Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2014 |
Goodwill And Intangible Assets Disclosure [Abstract] | ' |
Nature of the Business | ' |
Nature of the Business |
The accompanying condensed consolidated financial statements include the accounts of Lionbridge Technologies, Inc. and its wholly owned subsidiaries (collectively, “Lionbridge” or the “Company”). These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements include all adjustments, all of a normal recurring nature, necessary for their fair presentation. Interim results are not necessarily indicative of results expected for a full year. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of the operations, financial position and cash flows of the Company in conformity with U.S. generally accepted accounting principles (“GAAP”). The condensed consolidated balance sheet data as of December 31, 2013 was derived from audited financial statements, but does not include all disclosures required by GAAP for annual financial statements. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. |
The Company’s preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Estimates are used (but not limited to) when accounting for collectability of receivables, calculating service revenue using a proportional performance assessment and valuing intangible assets and deferred tax assets. Actual results could differ from these estimates. |
Stock-based Compensation | ' |
Stock-based Compensation |
The Company recognizes expense for stock options, performance-based restricted stock awards and time-based restricted stock awards pursuant to the authoritative guidance. Total compensation expense related to stock options, performance-based restricted stock awards and time-based restricted stock awards are classified in the condensed consolidated statements of operations line items as follows (in thousands): |
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| | Three Months Ended | | | Six Months Ended | |
June 30, | June 30, |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Cost of revenue | | $ | 44 | | | $ | 18 | | | $ | 64 | | | $ | 46 | |
Sales and marketing | | | 517 | | | | 309 | | | | 1,038 | | | | 620 | |
General and administrative | | | 1,406 | | | | 1,322 | | | | 2,657 | | | | 2,620 | |
Research and development | | | 25 | | | | 11 | | | | 47 | | | | 24 | |
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Total stock-based compensation expense | | $ | 1,992 | | | $ | 1,660 | | | $ | 3,806 | | | $ | 3,310 | |
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As of June 30, 2014, future compensation cost related to non-vested stock options, less estimated forfeitures, is approximately $1.3 million and will be recognized over an estimated weighted-average period of approximately 2.5 years. Lionbridge currently expects to amortize $12.0 million of unamortized compensation in connection with restricted stock awards outstanding as of June 30, 2014 over an estimated weighted-average period of approximately 2.5 years. |
Exit or Disposal Cost Obligations | ' |
During the six month period ended June 30, 2014, Lionbridge recorded $1.2 million of restructuring, and other charges, which included restructuring charges of $1.0 million for workforce reductions in Europe, Asia and North America consisting of 13 technical staff and 1 sales staff. $0.1 million of restructuring charges representing additional costs recorded for a previously vacated facility in order to reflect changes in initial estimates of a sublease arrangement due to current economic conditions, acquisition costs of $0.2 million and $0.1 million of accretion related to the contingent consideration from the VSI acquisition in 2012. These charges were offset by reductions in expense related to changes in the estimated fair value of contingent consideration of $0.1 million from the E5 acquisition in 2013 and deferred consideration of $0.1 million from the acquisition of PRI in 2012. All facility charges, $0.6 million of workforce charges, acquisition costs and the change in fair value of PRI deferred consideration relate to the Company’s GLC segment. Workforce charges of $0.3 million, the VSI contingent consideration accretion and the change in fair value of the E5 contingent consideration relate to the Company’s GES segment. The Company made $1.2 million of cash payments in the six month period ended June 30, 2014, which related to the GLC and GES segments. |
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During the six-month period ended June 30, 2013, Lionbridge recorded $2.0 million of restructuring and other charges. The $1.1 million of restructuring charges recorded in the six-month period ended June 30, 2013 included $0.9 million for workforce reductions in Europe, the Americas and Asia consisting of 12 technical staff, 7 administrative staff and 8 sales staff, and $0.2 million of additional costs recorded for a previously vacated facility in order to reflect changes in initial estimates of a sublease arrangement due to current economic conditions. The Company made $1.7 million of cash payments in the six-month period ended June 30, 2013 all of which related to the GLC operating segments. The remaining $0.9 million of other charges recorded in the six months ended June 30, 2013 relate to the Company’s engagement in strategic initiatives and a true-up of the contingent acquisition liability fair value from the VSI acquisition. |
Goodwill, Acquisition-Related Intangible Assets, and Other Long Lived Assets | ' |
Lionbridge assesses the impairment of goodwill and acquisition-related intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Such events or conditions could include an economic downturn in the industries to which Lionbridge provides services; increased competition; an increase in operating or other costs; additional volatility in international currencies; the pace of technological improvements; or other information regarding Lionbridge’s market value, such as a reduction in stock price to a price near or below the book value of the Company for an extended period of time. When Lionbridge determines that the carrying value of goodwill may not be recoverable based upon one or more of these indicators of impairment, the Company initially assesses any impairment using fair value measurements based on projected discounted cash flow valuation models and the market approach. In addition, goodwill is reviewed for impairment on an annual basis. At December 31, 2013, the Company performed its annual test of goodwill to determine if an impairment existed. This test determined that each reporting unit’s fair value substantially exceeded the carrying value of the net assets of each respective reporting unit, using projected discounted cash flow modeling and the market approach. As a result, no impairment was recorded for the year ended December 31, 2013. There were no events or changes in circumstances during the six months ended June 30, 2014 which indicated that an assessment of the impairment of goodwill and acquisition-related intangible assets was required. |
The Company evaluates whether there has been impairment in the carrying value of its long-lived assets if circumstances indicate that a possible impairment may exist. Impairment in the carrying value of an asset is assessed when the undiscounted expected future operating cash flows derived from the asset grouping are less than its carrying value. If it is determined that the asset group is impaired then it is written down to its estimated fair value. Factors that could lead to an impairment of its long-lived assets include a worsening in customer attrition rates compared to historical attrition rates, lower than initially anticipated cash flows associated with customer relationships, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for our overall business, identification of other impaired assets within a reporting unit, disposition of a significant portion of an operating segment, significant negative industry or economic trends, significant decline in our stock price for a sustained period and a decline in our market capitalization relative to net book value. |
Intangible assets arose from acquisitions made prior to 2011 and the acquisitions of Productive Resources, LLC (“PRI”) in June 2012, Virtual Solutions, Inc. (“VSI”) in November 2012, E5 Global Holdings, Inc. (“E5”) in October 2013 and Darwin Zone, S.A. (“Darwin”) in May 2014. Intangibles arising from acquisitions made prior to 2011 are being amortized using an economic consumption method over an estimated useful life of; (i) 3 to 12 year for customer relationships, (ii) 3 to 5 years for customer contracts and (iii) 1 to 4 years for acquired technology. Intangibles arising from the acquisitions of PRI, VSI, E5 and Darwin are being amortized over a straight-line basis over the estimated useful life of; (i) 5 to 10 years for acquired technology, (ii) 2 to 12 years for customer relationships, (iii) 1 to 5 years for non-compete agreements and (iv) 1 to 2 years for trademarks. |
Recent Accounting Pronouncements | ' |
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09 Revenue from Contracts with Customers (Topic 606) which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. For the Company, the standard will be effective in the first quarter of 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company has not yet selected a transition method. The Company is currently evaluating the potential changes from this ASU to its future financial reporting and disclosures. |