Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2012

Goodwill and Other Intangible Assets [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

10. GOODWILL AND OTHER INTANGIBLE ASSETS

Lionbridge assesses the impairment of goodwill and other 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. In addition, in accordance with ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”), goodwill is reviewed for impairment on an annual basis. At December 31, 2011, the Company performed its annual test of goodwill to determine if an impairment existed. This test determined that each reporting unit’s fair value exceeded the carrying value of the net assets of each respective reporting unit, using projected discounted cash flow modeling. As a result, no impairment was recorded for the year ended December 31, 2011. There were no events or changes in circumstances during the six months ended June 30, 2012 which indicated that an assessment of the impairment of goodwill and other intangible assets was required.

Changes in the carrying amount of goodwill on a total consolidated basis and by reportable segment for the six months ended June 30, 2012, and for the year ended December 31, 2011, consisted of the following:

	GLC			GDT		Total
Balance at December 31, 2010, gross	$	120,587,000		$	9,675,000	$	130,262,000
Accumulated goodwill impairment		(120,587,000	)		—		(120,587,000	)
Balance at December 31, 2011, net	$	—		$	9,675,000	$	9,675,000
Balance at December 31, 2011, gross	$	120,587,000		$	9,675,000	$	130,262,000
Accumulated goodwill impairment		(120,587,000	)		—		(120,587,000	)
Acquisition of Productive Resources, LLC	$	5,534,000		$	0	$	5,534,000
Balance at June 30, 2012, net	$	5,534,000		$	9,675,000	$	15,209,000

The Company evaluates whether there has been an impairment in the carrying value of its long-lived assets in accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), if circumstances indicate that a possible impairment may exist. An 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 acquired customer relationships (recorded with the acquisition of Bowne Global Solutions (“BGS”) in September 2005 and Productive Resources (“PRI”) in June 2012) include a worsening in customer attrition rates compared to historical attrition rates, or lower than initially anticipated cash flows associated with customer relationships.

During the three months ended June 30, 2012, Lionbridge determined that two events triggered an evaluation of long-lived assets under ASC 360, “Property, Plant, and Equipment” (“ASC360”) resulting in an aggregate impairment charge of $4,125,000. The first event involved certain software license and capitalized development costs in the amount of $3.9 million associated with the expected cash flows from the Company’s license of automated machine translation technology from IBM Corporation (the “RTTS License”) following the Company’s decision to integrate the Microsoft Translator machine translation engine in its GeoFluent SaaS-based real-time translation offering in place of the machine translation technology obtained through the RTTS License for certain language models. As the Company determined that the undiscounted cash flows associated with the RTTS License were lower than the carrying value, the RTTS License was written down to its estimated fair value of zero and a $3.9 million impairment charge was recorded. The second event related to the decision during the three months ended June 30, 2012 to offer for sale certain real property of the Company located in Wuppertal, Germany. The real property was recorded at fair value less selling costs, resulting in a $225,000 impairment charge.

Intangible assets arose from the acquisition of BGS and PRI. BGS customer relationships are being amortized using an economic consumption method over an estimated useful life of 3 to 12 years. PRI customer relationships and non-compete agreement are being amortized using a straight-line method over an estimated useful life of 12 years and 5 years, respectively.

The following table summarizes other intangible assets at June 30, 2012 and December 31, 2011, respectively.

	June 30, 2012							December 31, 2011
	Gross Carrying Value		Accumulated Amortization			Balance		Gross Carrying Value		Accumulated Amortization			Balance
BGS acquired customer relationships	$	32,000,000	$	(25,705,000	)	$	6,295,000	$	32,000,000	$	(24,744,000	)	$	7,256,000
PRI acquired customer relationships	$	6,200,000	$	(43,000	)	$	6,157,000		—		—			—
PRI acquired non-compete agreement	$	1,300,000	$	(21,000	)	$	1,279,000		—		—			—
	$	39,500,000	$	(25,769,000	)	$	13,731,000	$	32,000,000	$	(24,744,000	)	$	7,256,000

Lionbridge currently expects to amortize the following remaining amounts of intangible assets held at June 30, 2012 in the fiscal periods as follows:

Year ending December 31,
2012	$	1,349,000
2013		2,360,000
2014		2,081,000
2015		1,852,000
2016		1,662,000
Thereafter		4,427,000
	$	13,731,000