EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

Language Line, Inc. Reports 2006 Third Quarter Financial Results

Monterey, CA (October 26, 2006) – Language Line, Inc. (“Language Line”) reported today financial results for the three months ended September 30, 2006. The company will issue another press release at a later date to announce the date and time of its quarterly conference call to discuss its results.

Three Months Ended September 30, 2006 and September 30, 2005

Revenues for the three months ended September 30, 2006 were $41.0 million as compared to $36.4 million for the three months ended September 30, 2005, an increase of $4.6 million or 13%. The majority of the increase in revenue was driven by a 20% increase in OPI billed minutes offset by a 6% 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 September 30, 2006, cost of services were $14.3 million as compared to $12.2 million for the three months ended September 30, 2005, an increase of $2.1 million or 17%. This increase was primarily due to increased interpretation minutes.

For the three months ended September 30, 2006, other expenses were $26.4 million, compared with $25.7 million for the three months ended September 30, 2005. This increase was primarily driven by an increase in interest expense and an increase in selling, general and administrative expenses.

For the three months ended September 30, 2006, other income was $795K, representing a one-time final settlement of an escrow account established for potential indemnity obligations as part of the merger transaction with respect to the acquisition of Language Line Holdings, Inc. on June 11, 2004.

Net income for the three months ended September 30, 2006 was $0.7 million as compared to a net loss of $0.9 million for the three months ended September 30, 2005. The increase in net income was a result of the factors described above.


Nine Months Ended September 30, 2006 and September 30, 2005

Revenues for the nine months ended September 30, 2006 were $121.2 million as compared to $107.8 million for the nine months ended September 30, 2005, an increase of $13.4 million or 12%. The majority of the increase in revenue was driven by a 19% increase in OPI billed minutes offset by a 6% 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 nine months ended September 30, 2006, cost of services were $42.6 million as compared to $36.5 million for the nine months ended September 30, 2005, an increase of $6.1 million or 17%. This increase was primarily due to increased interpretation minutes.

For the nine months ended September 30, 2006, other expenses were $81.8 million, compared with $78.4 million for the nine months ended September 30, 2005. This increase was primarily driven by an increase in interest expense and an increase in selling, general and administrative expenses.

For the nine months ended September 30, 2006, other income was $795K, representing a one-time final settlement of an escrow account established for potential indemnity obligations as part of the merger transaction with respect to the acquisition of Language Line Holdings, Inc. on June 11, 2004.

The net loss for the nine months ended September 30, 2006 was $1.5 million as compared to a net loss of $4.2 million for the nine months ended September 30, 2005. This decrease in net loss was a result of the factors described above.

As of September 30, 2006 total debt outstanding was $401.6 million and cash balances were $25.6 million.


Note Regarding Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based upon current expectations and assumptions, and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as “intends”, “expects”, “expected”, “anticipates” or variations of such words and similar expressions are intended to identify such forward-looking statements. This press release also includes financial information, of which, as of the date of this press release, the Company’s independent auditors have not completed their review. Key risks are described in Language Line, Inc. and Holding’s respective Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 12, 2006.

Contact:

Matthew T. Gibbs II

Chief Financial Officer

Language Line, Inc. and Language Line Holdings, Inc.

(831) 648-5836


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)

 

     September 30, 2006     December 31, 2005  
Assets             

Current assets:

    

Cash and cash equivalents

   $ 25,617     $ 13,991  

Accounts receivable, net

     23,903       22,329  

Prepaid expenses and other current assets

     2,396       2,845  

Deferred taxes on income

     1,077       626  
                

Total current assets

     52,993       39,791  

Property and equipment, net

     5,651       4,991  

Goodwill

     408,793       408,793  

Intangible assets, net

     377,048       403,056  

Deferred financing costs, net

     9,966       11,425  

Other assets

     319       96  
                

Total assets

   $ 854,770     $ 868,152  
                

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 2,950     $ 1,208  

Accrued interest

     9,769       4,848  

Accrued payroll and related benefits

     1,783       817  

Accrued cost of interpreters

     968       1,288  

Other accrued liabilities

     2,406       1,786  

Income taxes payable

     2,858       2,488  

Current portion of long-term debt

     14,158       18,638  
                

Total current liabilities

     34,892       31,073  

Long-term debt

     225,813       236,431  

Senior subordinated notes

     161,619       161,315  

Deferred taxes on income

     157,481       163,188  
                

Total liabilities

     579,805       592,007  
                

Stockholders’ equity:

    

Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding

     —         —    

Additional paid-in capital

     280,110       281,064  

Accumulated deficit

     (5,145 )     (3,667 )

Deferred stock compensation

     —         (1,252 )
                

Total stockholders’ equity

     274,965       276,145  
                

Total liabilities and stockholders’ equity

   $ 854,770     $ 868,152  
                


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

September 30,

2006

  

Three months

ended

September 30,

2005

   

Nine months

ended

September 30,

2006

   

Nine months

ended

September 30,

2005

 

Revenues

   $ 41,039    $ 36,362     $ 121,201     $ 107,786  

Cost of services

     14,332      12,243       42,575       36,547  
                               

Gross Margin

     26,707      24,119       78,626       71,239  

Other expenses:

         

Selling, general and administrative

     7,067      5,603       21,364       18,685  

Interest - net

     11,087      10,318       32,605       30,319  

Depreciation and amortization

     8,249      9,797       27,826       29,427  
                               

Total other expenses

     26,403      25,718       81,795       78,431  
                               

Other income:

         

Settlement

     795      —         795       —    
                               

Loss before income taxes

     1,099      (1,599 )     (2,374 )     (7,192 )

Income tax benefit

     428      (675 )     (896 )     (2,966 )
                               

Net Income (Loss)

   $ 671    $ (924 )   $ (1,478 )   $ (4,226 )