, “~~How~~Fair ~~Taxes~~Value ~~Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement.~~Measurement” ~~The~~(“SFAS ~~pronouncement addresses disclosure requirements for taxes assessed by a~~157”), ~~governmental~~which ~~authority~~defines ~~that~~fair isvalue, ~~both~~establishes ~~imposed on and concurrent with~~ a ~~specific~~framework ~~revenue-producing~~for ~~transaction~~measuring ~~between~~fair avalue ~~seller~~under ~~and a customer~~GAAP, and ~~may~~expands ~~include,~~disclosure ~~but~~requirements isabout ~~not~~fair ~~limited to, sales, use,~~ value ~~added,~~measurements. ~~certain~~SFAS ~~excise~~157 ~~taxes~~applies ~~and~~to ~~some industry-specific~~other ~~taxes.~~accounting Apronouncements ~~consensus was reached~~ that ~~entities~~require ~~may adopt a policy of presenting these taxes in the income statement on either a gross~~ or ~~net~~permit ~~basis.~~fair ~~If such taxes are significant, EITF 06-3 requires disclosure of the accounting method~~value inmeasurements. ~~the~~The ~~accounting~~fair ~~policy~~value ~~section~~measurement of ~~the notes to the~~ financial ~~statements,~~assets and iffinancial ~~not~~liabilities ~~presented at net, then disclosure~~ is ~~required~~effective for ~~the~~us ~~amount~~beginning ~~of such taxes that are recognized on a gross basis. We adopted EITF 06-3 on our effective date of January 1, 2007. We present revenues net of sales and value-added taxes~~ in ~~our~~fiscal ~~consolidated~~year ~~financial position and results of operations~~2008. ~~The~~Three ~~amount~~FASB ofStaff ~~taxes~~Positions ~~collected~~(“FSP”) ~~from~~on ~~customers~~this ~~and remitted to government authorities are immaterial to our~~ ~~consolidated revenues.~~

In statement ~~September~~were ~~2006,~~subsequently ~~the~~issued. ~~FASB~~FSP No. 157-1, issued on February 14, 2008, excluded SFAS No. ~~157~~13, “Accounting for Leases” (“SFAS ~~157~~13”), ~~“Fair~~and ~~Value Measurements,”~~other ~~which~~accounting ~~defines~~pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. However, ~~establishes~~this scope exception does not apply to assets acquired and liabilities assumed in a ~~framework~~business ~~for~~combination, ~~measuring~~which are required to be measured at fair value under ~~generally~~SFAS ~~accepted~~No. 141, ~~accounting~~“Business ~~principles~~Combinations” or SFAS 141(R), ~~and~~regardless ~~expands~~of ~~disclosures~~whether ~~about~~those ~~fair~~assets ~~value~~and ~~measurements~~liabilities are related to leases. This FSP was effective upon our initial adoption of SFAS 157. ~~applies~~FSP toNo. 157-2, ~~other~~issued ~~accounting pronouncements~~on February 12, 2008, delayed the effective date of this statement for non-financial assets and non-financial liabilities that ~~require~~are recognized or ~~permit~~disclosed at fair value in ~~measurements~~the financial statements on a nonrecurring basis. ItThe isadoption of FSP No. 157-2 did not have a material impact on our financial statements. FSP No. 157-3, issued in October 2008 and effective ~~for~~upon usissuance, ~~beginning~~clarifies how SFAS 157 should be applied when valuing securities in ~~fiscal~~markets ~~year~~that are not active by illustrating key considerations in determining fair value. Our adoption of this statement on January 1, 2008 is limited to financial assets and liabilities, and did not have a material impact on our consolidated financial position, results of operations or cash flows. WeIn ~~are~~April ~~currently~~2009, ~~evaluating~~the FASB issued FASB Staff Position No. 157-4, “Determining Fair Value When the ~~impact~~Volume and Level of ~~adopting~~Activity ~~SFAS~~for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides guidance on determining when the trading volume and activity for an asset or liability has significantly decreased, which may indicate an inactive market, and on measuring the fair value of an asset or liability in inactive markets. We will adopt FSP 157-4 effective April 1, 2009. We do not expect the adoption of FSP 157-4 will have a material impact on our financial statements.

OnIn ~~February 15,~~April ~~2007~~2008, the FASB issued ~~SFAS~~FSP No. ~~159~~142-3, “~~The~~Determination ~~Fair~~of ~~Value~~the ~~Option~~Useful ~~for~~Life ~~Financial~~of Intangible Assets ~~and Financial Liabilities~~” (~~FAS~~“FSP ~~159~~142-3”). This ~~Statement~~FSP isamends athe ~~fair~~factors ~~value~~that ~~option~~should ~~for~~be ~~financial~~considered ~~assets~~in ~~and~~developing ~~financial~~renewal ~~liabilities~~or ~~and~~extension ~~includes~~assumptions anused ~~amendment~~to determine the useful life of a recognized intangible asset under FASB Statement No. ~~115~~142, ~~which~~Goodwill ~~covers~~and ~~accounting~~Other ~~for~~Intangible ~~certain~~Assets. ~~investments~~FSP in142-3 ~~debt~~applies to intangible assets that are acquired individually or with a group of other assets after the effective date of either a business combination or an asset acquisition. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and ~~equity~~the ~~securities~~period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other U.S. ItGAAP. The FSP also contains new disclosure requirements with respect to recognized intangible assets. This FSP is effective for usfiscal years beginning inafter December 15, 2008, and for interim periods within such fiscal ~~year~~years. ~~2008~~The adoption of FSP 142-3 may have an impact on our financial statements in the event we acquire intangible assets in either a business combination or asset acquisition. WeThe ~~are~~nature ~~currently~~and ~~evaluating~~magnitude of the ~~impact~~specific effects will depend upon the nature, terms and size of ~~adopting~~the ~~SFAS~~business combination ~~159~~or asset acquisition consummated after the effective date.

2.In ~~Guarantor~~April ~~and~~2009, ~~Non~~the FASB issued FSP No. 107-~~Guarantor~~1, ~~Subsidiaries~~“Interim Disclosures about Fair Value of Financial Instruments”, which is effective in the second quarter of 2009. This guidance increases the frequency of fair value disclosures from annual only to quarterly for all financial instruments within the scope of SFAS 107, whether recognized or not on the balance sheet.

~~The~~Reclassifications Company’s outstanding public debt (the “Senior Subordinated Notes”) is jointly and severally, fully and unconditionally guaranteed by the Company and certain of its subsidiaries (the “Guarantor Subsidiaries”). The Company or Parent Company has no independent assets or operations. The subsidiaries are 100% owned by the Company. At March 31, 2007, a total of approximately $161.8 million of Senior Subordinated Notes were outstanding. The Guarantor Subsidiaries and non-guarantor subsidiaries are direct or indirect wholly-owned subsidiaries of the Company. Separate financial statements of the Company and each of the Guarantor Subsidiaries are not presented because the guarantees are full and unconditional and the Guarantor Subsidiaries are jointly and severally liable.

~~The~~Certain ~~non-guaranteeing~~balance ~~subsidiaries~~sheet ~~represent~~amounts ~~less~~in ~~than~~our 3%previously onfiled anfinancial ~~individual~~statements ~~and~~have ~~aggregate~~been ~~basis~~reclassified ofto ~~consolidated~~conform ~~assets,~~to ~~pre-tax~~the ~~earnings,~~current ~~cash~~period ~~flow~~presentation, ~~and~~as ~~equity.~~discussed ~~Therefore,~~in ~~the~~Note ~~non-guarantor subsidiaries’ information is not separately presented~~5.

~~There~~2. ~~are no current restrictions on the ability of the~~ Guarantor Subsidiaries to make payments under the guarantees referred to above. The obligations of each guarantor under its guarantee are limited to the maximum amount permitted under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any similar Federal or state law (e.g. laws requiring adequate capital to pay dividends) respecting fraudulent conveyance or fraudulent transfer.

3The Company’s outstanding public debt (the “Senior Subordinated Notes”) is jointly and severally, fully and unconditionally guaranteed by the Company and its subsidiaries (the “Guarantor Subsidiaries”). ~~Subsequent~~The ~~Event~~Company or Parent Company has no independent assets or operations. The subsidiaries are 100% owned by the Company. At March 31, 2009, a total of approximately $162.8 million of Senior Subordinated Notes were outstanding. The Guarantor Subsidiaries are direct or indirect wholly-owned subsidiaries of the Company.

OnSeparate ~~April 25,~~financial ~~2007,~~statements ~~Language Line,~~of ~~Inc.~~the Company and ~~Subsidiaries~~each ~~issued a dividend distribution in the amount~~ of ~~$20,000,000 to Language Line Holdings II, Inc. an affiliated non-consolidated entity under~~ the ~~ultimate parent, Language Line Holdings, LLC. The distribution will be~~Guarantor ~~recorded~~Subsidiaries asare anot ~~reduction~~presented tobecause ~~Additional-Paid-In-Capital in~~ the ~~consolidated~~guarantees ~~financial~~are ~~statements~~full ofand ~~Language~~unconditional ~~Line, Inc.~~ and ~~Subsidiaries for~~ the ~~quarter~~Guarantor ~~ended~~Subsidiaries ~~June 30,~~are ~~2007~~jointly ~~due~~and toseverally ~~our accumulated deficit~~liable.

As a result of issuing the dividend distribution the Company borrowed $6,000,000 on our revolving credit facility to support current operating cash flow requirements. Borrowings under the revolving credit facility bear interest at 8.82%

4. Contingencies

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

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

3. Contingencies

4. Related Party Transactions

In January 2008, the Company’s ultimate parent, Language Line Holdings, LLC completed its acquisition of Coto Holdings, LLC (“Coto”), a previously unaffiliated company. As part of an affiliate and intercompany services agreement executed between the Company, its parent and Coto, the Company is to provide certain management, interpretation and other defined services to Coto.

As consideration for these management services, Coto is charged a management fee by the Company equal to $500,000 per quarter. Management fees earned by the Company for the three months ended March 31, 2009 and 2008, included in revenues in the accompanying statements of operations, totaled $500,000 and $445,000, respectively.

Additionally, Coto is charged a fee to reimburse the Company for costs it incurs for providing interpretation services including interpreter labor, telecommunication, interpreter management and other miscellaneous direct costs. Reimbursable charges to Coto for interpretation services, netted against cost of revenues for the three months ended March 31, 2009 and 2008, totaled $5,403,000 and $169,000, respectively. Finally, reimbursable charges to Coto for other miscellaneous (indirect) costs netted against selling, general and administrative expenses totaled $883,000 and $230,000 for the three months ended March 31, 2009 and 2008, respectively. At March 31, 2009, Coto owed the Company an aggregate of $2,917,000 related to these services and charges.

5. Income Taxes

The operations of the Company and subsidiaries are included in the consolidated federal and state income tax returns of its parent, Language Line Holdings, Inc. and its ultimate parent, Language Line Holdings, II Inc. The Company and subsidiaries manage the respective tax payments and refunds for both Language Line Holdings, Inc. and Language Line Holdings, II Inc. Included in the accompanying consolidated balance sheet at March 31, 2009 and December 31, 2008 are amounts owed to Language Line Holdings, Inc. and Language Line Holdings, II Inc. of $1,761,000 and $2,641,000, respectively, under this arrangement. These amounts are presented separately from the amounts that are receivable or payable (from/to) taxing authorities for federal and state income taxes. In prior periods amounts owed to Language Line Holdings, Inc. and Language Line Holdings, II Inc. were offset against amounts due from/to taxing authorities in the consolidated balance sheet. The Company revised this presentation in the consolidated balance sheet in 2008, and the resulting changes have been reflected in the accompanying consolidated cash flow statement for the three months ended March 31, 2008.

In February 2009, California budget legislation was signed into law that, among other things, contained several state tax law changes that affected the Company’s effective state tax rate. As a result of these changes, the Company re-evaluated its state deferred tax liabilities and assets in the first quarter of 2009, as the effect of changes in tax laws are accounted for in the period the law changed. The impact of these tax law changes reduced the blended state tax rates applied to the Company’s recorded deferred tax liabilities at March 31, 2009, which had the effect of reducing the Company’s income tax provision for the quarter ended March 31, 2009 in the amount of approximately $4.0 million.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Introduction

We believe we are the leading global provider of ~~over~~ Over-the-phone interpretation (“OPI”) services from English into more than ~~150~~170 different languages, 24 hours a day, seven days a week. Our specially-trained, proprietary base of interpreters perform value-added OPI services ~~which~~ which facilitate critical business transactions and delivery of emergency and government services between our customers and limited English ~~proficiency~~proficient (“LEP”) speakers throughout the world. In ~~2006~~2008, we helped more than 2435 million ~~people~~ people communicate across linguistic and cultural barriers, by 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~~ 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~~complementary ~~and~~services ~~enrollment~~such ~~fees~~as document translation, asVideo ~~well~~Interpretation asservices, ~~fees~~American ~~for~~Sign ~~other~~Language, ~~OPI~~and face-~~related~~to-face ~~services,~~interpretation. ~~such~~We asrecognize ~~document~~revenues ~~translation~~when the services have been performed.

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

Recent events, including the fallout from problems in the U.S. credit markets, indicate a moderate to severe recession in the U.S. and world economies, which could have an impact on our customers and the volume of business they are able to conduct with us, as well as the prices we able to charge for our services.

Results of Operations

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

	Three Months Ended March 31,2007		Three Months Ended March 31,2006
	Three Months EndedMarch 31, 2009		Three Months EndedMarch 31, 2008
Statement of Operations data:
Revenues	100.0	%	100.0	%
Cost of services	34.4	%	35.2	%
Cost of Revenues:	31.1	%	33.4	%
Other expenses:
Selling, general and administrative	1719.86	%	17.95	%
Interest	2212.9	%	2619.71	%
Depreciation and amortization	1812.82	%	2415.41	%
Total other expenses	5944.57	%	6951.07	%
Other income:
Interest	0.70	%	0.25	%
Total other income	0.7	%	0.2	%
Other	0.1	%	0.7	%
Income (loss) before taxes on income	6.8	%	(4.0	)%
Total other income	0.1	%	1.2	%
Tax (benefit) on income (loss)	5.7	%	(1.6	)%
Income before taxes	24.3	%	16.0	%
Net income (loss)	1.1	%	(2.4	)%
Tax on income	2.6	%	6.6	%
Net income	21.7	%	9.4	%

7Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

Revenues for the three months ended March 31, 2009 were $60.0 million as compared to $48.9 million for the three months ended March 31, 2008, an increase of $11.1 million or 22.7 %. This increase in revenue is driven by principally by an increase in OPI billed minutes, offset partially by a nominal decline in the average rate per billed minute.

Cost of services consists primarily of costs associated with interpretation services and customer support. Significant cost components include compensation of interpreters and telecommunication charges. For the three months ended March 31, 2009, cost of services were $18.7 million as compared to $16.3 million for the three months ended March 31, 2008 an increase of $2.4 million or 14.5%. This increase was primarily due to increased interpretation minutes, partially offset by a lower cost per minute as a result of lower interpreter costs.

Selling, general and administrative expenses for the three months ended March 31, 2009 were $11.7 million as compared to $8.6 million for the three months ended March 31, 2008, an increase of $3.2 million or 37.1%. This increase was primarily due to higher sales, marketing and corporate expenses of $2.7 million, coupled with increases in other selling, general and administrative expenses.

Interest expense for the three months ended March 31, 2009 was $7.8 million as compared to $9.4 million for the three months ended March 31, 2008, a decrease of $1.6 million or 17.1%. This was primarily due to a decrease in the interest rate on our senior secured debt (at March 31, 2009 the rate was 4.47% as compared to 5.95% at March 31, 2008), combined with a lower average principal balance during the period for our senior secured debt.

Depreciation and amortization was $7.3 million for the three months ended March 31, 2009, principally unchanged from the same amount recorded for the three months ended March 31, 2008.

~~Three~~Interest ~~Months~~income ~~Ended~~for the three months ended March 31, ~~2007~~2009 ~~Compared~~was $0 million as compared to $0.3 million for the ~~Three~~three ~~Months~~months ~~Ended~~ended March 31, ~~2006~~2008, due to a decline in the rate of interest earned on deposits.

~~Revenues~~Tax expense on income for the three months ended March 31, ~~2007~~2009 ~~were~~was $451.36 million as compared to $403.02 million for the three months ended March 31, ~~2006~~2008, an ~~increase~~a decrease of $51.37 million. orPre-tax 13income increased $6.3%7.million during the quarter ended March 31, 2009. The effective ~~majority~~tax ofrate for the ~~increase~~quarter inended ~~revenue~~March 31, is2009 ~~driven~~was by10.7% aas 19compared to 41.93% ~~increase~~for inthe ~~OPI~~quarter ~~billed~~ended ~~minutes~~March 31, ~~offset~~2008. byIn aFebruary 62009, California budget legislation was signed into law that, among other things, contained several state tax law changes that affected the Company’s effective state tax rate.0% ~~decline~~As a result of these changes, the Company re-evaluated its state deferred tax liabilities and assets in the ~~average~~first ~~rate~~quarter ~~per~~of ~~billed~~2009, ~~minute~~as ~~driven~~the byeffect ~~our~~of ~~pricing~~changes ~~strategy~~in tax laws are accounted for in the period the law changed. ~~Our~~The ~~pricing~~impact ~~strategy~~of ~~is designed~~these tax law changes reduced the blended state tax rates applied to ~~increase~~the ~~revenues~~Company’s byrecorded ~~opportunistically~~deferred tax liabilities at March 31, 2009, which had the effect of reducing ~~average~~the Company’s ~~rate~~income ~~per~~tax ~~minute~~provision ~~pricing~~for inthe ~~order~~quarter toended ~~stimulate~~March 31, ~~growth~~2009 in ~~billed~~the ~~minute~~amount ~~volume~~of approximately $4.0 million.

~~Cost~~As ofa ~~services~~result ~~consists primarily~~ of the ~~costs~~factors ~~associated~~described ~~with~~above, ~~interpretation~~net ~~services~~income ~~and~~was ~~customer support~~$13.0 ~~Significant~~million ~~cost~~for ~~components include compensation of interpreters and telecommunication charges. For~~ the three months ended March 31, ~~2007,~~2009 ~~cost of services were $15.6 million~~ as compared to $144.16 million for the three months ended March 31, ~~2006, an increase of $1~~2008.5 ~~million or 10.6%. This increase was primarily due to increased interpretation minutes.~~

Selling, general and administrative expenses for the three months ended March 31, 2007 were $8.0 million as compared to $7.2 million for the three months ended March 31, 2006, an increase of $0.8 million or 11.1%. This increase was primarily due to the results of an increase in marketing and sales initiatives.

Interest expense for the three months ended March 31, 2007 was $10.4 million as compared to $10.7 million for the three months ended March 31, 2006. There was a slight decrease for the three months ended March 31, 2007 in interest expense due to refinancing our term loan.

Depreciation and amortization was $8.5 million for the three months ended March 31, 2007 compared to $9.8 million for the three months ended March 31, 2006, a decrease of $1.3 million or 13.3%. The decrease was primarily due to one intangible asset being fully amortized in 2006.

Interest income for the three months ended March 31, 2007 was $0.3 million as compared to $0.1 million for the three months ended March 31, 2006. The increase was due to having a higher cash balance as well as earning higher interest on our cash.

The tax expense on income for the three months ended March 31, 2007 was $2.6 million as compared to $0.6 million of tax benefit on loss for the three months ended March 31, 2006, a change of $3.2 million. This change in tax expense is primarily due to a $4.7 million change in pretax results of operations (income before income taxes of $3.1 million for the three months ended March 31, 2007 compared to a loss before income taxes of $1.6 million for the three months ended March 31, 2006), combined with a $2.3 million increase in the liability for unrecognized tax benefits recorded in the three months ended March 31, 2007. The effective tax rate for the three months ended March 31, 2007 was 83% as compared to 38% for the three months ended March 31, 2006. The increase in the effective rate is primarily a result a $2.3 million increase in the liability for unrecognized tax benefits, representing a change in estimate given new information related to tax positions of prior years, recorded in the three months ended March 31, 2007.

As a result of the factors described above, net income was $0.5 million for the three months ended March 31, 2007 as compared to a net loss of $1.0 million for the three months ended March 31, 2006.

Liquidity and Capital Resources

Operating Activities. Net cash provided by operating activities for the three months ended March 31, ~~2007~~2009 was $1126.75 million. ~~compared~~This ~~with~~reflects net income of $13.0 million, non-cash charges of $8.2 million, cash provided by operating assets and liabilities (net) of $10.1 million, offset by a decrease in deferred income taxes of $4.9 million. Non-cash charges include depreciation and amortization, amortization of deferred financing costs, accretion of discount on long-term debt, and stock based compensation. Net cash provided by operating activities ~~during~~for the three months ended March 31, ~~2006~~2008 ofwas $1218.13 million. This ~~decrease~~reflects net income of $0.4.6 million, isnon-cash ~~mainly~~charges ~~attributable~~of to$8.2 million, cash provided by operating assets and liabilities (net) of $6.1million, offset by a ~~reduction~~decrease in deferred ~~accrued~~income ~~interest~~taxes ~~and~~of ~~other~~$0.6 ~~liabilities~~million.

Investing Activities. Net cash used in investing activities was $01.9 3 million for the three months ended March 31, ~~2007,~~2009. ~~compared~~This toreflects capital expenditures of $1.3 million for the period. Net cash used in investing activities was $0 .4 million for the three months ended March 31, ~~2006~~2008. This ~~decrease~~reflects ~~was~~principally ~~mainly~~capital expenditures ~~attributable~~of to$0.3 million afor ~~reduction~~the ~~in capital expenditure spending~~period.

Financing Activities. Net cash used in financing activities ~~during~~for the three months ended March 31, ~~2007~~2009 was $7.83 million, ~~compared~~reflecting topayments made on our senior secured debt of $7.23 million. ~~during~~Net cash used in financing activities for the three months ended March 31, ~~2006~~2008 was $9.3 ~~The~~million. ~~increase~~This reflects payments made on our senior secured debt of $08.63 million is and a dividend distribution in the ~~result~~amount of $1.0 million to Language Line Holding II, Inc. an ~~increase~~affiliated innon-consolidated ~~principal~~entity ~~payments~~under ~~made~~the onultimate ~~our~~parent, ~~senior~~Language ~~secured~~Line ~~debt~~Holdings, LLC. At March 31, 2009 the maximum amount available under the revolving credit facility was $40.0 million, and no balance was outstanding.

8Debt Service. As of March 31, 2009, we had total indebtedness of $357.2 million and $40 million of borrowings available under our revolver credit facility, as defined in our loan agreement, of which $0 is outstanding.

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

~~Our~~On ~~principal~~June 11, ~~source~~2004 ofLanguage ~~liquidity~~Line, isInc. ~~cash~~issued ~~flow~~$165 ~~from~~million ~~operations.~~of We11 1/8% ~~believe~~Senior ~~that~~Subordinated ~~cash~~Notes (the ~~flow~~“Notes”) ~~from~~for ~~operations will~~net ~~provide~~proceeds usof ~~with~~$160.8 ~~sufficient~~million. ~~liquidity~~Interest ~~and~~is ~~capital~~payable ~~resources~~on ~~for~~June 15 usand toDecember 15 ~~meet~~of ~~our~~each ~~current~~year. ~~and~~The ~~future~~Notes ~~financial~~will ~~obligations,~~mature ~~including~~on ~~our~~June 15, ~~scheduled~~2012. ~~principal~~LLI ~~and~~may ~~interest~~redeem ~~payments,~~some asor ~~well~~all asof tothe ~~provide~~notes ~~funds~~at ~~for~~any ~~working~~time ~~capital,~~on ~~capital~~or after ~~expenditures~~June 15, ~~and~~2008 ~~other~~at ~~needs.~~the ~~Our~~redemption ~~principal~~prices ~~uses~~set offorth. ~~cash~~The notes are ~~debt~~unsecured ~~service~~and ~~requirements,~~are ~~capital~~subordinated ~~expenditures,~~to all existing and ~~working~~future ~~capital~~senior ~~requirements~~indebtedness. Each of LLI’s domestic subsidiaries guarantees the notes on a senior subordinated basis.

~~Debt~~Capital ~~Service~~Expenditures. AsWe ofexpect ~~March 31,~~to ~~2007,~~spend weapproximately ~~had total indebtedness of~~ $~~390~~4.~~5 million and $40.~~0 million ofin ~~borrowings~~2009 ~~available~~to ~~under~~fund our ~~revolver~~capital ~~credit~~expenditures ~~facility,~~as well as ~~defined~~normal investments in ~~our~~telecommunications ~~loan~~and ~~agreement~~company ~~and~~equipment. ~~subject~~We plan to ~~customary~~fund ~~conditions~~these expenditures through net cash flows from operations.

~~The~~Our principal ~~senior~~sources ~~secured~~of ~~credit~~liquidity ~~facilities~~are ~~consist~~cash offlow afrom ~~six-year~~operations ~~$40.0~~and ~~million~~borrowings ~~revolving~~available under our revolver credit facility. ~~and~~We abelieve ~~seven-year~~that ~~amortizing~~these ~~$285.0 million~~funds ~~term~~will ~~loan~~be ~~facility.~~sufficient ~~Borrowings~~to ~~under~~meet ~~the~~our ~~senior~~debt ~~credit~~service, ~~facilities~~capital ~~generally~~expenditures ~~bear~~and ~~interest~~working ~~based~~capital onrequirements for athe ~~margin~~next ~~over,~~twelve atmonths. Subject to restrictions in our ~~option,~~senior ~~the~~secured ~~base~~credit ~~rate~~facilities orand the ~~reserve-adjusted~~indentures ~~LIBOR.~~governing ~~The~~the ~~applicable~~notes, ~~margin~~we may incur more debt for ~~revolving~~working ~~credit~~capital, ~~loans~~capital ~~will~~expenditures, ~~vary~~acquisitions ~~based upon~~and ~~our~~for ~~leverage~~other ~~ratio~~purposes. asIn ~~defined~~addition, we inmay ~~the~~require ~~senior~~additional ~~credit~~financing ~~facilities.~~if ~~The~~our ~~senior~~plans ~~credit~~materially ~~facilities~~change ~~are~~in ~~secured~~an byadverse ~~first~~manner ~~priority~~or ~~interests~~prove ~~in,~~to ~~and~~be ~~mortgages~~materially ~~on,~~inaccurate. ~~substantially~~There ~~all~~can ofbe ~~our~~no ~~tangible~~assurance ~~and~~that ~~intangible~~such ~~assets~~financing, ~~and~~if ~~first~~permitted ~~priority~~under ~~pledges~~the terms of ~~all the~~our ~~equity~~debt ~~interests~~agreements, ~~owned~~will bybe usavailable inon terms ~~our~~acceptable ~~existing~~to ~~and~~us ~~future~~or ~~domestic~~at ~~subsidiaries~~all.

~~Our~~Recent ~~senior~~events, ~~subordinated~~including ~~notes~~the ~~mature~~fallout from problems in ~~2012~~the U.S. credit markets, indicate a moderate to severe recession in the U.S. and world economies, which could have an impact on our customers and the volume of business they are able to conduct with us, as well as the prices we able to charge for our services. Additionally, the securities and ~~guaranteed~~credit bymarkets ~~each~~have recently been experiencing volatility and disruption, which could impact our ability to access capital. Our principal sources of liquidity are cash flow from operations and borrowings available under our ~~existing~~revolver ~~domestic~~credit ~~subsidiaries~~facility. We onbelieve athat these funds will be sufficient to meet our debt service, capital expenditures and working capital requirements. Subject to restrictions in our senior ~~subordinated~~secured ~~basis~~credit facilities and the indentures governing the notes, we may incur more debt for working capital, capital expenditures, acquisitions and for other purposes. ~~Interest~~In addition, we may require additional financing if our plans materially change in an adverse manner or prove to be materially inaccurate. There can be no assurance that such financing, if permitted under the terms of our debt agreements, will be available on terms acceptable to us or at all. However, we believe the ~~notes~~lenders participating in our revolver credit facility will be ~~payable~~willing ~~semi-annually~~and able to provide financing in accordance with the terms of the agreement, and to date, our access to credit under our revolving credit facility has not been adversely affected by recent market conditions. Finally, we monitor the financial strength of our third-party financial institutions, including those that hold our cash, and attempt to diversify our concentration of cash that we hold at any point in time.

~~Capital~~11 Expenditures. We expect to spend approximately $3.0 million in 2007 and approximately $3.0 million in 2008 to fund our capital expenditures as well as normal investments in telecommunications and company equipment. We plan to fund these expenditures through net cash flows from operations.

Contractual and Commercial Commitments Summary

The following ~~tables~~table ~~present~~presents our long-term contractual cash obligations as of March 31, ~~2007~~2009 (dollars in thousands):

	Total		~~2007~~2009		~~2008~~2010		~~2009~~2011		~~2010~~2012		~~2011~~2013		Thereafter		Other
Senior secured credit facilities	$	~~228~~194,~~653~~398	$	9,~~472~~054	$	12,~~630~~071	$	12173,~~630~~273	$	~~12,630~~—	$	~~181,291~~—	$	—	$	—
Senior subordinated notes offered by Language Line, Inc.		165,000		—		—		—		—165,000		—		~~165,000~~—		—
Interest payments		~~175~~82,~~300~~584		3224,~~901~~772		3626,~~798~~439		3522,~~712~~195		349,~~626~~178		~~26,084~~—		~~9,179~~—		—
Unrecognized tax benefit		499		499
Unrecognized tax benefits		1,128		375		—		—		—		—		—		753
Operating leases		72,~~757~~046		~~3,098~~887		~~2,660~~983		~~1,023~~176		~~831~~—		~~145~~—		—
Total cash contractual obligations	$	577,209	$	45,970	$	52,088	$	49,365	$	48,087	$	207,520	$	174,179
Service contract commitments		8,633		2,775		3,700		2,158
Total cash contractual obligations	$	453,789	$	37,863	$	43,193	$	197,802	$	174,178	$	—	$	—	$	753

Interest payments with respect to the senior secured credit facilities assume a variable rate of 8(4.6047% at March 31, 2009), which represents the most recent rate applicable to these facilities. The senior subordinated notes offered by Language Line, Inc. are 11 1/8% fixed rate notes.

WeRelated ~~expect~~Party ~~that,~~Transactions within the next twelve months, we will make settlement payments on tax positions relating to state tax apportionments. As a result of this settlement payment, the total unrecognized tax benefit is expected to decrease by $499,000. Since settlement of all other tax positions can not be reasonably estimated, $4,995,000 of the unrecognized tax benefit is not included in the Contractual and Commercial Commitment Summary.

~~Critical~~In ~~Accounting~~January ~~Policies~~2008, the Company’s ultimate parent, Language Line Holdings, LLC completed its acquisition of Coto Holdings, LLC (“Coto”), a previously unaffiliated company. As part of an affiliate and intercompany services agreement executed between the Company, its parent and Coto, the Company is to provide certain management, interpretation and other defined services to Coto.

InAs consideration ~~preparing~~for ~~the consolidated~~these ~~financial~~management ~~statements~~services, ~~GAAP~~Coto ~~requires~~is ~~management~~charged toa ~~select~~management ~~and~~fee ~~apply~~by ~~accounting~~the ~~policies~~Company ~~that~~equal ~~involve~~to ~~estimates~~$500,000 ~~and~~per ~~judgment~~quarter. ~~The~~Management ~~following~~fees ~~accounting~~earned ~~policies~~by ~~may~~the ~~require~~Company afor ~~higher~~the ~~degree~~three ofmonths ~~judgment~~ended orMarch 31, ~~involve~~2009 ~~amounts~~and ~~that~~2008, ~~could~~included ~~have~~in arevenues in the ~~material~~accompanying ~~impact~~statements onof ~~the~~operations, ~~consolidated~~totaled ~~financial~~$500,000 ~~statements~~and $445,000, respectively.

~~Allowance~~Additionally, ~~for~~Coto ~~Doubtful~~is ~~Accounts—We~~charged ~~maintain~~a anfee ~~allowance~~to ~~for~~reimburse the ~~doubtful~~Company ~~accounts~~ for ~~estimated~~costs ~~losses~~it ~~resulting~~incurs ~~from~~for ~~the~~providing ~~failure~~interpretation ofservices ~~customers~~including tointerpreter ~~make~~labor, ~~payment.~~telecommunication, Weinterpreter ~~determine~~management ~~the~~and ~~allowance~~other ~~based~~miscellaneous ~~upon~~direct ancosts. ~~evaluation~~Reimbursable ofcharges ~~individual~~to ~~accounts~~Coto for interpretation services, ~~aging~~netted against cost of revenues for the ~~portfolio~~three months ended March 31, ~~issues~~2009 ~~raised~~and by2008, ~~customers~~totaled ~~that~~$5,403,000 ~~may~~and ~~suggest non-payment~~$169,000, ~~historical~~respectively. ~~experience~~Finally, ~~and/or~~reimbursable ~~the~~charges ~~current~~to ~~economic~~Coto ~~environment.~~for ~~While~~other ~~our~~miscellaneous ~~bad~~(indirect) ~~debt~~costs ~~losses~~netted ~~have~~against ~~historically~~selling, ~~been~~general ~~within~~and administrative ~~our~~expenses ~~expectations~~totaled $883,000 and $230,000 for the ~~allowance~~three ~~established~~months ended March 31, we2009 ~~might~~and ~~not~~2008, ~~continue~~respectively. toAt ~~experience~~March 31, 2009, Coto owed the ~~same~~Company ~~loss~~an ~~rates~~aggregate ~~that~~of we$2,917,000 ~~have in~~related ~~the~~to ~~past.~~these Ifservices ~~the~~and ~~financial~~charges.

912

~~condition~~Income ofTaxes individual customers or the general worldwide economy were to vary materially from the estimates and assumptions made by us, the allowance may require adjustment in the future. We evaluate the adequacy of the allowance on a regular basis, modifying, as necessary, its assumptions, updating its record of historical experience and adjusting reserves as appropriate.

~~Impairment~~The operations of ~~Long-Lived~~the ~~Assets—We~~Company ~~assess~~and subsidiaries are included in the ~~impairment~~consolidated offederal ~~long-lived~~and ~~assets~~state atincome ~~least~~tax ~~annually~~returns orof ~~when~~its ~~events~~parent, orLanguage ~~changes~~Line inHoldings, ~~circumstances indicate~~II ~~that~~Inc. ~~the~~The ~~carrying~~Company ~~value~~and ofsubsidiaries manage the ~~assets~~respective ortax ~~the~~payments ~~asset~~and ~~grouping~~refunds for ~~may~~Language ~~not~~Line beHoldings, ~~recoverable~~II Inc. ~~Customer~~Included ~~relationships,~~in ~~internally~~the ~~developed~~accompanying ~~technology,~~consolidated ~~tradenames~~balance ~~and~~sheet ~~trademarks~~at March 31, 2009 and ~~goodwill~~December 31, 2008 are ~~our~~amounts ~~most~~owed ~~significant~~to ~~long-lived~~Language ~~assets~~Line Holdings, II Inc. of $1,761,000 and ~~are~~$2,641,000, ~~tested~~respectively, under this ~~annually~~arrangement. ~~Impairment~~These isamounts ~~measured~~are bypresented separately from the ~~difference~~amounts ~~between~~that ~~the~~are ~~carrying~~receivable ~~amount~~or payable (from/to) taxing authorities for federal and ~~the~~state ~~respective~~income ~~fair~~taxes. ~~values,~~In ~~based~~prior onperiods ~~the~~amounts ~~best~~owed ~~information~~to ~~available~~Language Line Holdings, ~~including~~II ~~market~~Inc. ~~prices~~were oroffset aagainst amounts ~~discounted~~due ~~cash~~from/to ~~flow~~taxing ~~analysis~~authorities in the consolidated balance sheet. ~~Estimates~~The ~~are~~Company ~~made~~revised onthis ~~the~~presentation ~~useful lives~~in orthe ~~economic~~consolidated ~~values~~balance ofsheet ~~assets~~in 2008, and ~~could~~the ~~change~~resulting ~~based~~changes onhave ~~changes~~been reflected in the ~~economy~~consolidated orcash ~~industry~~flow ~~trends~~statement for the three months ended March 31, 2008.

~~Stock-Based Compensation—We~~In ~~account~~February ~~for~~2009, ~~stock-based~~California ~~compensation~~budget inlegislation ~~accordance~~was ~~with~~signed ~~Statement~~into oflaw ~~Financial~~that, ~~Accounting~~among ~~Standards~~other ~~(SFAS) No. 123(R)~~things, contained ~~“Share~~several ~~Based~~state ~~Payment”.~~tax ~~Under~~law ~~SFAS~~changes ~~123(R),~~that affected the Company’s ~~determines~~effective ~~the~~state ~~fair~~tax ~~value~~rate. ~~of its~~As ~~Language~~a ~~Line~~result ~~Holdings,~~of ~~LLC~~these ~~(“Holdings”)~~changes, ~~Class~~the CCompany ~~restricted~~re-evaluated ~~stock~~its ~~units~~state ~~pursuant~~deferred totax ~~the~~liabilities ~~probability-weighted~~and ~~expected~~assets ~~return~~in ~~method.~~the ~~Under~~first ~~this~~quarter ~~method~~of 2009, as the ~~value~~effect of changes anin ~~enterprise’s~~tax ~~common~~laws ~~stock~~are isaccounted ~~estimated~~for ~~from~~in ~~an analysis of~~ the ~~future~~ ~~values~~period ~~for~~ the ~~Company~~law ~~assuming~~changed. ~~various~~The ~~possible~~impact ~~future~~of ~~liquidity~~these ~~events.~~tax ~~SFAS~~law ~~123(R)~~changes ~~requires~~reduced ~~that~~ the ~~Company~~blended ~~recognize~~state ~~compensation~~tax ~~expense~~rates ~~for~~applied ~~only~~to the ~~portion~~Company’s ofrecorded ~~restricted~~deferred ~~stock~~tax ~~units~~liabilities ~~that~~at ~~are expected to vest~~March 31, ~~rather than recording forfeitures when they occur~~2009, aswhich ~~previously~~had ~~permitted. If~~ the ~~actual number~~ effect of ~~forfeitures~~reducing ~~differs~~the ~~from~~Company’s ~~those~~income ~~estimated~~tax byprovision ~~management,~~for ~~additional~~the ~~adjustments~~quarter toended ~~compensation~~March 31, ~~expense~~2009 ~~may~~in bethe ~~required~~amount inof ~~future~~approximately ~~periods~~$4.0 million.

~~Income Taxes—In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in~~Critical ~~which~~Accounting wePolicies operate. This process involves estimating actual current tax exposures together with assessing tax credits and temporary differences resulting from differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheet. We then assess the likelihood of additional tax exposure, and to the extent we believe that additional tax exposure may be likely, we must record a liability for such matters. To the extent we increase this liability in a period, we include an expense within the tax provision in our consolidated statement of operations.

~~Significant~~Financial ~~management~~statement ~~judgment~~preparation isrequires ~~required~~management into ~~determining~~make ~~our~~estimates ~~provision~~and ~~for~~judgments ~~income~~that ~~taxes,~~affect ~~income~~the ~~tax~~reported amounts ~~credits,~~of ~~deferred tax~~ assets, ~~and~~ liabilities., ~~The~~revenue ~~recording~~and ofexpenses aand ~~liability~~disclosure ~~based on additional tax exposure is based on estimates~~ of ~~taxable~~contingent ~~income~~assets ~~by the jurisdictions in which we operate~~ and ~~the period over which amounts would be recoverable~~liabilities. InThe ~~the~~accompanying ~~event~~consolidated ~~that~~unaudited ~~actual~~financial ~~results~~statements ~~differ~~are ~~from~~prepared ~~these~~using ~~estimates~~the orsame wecritical ~~adjust~~accounting ~~these~~policies ~~estimates~~discussed in ~~future~~our ~~periods, we may~~Annual ~~need~~Report toon ~~adjust~~Form ~~our~~10-K ~~income~~for ~~tax~~the ~~liability,~~fiscal ~~which~~year ~~could~~ended ~~impact~~December 31, ~~our financial position and results of operations~~2008.

Claims and Legal Proceedings—In the normal course of business, we are party to 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. Although the outcome of these matters is currently not determinable, we do not believe that the resolution of these matters in a manner adverse to our interest will have a material effect upon our financial condition, results of operations or cash flows for any interim or annual period.

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

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

As of March 31, ~~2006,~~2009 we had $165.0 million principal amount of fixed-rate debt and $~~268~~234.74 million of available floating-rate debt (of which we borrowed $~~228~~194.74 million). Based on the ~~pro forma~~ amounts outstanding under the revolver credit facility and the term loan, a hypothetical increase of one percentage point would cause an increase to interest expense of approximately $21.39 million on an annual basis on the floating rate debt.

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

Item 4T.

Controls and Procedures.

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

~~The~~(b) ~~Company~~Changes ~~maintains~~in ~~disclosure~~internal controls. ~~and~~There ~~procedures~~were ~~(as~~no ~~defined~~changes in ~~Rule~~our ~~13a–15(e)~~internal ~~and~~control ~~15d–15(e) under~~over ~~the~~financial ~~Securities~~reporting ~~Exchange Act of 1934)~~ that ~~are~~occurred ~~designed~~during ~~to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the~~our ~~Commission’s~~most ~~rules~~recent ~~and~~fiscal ~~forms,~~quarter ~~and~~ that ~~such~~have ~~information~~materially ~~is accumulated and communicated to the Company’s management~~affected, ~~including~~or ~~its~~are ~~Chief~~reasonably ~~Executive~~likely ~~Officer and Chief Financial Officer, as appropriate,~~ to ~~allow~~materially ~~timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures~~affect, ~~management~~our ~~recognized~~internal ~~that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired~~ control ~~objectives,~~over ~~and~~financial ~~management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures~~reporting.

The Company’s management has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

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 most recent fiscal year that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART 2. OTHER INFORMATION

Item 1.

Legal Proceedings

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

Item 1A.

Risk Factors

~~For~~There ahave ~~more detailed~~been ~~explanation~~no ofmaterial ~~the~~changes ~~factors~~in ~~affecting~~ our ~~business,~~risk ~~please~~factors ~~refer~~from tothose ~~the~~disclosed ~~Risk~~in ~~Factors~~Item 1A ~~section~~of inPart I of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2006~~2008.

There have been no material changes from Risk Factors previously disclosed in our Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other Information

None.

Item 6.

Exhibits and Reports on Form 8-K

(a) Exhibits

31.1		Certification by Dennis G. Dracup pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by ~~Jeffrey~~Michael C.Schmidt ~~Grace~~ 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.

1215

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Monterey, California on May 108, ~~2007~~2009.

LANGUAGE LINE, INC. /s/ Dennis G. Dracup Dennis G. Dracup Chief Executive Officer and Director ~~/s/ Jeffrey C. Grace Jeffrey C. Grace Chief Financial Officer, Vice President, Secretary and Director~~

13/s/ Michael F. Schmidt Michael F. Schmidt Chief Financial Officer and Secretary

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Filing Compare · Language Line, Inc.