Amended Current Report Filing (8-k/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Date of Report (Date of Earliest Event Reported):		January 7, 2015

Lionbridge Technologies, Inc.

__________________________________________

(Exact name of registrant as specified in its charter)



Delaware	000-26933	04-3398462
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1050 Winter Street, Suite 2300, Waltham, Massachusetts		02451
_________________________________ (Address of principal executive offices)		___________ (Zip Code)




Registrant’s telephone number, including area code:		781-434-6000

Not Applicable

______________________________________________

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.01 Completion of Acquisition or Disposition of Assets.

On January 8, 2015, Lionbridge Technologies, Inc. ("Lionbridge" or the "Company") filed a Current Report on Form 8-K reporting its January 7, 2015 acquisition of CLS Corporate Language Services Holding AG ("CLS") for approximately 71.8 million Swiss Francs, or approximately $71.4 million U.S. Dollars (based upon the January 7, 2015 exchange rate). Lionbridge is filing this Amendment No. 1 to provide the financial statements and pro forma financial information required by Item 9.01(a) and Item 9.01(b) of Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.


•	Audited consolidated financial statements of CLS as of and for the year ended December 31, 2014, including an audited note reconciling Swiss law financial reporting to U.S. GAAP, are attached hereto as Exhibit 99.2.

(b) Pro Forma Financial Information.


•	Unaudited Pro Forma Combined Balance Sheet as of December 31, 2014, Unaudited Pro Forma Combined Statement of Operations for the Year Ended December 31, 2014 and Notes to the Unaudited Pro Forma Combined Financial Statements of the Company and CLS are attached hereto as Exhibit 99.3.

(d) Exhibits

See the Exhibit Index attached to this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



	Lionbridge Technologies, Inc.

March 23, 2015		/s/ DONALD M. MUIR
		Name: Donald M. Muir
		Title: Chief Financial Officer

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Exhibit Index



Exhibit No.		Description
2.1		Share Purchase Agreement dated as of November 9, 2014, by and among Lionbridge International and the individuals and entities identified as sellers therein and consisting of (a) certain investors of Zurmont Madison Private Equity L.P., (b) CHD Coinvest Ltd., and (c) certain additional management shareholders (filed as Exhibit 2.1 to Report on Form 8-K filed with the Securities and Exchange Commission on November 10, 2014 and incorporated herein by reference).

23.1		Consent of Independent Auditors.

99.1		Press release dated January 8, 2015 entitled “Lionbridge Completes Acquisition of CLS Communication” was previously filed as an exhibit to Lionbridge’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 8, 2015 and incorporated herein by reference.

99.2		CLS Corporate Language Services Holding AG consolidated financial statements as of and for the year ended December 31, 2014.

99.3		Lionbridge unaudited pro forma combined consolidated financial information as of and for the year ended December 31, 2014.

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We have issued our Independent Auditor’s Report dated March 23, 2015 on the consolidated financial statements of CLS Corporate Language Services Holding AG as of December 31, 2014 and for the year then ended, included in the Current Report of Lionbridge Technologies, Inc. on Form 8-K/A dated March 23, 2015. We hereby consent to the incorporation by reference in the Registration Statements of Lionbridge Technologies, Inc. on Form S-8 (Nos. 333-174241, 333-159391, 333-129836, 333-115942, 333-188546).

/s/ Ernst & Young Ltd

Zurich, Switzerland

March 23, 2015

Report of Independent Auditors

To the Shareholders' of CLS Corporate Language Services Holding AG

We have audited the accompanying consolidated financial statements of CLS Corporate Language Services Holding AG, which comprise the consolidated balance sheet as of December 31, 2014 and the related consolidated income statement, statement of changes in shareholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with Swiss law; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CLS Corporate Language Services Holding AG at December 31, 2014 and the consolidated results of its operations and its cash flows for the year then ended in conformity with Swiss law, which differs in certain respects from those accounting principles generally accepted in the United States (see Note 4 of notes to consolidated financial statements).

/s/ Ernst & Young Ltd

Zurich, Switzerland

March 23, 2015

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2014



(In thousands of CHF)	2014
ASSETS
Cash and cash equivalents	Fr.	6,188
Accounts receivable, net of doubtful debts	11,036
Loans to shareholders	500
Other receivables from third parties	2,587
Other receivables from shareholders	66
Work in progress	435
Accrued income and prepaid expenses	825
Total current assets	21,637
Property	237
Office/business equipment	378
IT and communications	1,181
Other fixed assets	493
Total fixed assets	2,289
Treasury shares	624
Goodwill	8,954
Intangible assets	1,651
Total intangible assets	10,605
Total non-current assets	13,518
Total assets	Fr.	35,155
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current financial liabilities	Fr.	3,500
Accounts payable	2,222
Other current liabilities to third parties	2,031
Accrued expenses and deferred income	6,982
Provisions	2,264
Total liabilities	16,999
Share capital	2,656
Capital reserves	24,288
Reserves for treasury shares	624
Accumulated deficit	(8,781		)
Foreign currency translation	(631		)
Total shareholders’ equity	18,156
Total liabilities and shareholders’ equity	Fr.	35,155

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

CONSOLIDATED INCOME STATEMENT

YEAR ENDING DECEMBER 31, 2014



(In thousands of CHF)	2014
Service revenues, net	Fr.	81,377
Total service revenues	81,377

Fees external partner including machine translation	(22,331		)
Personnel expense	(41,172		)

Rent and maintenance	(2,870		)
Marketing, sales and distribution expense	(620		)
IT expense	(3,668		)
External consultants and services	(923		)
Other administrative expenses	(1,689		)
Total administrative expenses	(9,770		)
Total operating expenses	(73,273		)
Earnings before interest, taxes, depreciation and amortization	8,104
Depreciation of fixed assets	(822		)
Amortization of intangible assets	(5,303		)
Earnings before interest and taxes	1,979
Financial income	659
Financial expense	(1,034		)
Extraordinary income	36
Extraordinary expense	(751		)
Result for the year before tax	889
Capital and income taxes	(1,873		)
Net loss	Fr.	(984	)

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

CONSOLIDATED CASH FLOW STATEMENT

YEAR ENDING DECEMBER 31, 2014



(In thousands of CHF)	2014
Net loss	Fr.	(984	)
Depreciation of fixed assets	822
Amortization of intangible assets	5,303
Change in provisions	1,447
Other non-cash adjustments	367
Cash flow	6,955
Increase in accounts receivable	(206		)
Increase in accrued income and prepaid expenses	(141		)
Decrease in work in progress	405
Increase in accounts payable	225
Increase in accrued expenses and deferred income	478
Cash flow from operating activities	7,716
Investments in tangible assets	(836		)
Investments in financial assets	(500		)
Investments in intangible assets	(5,561		)
Divestment of subsidiary	(367		)
Cash flow from investing activities	(7,264		)
Increase in current liabilities to bank	3,500
Decrease in long-term financial liabilities	(4,000		)
Increase in treasury shares	(397		)
Cash flow financing activities	(897		)
Change in cash and cash equivalents	(445		)
Exchange differences	275
Cash and cash equivalents as of January 1, 2014	6,358
Cash and cash equivalent as of December 31, 2014	Fr.	6,188

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

YEAR ENDING DECEMBER 31, 2014



(In thousands of CHF)	Share capital		Capital reserves		Reserves for treasury shares		Accumulated deficit			Foreign currency translation			Total
Starting balance at January 1, 2014	Fr.	2,656	Fr.	24,288	Fr.	226	Fr.	(7,399	)	Fr.	(905	)	Fr.	18,866
Treasury share purchases	—		—		398		(398		)	—			—
Net loss for the year 2014	—		—		—		(984		)	—			(984		)
Exchange differences	—		—		—		—			274			274
Closing balance at December 31, 2014	Fr.	2,656	Fr.	24,288	Fr.	624	Fr.	(8,781	)	Fr.	(631	)	Fr.	18,156

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014


1.	Basis of Presentation and Significant Accounting Policies

General information

These consolidated financial statements were prepared in accordance with provisions of Swiss law and the accounting policies described in these notes.

Account closing date

The account closing date for CLS Corporate Language Services Holding AG and its subsidiaries ("CLS" or the "Group") is December 31.

Group of consolidated companies

The consolidated annual accounts of the Group comprise the annual accounts of the parent company CLS Corporate Language Services Holding AG and all the subsidiaries in which it holds the majority of the capital and votes.

Method of consolidation

Assets and liabilities and income and expenses of the consolidated companies are recorded using the full consolidation method, with all intra-group items being eliminated. Intra-group profits were negligible and therefore not eliminated. Any shares of net assets and net profit for the year attributable to minority interests are segregated out and shown separately. Associated companies (20%—50%) are accounted for using the equity method. Investments in associates of less than 20% are carried at the lower of cost or net asset value.

Capital consolidation

For the purposes of capital consolidation, assets and liabilities are valued at the date of acquisition (or first-time consolidation) and this figure set off against the book value of the parent company's investment (purchase method). Any surplus remaining after this revaluation (goodwill) will be amortized over 5 years.

The share capital of the subsidiaries is presented in the subsidiary's functional currency. The currencies include: the Euro ("EUR"), the United States Dollar ("USD"), the British Pound Sterling ("GBP"), the Danish Krone ("DKK"), the Singapore Dollar ("SGD"), the Hong Kong Dollar ("HKD") and the Canadian Dollar ("CAD"). See "Note 2. Overview of Subsidiaries" for additional information.

Foreign currency translation of financial statements of subsidiaries in foreign currencies

Individual Group companies compile their financial statements in the local currency. Assets and liabilities in balance sheets prepared in foreign currencies are translated into Swiss francs ("CHF" or "Fr.") at the year-end exchange rate. Income and expenses are translated at the average rate for the year. Foreign currency translation differences arising from application of this method are offset against foreign currency translation in the equity without affecting the income statement.

In the individual accounts, business transactions in foreign currencies are translated at current exchange rates. Any realized or unrealized gains and losses arising on the valuation of short-term foreign currency receivables and payables are recognized in profit and loss. Unrealized gains from the valuation of long-term receivables and payables are not booked. Unrealized foreign currency losses are booked.

Valuation principles

The consolidation is based on the individual Group company accounts prepared under commercial law.

Intangible Assets

In 2014, Information Technology development costs in the amount of Fr. 859,000, which are mainly related to a "Customer Portal Software" project, have been capitalized and will be amortized over a period of 3 years.

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014


2.	Overview of Subsidiaries

CLS Subsidiaries

The following table is an overview of CLS subsidiaries at December 31, 2014:



				December 31, 2014
CLS Corporate Language Services Holding AG, Opfikon
	holds equity investments:
		CLS Communication AG, Opfikon
			Object: To provide and sell translation services
			Share capital	CHF 150,000
			Share	100	%
		CLS Communication Holding Limited, Saint John NB
			Object: To hold and manage equity investments
			Share capital	CAD 10
			Share	100%
CLS Communication AG, Opfikon
	holds equity investments:
		CLS Communication Inc., Weehawken
			Object: To provide and sell translation services
			Share capital	USD 1,000
			Share	100%
		CLS Communication Limited, London
			Object: To provide and sell translation services
			Share capital	GBP 1,000
			Share	100%
		CLS Communication S.A.R.L., Paris
			Object: To provide and sell translation services
			Share capital	EUR 157,850
			Share	100%
		CLS Communication S.L., Madrid
			Object: To provide and sell translation services
			Share capital	EUR 3'006
			Share	100%
		CLS Communication A/S, Copenhagen
			Object: To provide and sell translation services
			Share capital	DKK 1,162,000
			Share	100	%
		CLS Communication GmbH, Frankfurt am Main
			Object: To provide and sell translation services
			Share capital	EUR 100,000
			Share	100	%
		CLS Communication Asia Pacific Pte. Ltd., Singapore

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014



			Object: To provide and sell translation services
			Share capital	SGD 1
			Share	100	%
		CLS Communication (Shanghai) Co. Ltd., Shanghai
			Object: To provide and sell translation services
			Share capital	—
			Share	—
		CLS Communication HK Limited, Hong Kong
			Object: To provide and sell translation services
			Share capital	HKD 1
			Share (held by CLS Communication Asia Pacific Ltd, Singapore)	100	%
CLS Communication Holding Limited, Saint John NB
	holds equity investments:
		CLS Lexi-tech Limited, Moncton, NB
			Object: To provide and sell translation services
			Share capital	CAD 10
			Share	100	%
CLS Communication GmbH, Frankfurt am Main
	holds equity investments:
		CLS 4-Text GmbH, Berlin
			Object: To provide and sell translation services
			Share capital	EUR 25,600
			Share	100	%


3.	Other Disclosures



(In thousands of CHF)			December 31, 2014
Fire insurance values of tangible assets (incl. new value addition):
	Real estate, office and business equipment as well as IT and communications		Fr.	7,484

(In thousands of CHF)			December 31, 2014
Liabilities to employee benefit institutions			Fr.	37
Operating lease commitments			678

(In thousands of CHF)			December 31, 2014
Assets pledged to secure own liabilities			Fr.	1,875
Guarantees in favor of third parties			42

(In thousands of CHF, except share amounts)			December 31, 2014
		Shares	Fr.
Balance of treasury shares at December 31, 2013		264	227
Purchase of treasury shares		350	397
Balance of treasury shares at December 31, 2014		614	624

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014

Contingent Liability

In connection with the acquisition in 2013 of CLS 4-text GmbH, Berlin, earn-out payments may be payable in financial year 2015.


4.	Summary of Differences between Swiss law and U.S. Generally Accepted Accounting Principles (U.S. GAAP)

The Group’s consolidated financial statements are prepared in accordance with the requirements of Swiss law. These principles differ in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant differences and their effect on the consolidated net income (loss) and shareholders’ equity of the Group are set out below. While this is not a comprehensive summary of all differences between Swiss law and U.S. GAAP, other differences would not have a significant effect on the consolidated net loss or shareholders' equity of the Group.

Reconciliation of net income

The effect of differences between Swiss law and U.S. GAAP on consolidated net loss after tax for the year December 31, 2014 is set out below:



(In thousands of CHF)	Notes	December 31, 2014
Net loss after tax for the year in accordance with Swiss law		Fr.	(984	)

U.S. GAAP adjustments:
Recognition of post-retirement benefit liability	(a)	180
Acquisition accounting	(b)	2,798
Measurement of accounts receivable doubtful debts	(c)	(9		)
Revenue and cost recognition	(d)	80
Recognition and depreciation of IT and communications equipment	(e)	(61		)
Treasury shares	(f)	—
De-recognize capitalized costs for raising additional capital	(g)	82
Uncertain tax positions	(h)	1,264
Lease expense	(i)	10
Measurement of accrual for Jubilee awards	(j)	(25		)
Total pre-tax effect of U.S. GAAP adjustments		4,319
Tax provision effect of U.S. GAAP adjustments		256
Net income after tax for the year in accordance with U.S. GAAP		Fr.	3,591

Net income after tax for the year in accordance with U.S. GAAP includes Fr.20,000 that is attributable to CLS Communication (Shanghai) Co. Ltd. We have disposed of this entity effective December 30, 2014.

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014

Reconciliation of shareholders’ equity

The cumulative effect of differences between Swiss law and U.S. GAAP on the shareholders’ equity of the Group as at December 31, 2014:



(In thousands of CHF)	Notes	December 31, 2014
Shareholders’ Equity in accordance with Swiss law		Fr.	18,156

U.S. GAAP adjustments:
Recognition of post-retirement benefit liability	(a)	(8,346		)
Acquisition accounting	(b)	9,744
Measurement of accounts receivable doubtful debts	(c)	166
Revenue and cost recognition	(d)	(119		)
Recognition and depreciation of IT and communications equipment	(e)	99
Treasury shares	(f)	(624		)
De-recognize capitalized costs for raising additional capital	(g)	—
Uncertain tax positions	(h)	(160		)
Lease expense	(i)	(36		)
Measurement of accrual for Jubilee awards	(j)	(112		)
Shareholders’ Equity in accordance with U.S. GAAP		Fr.	18,768

Significant differences between Swiss law and U.S. GAAP

(a) Recognition of Post-retirement benefit liability

Under Swiss law, the Group has accounted for the pension plan for Swiss employees, which is administered by an independent pension fund, similar to a defined contribution plan. Because participants of the plan are entitled to a defined rate of interest on contributions made, the plan meets the criteria for a defined benefit plan under US GAAP. The Group’s defined benefit obligation under the plan was Fr.47.0 million and Fr.37.1 million as of December 31, 2014 and December 31, 2013, respectively, and was calculated by an independent third-party actuary. Plan assets of Fr.38.7 million and Fr36.7 million as of December 31, 2014 and December 31, 2013, respectively, are measured at fair value. Accordingly, a liability for the underfunded portion of the plan that would need to be recognized under US GAAP was Fr.8.3 million and Fr.0.3 million as of December 31, 2014 and December 31, 2013, respectively. Pension expense for calendar year 2014 relates to current service cost of Fr.1.5 million and financing cost of Fr.0.9 million, net of the expected return on plan assets of Fr.1.2 million. Actuarial losses for calendar 2014 of Fr8.2 million result mostly from a decrease in the interest rate and were recognized directly in shareholders’ equity. For U.S. GAAP, the Group recognized additional post-retirement benefit liabilities primarily driven by higher post-retirement benefit costs under U.S. GAAP compared to Swiss law.

(b) Acquisition accounting

In 2009, CLS Communication AG acquired 100% of Lexi-tech International (“Lexi-tech”), an entity incorporated in Canada. The Group originally recorded the assets acquired and liabilities assumed in its Swiss law consolidated financial statements based on the carrying value of the assets and liabilities recorded in Lexi-tech’s closing local GAAP financial statements, and the entire difference between the net assets acquired and the purchase price was recorded as goodwill. The acquisition of Lexi-tech meets the definition of a business combination under U.S. GAAP. Accordingly, the assets acquired, including any identifiable intangible assets, and liabilities assumed need to be measured at fair value as of the acquisition date. The excess of the consideration transferred over the fair value of the net assets acquired is recorded as goodwill.

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014

The reconciliation between the effects of the accounting for this business combination under Swiss law compared with the accounting under U.S. GAAP is as follows:



(In thousands of CHF)	Effect on 2014 net income			Effect on 2014 net equity
Elimination of goodwill recognized under Swiss law	Fr.	1,994		Fr.	(37	)
Customer relationships recognized under U.S. GAAP	(403		)	3,300
Trademark recognized under U.S. GAAP	(69		)	—
Goodwill recognized under U.S. GAAP	—			5,152
Total pre-tax effect	1,522			8,415
Tax benefit (provision)	121			(857		)
Net effect	Fr.	1,643		Fr.	7,558

In 2013, CLS Communication AG acquired 100% of 4-Text GmbH (“4-Text”), an entity incorporated in Germany. The Group originally recorded the assets acquired and liabilities assumed in its Swiss law consolidated financial statements based on the carrying value of the assets and liabilities recorded in 4-Text’s closing local GAAP financial statements, and the entire difference between the net assets acquired and the purchase price was recorded as goodwill. The acquisition of 4-Text meets the definition of a business combination under U.S. GAAP. Accordingly, the assets acquired, including any identifiable intangible assets, and liabilities assumed need to be measured at fair value as of the acquisition date. The excess of the consideration transferred over the fair value of the net assets acquired is recorded as goodwill.

Additionally, a portion of the purchase price of 4-Text was contingent upon the achievement of certain financial metrics during the earnout period. Under U.S. GAAP, the contingent consideration needs to be fair valued as of the acquisition date, with any subsequent changes to the fair value being recorded through current period earnings. The application of this method under U.S. GAAP resulted in accretion of the contingent consideration of Fr.1.1 million, of which Fr.0.3 million was recorded during 2014.

The reconciliation between the effects of the accounting for this business combination under Swiss law compared with the accounting under U.S. GAAP is as follows:



(In thousands of CHF)	Effect on 2014 net income			Effect on 2014 net equity
Elimination of goodwill recognized under Swiss law	Fr.	2,028		Fr.	(8,811	)
Contingent consideration recognized under U.S. GAAP	(255		)	—
Software recognized under U.S. GAAP	—			66
Customer relationships recognized under U.S. GAAP	(628		)	3,544
Trademark recognized under U.S. GAAP	(51		)	152
Goodwill recognized under U.S. GAAP	—			7,356
Total pre-tax effect	1,094			2,307
Tax benefit (provision)	188			(1,029		)
Net effect	Fr.	1,282		Fr.	1,278

In 2009, CLS Communication AG acquired 100% of Scandinavian Translators A/S (“CLS DK”), an entity incorporated in Denmark. The Group originally recorded the assets acquired and liabilities assumed in its Swiss law consolidated financial statements based on the carrying value of the assets and liabilities recorded in CLS DK’s closing local GAAP financial statements, and the entire difference between the net assets acquired and the purchase price was recorded as goodwill. The acquisition of CLS DK meets the definition of a business combination under U.S. GAAP. Accordingly, the assets acquired, including any identifiable intangible assets, and liabilities assumed need to be measured at fair value as of the acquisition date. The excess of the consideration transferred over the fair value of the net assets acquired is recorded as goodwill.

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014

The reconciliation between the effects of the accounting for this business combination under Swiss law compared with the accounting under U.S. GAAP is as follows:



(In thousands of CHF)	Effect on 2014 net income		Effect on 2014 net equity
Elimination of goodwill recognized under Swiss law	Fr.	182	Fr.	—
Goodwill recognized under U.S. GAAP	—		908
Total pre-tax effect	182		908
Tax benefit (provision)	—		—
Net effect	Fr.	182	Fr.	908

Swiss law allows the recognition of general allowances for bad debt up to certain thresholds, without evidence or past history of impairment. This policy has been adopted in the Group’s Swiss law consolidated financial statements for receivables of the Swiss entities. For U.S. GAAP, the Group adjusted the measurement of these accounts receivable so that the carrying amount reflects the Group’s estimate of amounts that will be collected based on historical experience.

(d) Revenue and cost recognition

Based on the nature of the services being delivered and the contracts with its customers, the Group applies a completed contract revenue recognition model under U.S. GAAP. The work in progress balance in the Group’s Swiss law consolidated financial statements represents the direct and certain indirect overhead costs associated with certain unfinished projects, for which revenue is recognized on the basis of the completed contract method. Under U.S. GAAP, the Group defers only direct cost with regard to such projects. Additionally, certain jurisdictions apply a proportional-performance model for revenue recognition, which have been adjusted to completed contract for U.S. GAAP presentation.

(e) Recognition and depreciation of IT and communications equipment

For the purpose of preparing the Swiss law consolidated financial statements, purchases of items of equipment are generally expensed as incurred if the purchase price for an individual item does not exceed a specific threshold. This threshold varies among the Group’s subsidiaries and is usually based on local tax rules. For U.S. GAAP, the Group applies a lower capitalization threshold that is consistent across all subsidiaries and therefore needs to recognize purchases of IT equipment as an asset.

(f) Treasury shares

The Group holds treasury shares which it has purchased back from shareholders in the past. In the Swiss law consolidated financial statements, treasury shares are recorded at cost in the balance sheet with a corresponding reserve in equity. Under U.S. GAAP, purchases of treasury shares are not recorded as an asset, but rather are recorded as reductions of shareholders’ equity.

(g) De-recognize capitalized costs for raising additional capital

The Group has historically capitalized certain costs for raising additional capital in its Swiss law consolidated financial statements. Under U.S. GAAP, these costs are expensed as incurred.

(h) Uncertain tax positions

The Group evaluated whether it had any uncertain tax positions in accordance with ASC 740-10 under U.S. GAAP and determined that as of January 1, 2014 approximately Fr.1.4 million of uncertain tax positions existed relating to various jurisdictions within the Group. During 2014, certain of these liabilities were deemed no longer likely to occur, resulting in the recognition of a gain of approximately Fr.1.2 million during 2014. Current and deferred taxes were calculated using estimated local statutory rates.

CLS CORPORATE LANGUAGE SERVICES HOLDING AG

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDING DECEMBER 31, 2014

(i) Lease expense

Some of the Group’s office leases include periods of free rent or step-rent provisions. Lease expense for some of these leases is recognized at an amount equal to the amount of actual lease payments in the Swiss law consolidated financial statements. U.S. GAAP requires that lease expense be recognized on a straight-line basis over the lease term for these leases.

(j) Measurement of accrual for Jubilee awards

The Group is obliged to provide Jubilee (or anniversary) awards to certain employees after completion of specified service periods. Measurement of the liability is based on an estimate of jubilee awards that will occur in the respective following calendar year in the Swiss law consolidated financial statements. Under U.S. GAAP, the Group needs to account for the obligation to provide jubilee awards to its employees in a way similar to the accounting for defined benefit post-retirement benefits, which includes determination of the portion of an award that an employee has already earned as of the balance sheet date based on past service. As such, the Group has recognized a liability of Fr.142,000 as of December 31, 2014, of which Fr.25,000 was recognized as expense during 2014. On a tax effect basis, this had a cumulative impact of Fr.112,000 decrease to Shareholder's Equity.

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

On January 7, 2015, Lionbridge Technologies, Inc. (“Lionbridge” or the "Company") acquired CLS Corporate Language Services Holding AG ("CLS"), a global language service provider headquartered in Switzerland. The transaction was effected through the purchase of (a) 100% of the outstanding shares of Tuscany Holding AG, a holding company that held 68.9% of the outstanding shares of CLS Holding and (b) 31.1% of the shares of CLS Corporate Language Services Holding AG held by certain management sellers. The Company made a cash payment of approximately 71.8 million Swiss Francs (“Fr.”), or approximately $71.4 million U.S. Dollars (at January 7, 2015 exchange rate).

The unaudited pro forma combined balance sheet as of December 31, 2014 is presented as if the acquisition of CLS had occurred on December 31, 2014. The unaudited pro forma combined consolidated statements of operations for the year ended December 31, 2014 give effect to the acquisition of CLS as if it had occurred on January 1, 2014. The assumptions, estimates and adjustments herein have been made solely for purposes of developing this pro forma combined consolidated financial information. The CLS financial statements have been adjusted to conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) from their original presentation under Swiss law, and converted to U.S. dollars using average exchange rates for the statement of operations and period-end exchange rates for the balance sheet.

These unaudited pro forma combined financial statements have been prepared based on preliminary estimates of fair values attributable to Lionbridge’s acquisition of CLS; therefore, the actual amounts recorded for the acquisition may differ materially from the information presented in these unaudited pro forma combined financial statements. The assets acquired and liabilities assumed have been reflected in these unaudited pro forma combined financial statements based on management’s preliminary estimates of fair value, with the excess purchase price over net tangible and identifiable intangible assets acquired recognized as goodwill. The Company expects to finalize its estimates of fair value and the accounting for the CLS business combination in the first quarter of 2015.

The unaudited pro forma combined statements of operations do not reflect nonrecurring charges resulting from the acquisition transaction. The unaudited pro forma combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position of Lionbridge that would have been reported had the acquisition of CLS been completed as of the dates presented, and should not be taken as representative of the future results of operations or financial position of Lionbridge. This information should be read in conjunction with the accompanying notes to the unaudited pro forma combined financial statements. The unaudited pro forma statements of operations do not reflect any operating efficiencies, cost savings or revenue synergies that may be achieved with respect to the combined companies.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of Lionbridge and CLS included in the respective Lionbridge annual report on Form 10-K and the attached CLS financial statements in Exhibit 99.2.

LIONBRIDGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2014



				CLS Corporate Language Services Holding AG
(In thousands)	Lionbridge			Swiss law			U.S. GAAP Adjustments			Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	36,893		$	6,254		$	—		$	4,890		$	48,037
Accounts receivable, net of allowances	66,479			11,152			212			—			77,843
Unbilled receivables	25,843			834			(251		)	—			26,426
Other current assets	12,090			3,119			84			346			15,639
Total current assets	141,305			21,359			45			5,236			167,945
Property and equipment, net	23,622			3,982			60			(1,527		)	26,137
Goodwill	21,937			9,048			4,771			30,976			66,732
Acquisition-related intangible assets, net	12,232			—			7,070			30,110			49,412
Other assets	5,677			1,136			(630		)	1,385			7,568
Total assets	$	204,773		$	35,525		$	11,316		$	66,180		$	317,794
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term notes payable	$	—		$	3,537		$	—		$	3,085		$	6,622
Accounts payable	21,885			2,245			—			—			24,130
Accrued compensation and benefits	17,249			2,911			—			—			20,160
Accrued outsourcing	10,429			461			—			—			10,890
Accrued restructuring	3,492			—			—			—			3,492
Accrued expenses and other current liabilities	10,485			3,000			46			—			13,531
Income taxes payable	2,123			2,323			11			—			4,457
Deferred revenue	11,866			412			—			—			12,278
Total current liabilities	77,529			14,889			57			3,085			95,560
Long-term debt	27,000			—			—			79,352			106,352
Deferred income taxes, net of current portion	704			—			1,911			2,737			5,352
Other long-term liabilities	13,786			2,289			8,718			(17		)	24,776
Total liabilities	119,019			17,178			10,686			85,157			232,040
Commitments and Contingencies	—			—			—			—			—
Stockholders’ equity:
Preferred stock	—			—			—			—			—
Common stock	635			2,684			—			(2,684		)	635
Additional paid-in capital	272,252			25,174			(1,199		)	(23,975		)	272,252
Accumulated deficit	(203,897		)	(8,956		)	8,723			233			(203,897		)
Accumulated other comprehensive income	16,764			(555		)	(6,894		)	7,449			16,764
Total stockholders’ equity	85,754			18,347			630			(18,977		)	85,754
Total liabilities and stockholders’ equity	$	204,773		$	35,525		$	11,316		$	66,180		$	317,794

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

LIONBRIDGE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2014



				CLS Corporate Language Services Holding AG
(In thousands, except per share amounts)	Lionbridge			Swiss law			U.S. GAAP Adjustments			Pro Forma Adjustments			Pro Forma Combined
Revenue	$	490,612		$	88,982		$	79		$	—		$	579,673
Operating expenses:
Cost of revenue (exclusive of depreciation and amortization)	334,537			57,539			67			—			392,143
Sales and marketing	40,230			4,669			—			—			44,899
General and administrative	80,150			16,642			(281		)	—			96,511
Research and development	6,945			1,884			—			—			8,829
Depreciation and amortization	7,851			1,691			139			(793		)	8,888
Amortization of acquisition-related intangible assets	3,317			5,006			(3,416		)	251			5,158
Restructuring, impairment and other charges	6,624			272			—			(2,016		)	4,880
Total operating expenses	479,654			87,703			(3,491		)	(2,558		)	561,308
Income from operations	10,958			1,279			3,570			2,558			18,365
Interest expense:
Interest on outstanding debt	547			73			—			1,480			2,100
Amortization of deferred financing costs	100			—			—			346			446
Interest income	75			13			—			—			88
Other (income) expense, net	(1,097		)	248			282			—			(567		)
Income from continuing operations before income taxes	11,483			971			3,288			732			16,474
Provision for (benefit from) income taxes	3,376			2,048			(289		)	157			5,292
Net income (loss)	$	8,107		$	(1,077	)	$	3,577		$	575		$	11,182
Net income per share of common stock:
Basic	$	0.13											$	0.19
Diluted	$	0.13											$	0.18
Weighted average number of shares outstanding:
Basic	60,149												60,149
Diluted	63,040												63,040

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS


1.	Basis of Pro Forma Presentation

The unaudited pro forma combined financial statements are based on the historical financial statements of Lionbridge Technologies, Inc. (“Lionbridge” or the "Company") and CLS Corporate Language Services Holding AG ("CLS") after giving effect to the Company's acquisition of CLS and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements. On January 7, 2015, the Company acquired CLS, a global language service provider headquartered in Switzerland. The transaction was effected through the purchase of (a) 100% of the outstanding shares of Tuscany Holding AG, a holding company that held 68.9% of the outstanding shares of CLS Holding and (b) 31.1% of the shares of CLS Corporate Language Services Holding AG held by certain management sellers.

The unaudited pro forma combined balance sheet as of December 31, 2014 is presented as if the acquisition of CLS had occurred on December 31, 2014. The unaudited pro forma combined consolidated statements of operations for the year ended December 31, 2014 give effect to the acquisition of CLS as if it had occurred on January 1, 2014. The assumptions, estimates and adjustments herein have been made solely for purposes of developing this pro forma combined consolidated financial information. The financial statements of CLS have been adjusted to conform to U.S. GAAP and converted to U.S. dollars (“USD”).

The historical financial information has been adjusted in the unaudited pro forma condensed combined consolidated financial statement to give effect to the pro forma events that are directly attributable to the acquisition of CLS by the Company, factually supportable, and with respect to the statement of operations, expected to have a continuing impact on the combined consolidated results. The financial statements of CLS were originally prepared using Swiss franc ("Fr.") as the reporting currency and in accordance with Swiss law financial reporting requirements. The financial statements, the related U.S. GAAP adjustments and the pro forma adjustments presented herein have been translated from Fr. to USD using the average monthly historic exchange rates during the period for the statement of operations and the period-end exchange rate for the balance sheet, and are presented in accordance with U.S. GAAP accounting guidance.

The unaudited pro forma combined consolidated financial information has been prepared to give effect to the acquisition, which will be accounted for under the acquisition method in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).

Under ASC 805, the assets acquired and liabilities assumed are recognized at their estimated fair values as of the date of the acquisition. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed is recognized as goodwill. The unaudited pro forma combined consolidated financial information included herein has been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for purposes of inclusion in the Company’s amended Current Report on Form 8-K/A prepared in connection with the acquisition of CLS. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures provided herein are adequate to make the information presented not misleading. The significant accounting policies used in preparing the unaudited pro forma combined consolidated financial information are set out in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2015.

The pro forma adjustments are based in part on preliminary estimates of fair value of assets acquired and liabilities assumed. Additional analysis with respect to the value of certain acquired assets, contractual arrangements, tax attributes, and assumed liabilities could materially affect the accounting for the business combination presented in the unaudited pro forma combined consolidated financial information. The standalone financial information of the Company has been derived from the audited financial statements of the Company for the year ended December 31, 2014 prepared in accordance with U.S. GAAP. The standalone financial information of CLS has been derived from the audited consolidated financial statements of CLS for the year ended December 31, 2014 prepared in accordance with Swiss law. CLS fiscal year end is December 31.

The audited statement of operations of CLS was derived from the audited accounting records of CLS after making adjustments to convert this financial information to U.S. GAAP and accounting policies consistent with that of the Company. Certain reclassifications and adjustments have been made to CLS’s historical balances in the unaudited pro forma combined consolidated financial statements to conform to the Company’s presentation.

The unaudited pro forma combined consolidated financial information is provided for informational purposes only and does not purport to be indicative of the Company's financial position or results of operations that would actually have been obtained had these transactions been completed as of the date or for the period presented, or of the financial position or results of operations that may be obtained in the future.


2.	Acquisition Details

On January 7, 2015, the Company acquired CLS Holding AG ("CLS"), a global language service provider headquartered in Switzerland. The transaction was effected through the purchase of (a) 100% of the outstanding shares of Tuscany Holding AG, a holding company that held 68.9% of the outstanding shares of CLS Holding and (b) 31.1% of the shares of CLS Corporate Language Services Holding AG held by certain management sellers. The Company made a cash payment of approximately Fr.71.8 million, or approximately $71.4 million (at January 7, 2015 exchange rate). Due to the timing of this acquisition, certain disclosures, including the preliminary allocation of the purchase price, have been omitted from this amended Current Report on Form 8-K/A because the initial accounting for the business combination was incomplete as of the filing date. The Company expects the preliminary allocation of the purchase price and other disclosures to be included in the Company's Quarterly Report on Form 10-Q for the first quarter of 2015.


3.	U.S. GAAP Adjustments to CLS's Historical Financial Statements

The tables below set forth the U.S. GAAP adjustments to CLS’s historical financial statements:



	Recognition of post-retirement benefit liability			Acquisition accounting			Allowance for doubtful accounts		Revenue and cost recognition			Recognition and depreciation of IT and communications equipment		Treasury shares			Capitalized costs for raising additional capital			Uncertain tax positions			Lease expense			Accrual for Jubilee awards			Tax impact			Total adjustments
(In thousands)	(a)			(b)			(c)		(d)			(e)		(f)			(g)			(h)			(i)			(j)			(k)
Balance Sheet:
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Accounts receivable	—			—			212		—			—		—			—			—			—			—			—			212
Unbilled receivables	—			—			—		(251		)	—		—			—			—			—			—			—			(251		)
Other current assets	—			—			—		84			—		—			—			—			—			—			—			84
Total current assets	—			—			212		(167		)	—		—			—			—			—			—			—			45
Property and equipment, net	—			(66		)	—		—			126		—			—			—			—			—			—			60
Goodwill	—			4,771			—		—			—		—			—			—			—			—			—			4,771
Acquisition-related intangible assets, net	—			7,070			—		—			—		—			—			—			—			—			—			7,070
Other assets	—			—			—		—			—		(630		)	—			—			—			—			—			(630		)
Total assets	$	—		$	11,775		$	212	$	(167	)	$	126	$	(630	)	$	—		$	—		$	—		$	—		$	—		$	11,316
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term notes payable	$	—		$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Accounts payable	—			—			—		—			—		—			—			—			—			—			—			—
Accrued compensation and benefits	—			—			—		—			—		—			—			—			—			—			—			—
Accrued outsourcing	—			—			—		—			—		—			—			—			—			—			—			—
Accrued restructuring	—			—			—		—			—		—			—			—			—			—			—			—
Accrued expenses and other current liabilities	—			—			—		—			—		—			—			—			46			—			—			46
Income taxes payable	—			—			—		—			—		—			—			—			—			—			11			11
Deferred revenue	—			—			—		—			—		—			—			—			—			—			—			—
Total current liabilities	—			—			—		—			—		—			—			—			46			—			11			57
Long-term debt	—			—			—		—			—		—			—			—			—			—			—			—
Deferred income taxes, net of current portion	—			1,911			—		—			—		—			—			—			—			—			—			1,911
Other long-term liabilities	8,395			17			—		—			—		—			—			161			—			145			—			8,718
Total liabilities	8,395			1,928			—		—			—		—			—			161			46			145			11			10,686
Stockholders’ equity:
Preferred stock	—			—			—		—			—		—			—			—			—			—			—			—
Common stock	—			—			—		—			—		—			—			—			—			—			—			—
Additional paid-in capital	—			(569		)	—		—			—		(630		)	—			—			—			—			—			(1,199		)
Accumulated deficit	(8,384		)	17,191			212		(164		)	121		—			5			(56		)	(46		)	(145		)	(11		)	8,723
Accumulated other comprehensive income	(11		)	(6,775		)	—		(3		)	5		—			(5		)	(105		)	—			—			—			(6,894		)
Total stockholders’ equity	(8,395		)	9,847			212		(167		)	126		(630		)	—			(161		)	(46		)	(145		)	(11		)	630
Total liabilities and stockholders’ equity	$	—		$	11,775		$	212	$	(167	)	$	126	$	(630	)	$	—		$	—		$	—		$	—		$	—		$	11,316



	Recognition of post-retirement benefit liability			Acquisition accounting			Allowance for doubtful accounts			Revenue and cost recognition		Recognition and depreciation of IT and communications equipment			Treasury shares		Capitalized costs for raising additional capital			Uncertain tax positions		Lease expense			Accrual for Jubilee awards			Tax impact			Total adjustments
(In thousands)	(a)			(b)			(c)			(d)		(e)			(f)		(g)			(h)		(i)			(j)			(k)
Statement of Operations:
Revenue	$	—		$	—		$	(10	)	$	89	$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	79
Operating expenses:
Cost of revenue (exclusive of depreciation and amortization)	—			—			—			40		—			—		—			—		—			27			—			67
Sales and marketing	—			—			—			—		—			—		—			—		—			—			—			—
General and administrative	(197		)	—			—			—		(72		)	—		—			—		(12		)	—			—			(281		)
Research and development	—			—			—			—		—			—		—			—		—			—			—			—
Depreciation and amortization	—			—			—			—		139			—		—			—		—			—			—			139
Amortization of acquisition-related intangible assets	—			(3,326		)	—			—		—			—		(90		)	—		—			—			—			(3,416		)
Restructuring, impairment and other charges	—			—			—			—		—			—		—			—		—			—			—			—
Total operating expenses	(197		)	(3,326		)	—			40		67			—		(90		)	—		(12		)	27			—			(3,491		)
Income from operations	197			3,326			(10		)	49		(67		)	—		90			—		12			(27		)	—			3,570
Interest expense:
Interest on outstanding debt	—			—			—			—		—			—		—			—		—			—			—			—
Amortization of deferred financing costs	—			—			—			—		—			—		—			—		—			—			—			—
Interest income	—			—			—			—		—			—		—			—		—			—			—			—
Other (income) expense, net	—			282			—			—		—			—		—			—		—			—			—			282
Income from continuing operations before income taxes	197			3,044			(10		)	49		(67		)	—		90			—		12			(27		)	—			3,288
Benefit from income taxes	—			—			—			—		—			—		—			—		—			—			(289		)	(289		)
Net income	$	197		$	3,044		$	(10	)	$	49	$	(67	)	$	—	$	90		$	—	$	12		$	(27	)	$	289		$	3,577

(a) Recognition of post-retirement benefit liability

Under Swiss law, CLS accounted for pension plan for Swiss employees, which is administered by an independent pension fund, similar to a defined contribution plan. Because participants of the plan are entitled to a defined rate of interest on contributions made, the plan meets the criteria for a defined benefit plan under U.S. GAAP. At December 31, 2014 CLS had an underfunded obligation of $8.4 million.

(b) Acquisition accounting

In 2009, CLS Communication AG acquired 100% of Lexi-tech International (“Lexi-tech”), an entity incorporated in Canada. In 2009, CLS Communication AG acquired 100% of Scandinavian Translators A/S (“DK”), an entity incorporated in Denmark. In 2013, CLS Communication AG acquired 100% of 4-Text GmbH (“4-Text”), an entity incorporated in Germany. For each of these acquisitions, CLS originally recorded the assets acquired and liabilities assumed in its Swiss law consolidated financial statements based on the carrying value of the assets and liabilities from the respective closing local GAAP financial statements, and the entire difference between the net assets acquired and the purchase price was recorded as goodwill, which was amortized over five years for accounting purposes. The adjustments reflect the application of U.S. GAAP business combination accounting rules, resulting in:


i)	The reversal of historical goodwill balances and related goodwill amortization recognized under Swiss law, as goodwill is considered an indefinite-lived asset under U.S. GAAP; and


ii)	the recognition of goodwill and certain identifiable intangible assets, net of accumulated amortization since the respective acquisition dates, under U.S. GAAP.

The table below sets forth these U.S. GAAP adjustments:



(In thousands)	CLS acquisition of Lexi-Tech			CLS acquisition of 4-Text			CLS acquisition of DK			Total
Goodwill:
De-recognition of historical goodwill balances recognized under Swiss law	$	—		$	(9,048	)	$	—		$	(9,048	)
Recognition of goodwill under U.S. GAAP	5,207			7,694			918			13,819
Total adjustment	$	5,207		$	(1,354	)	$	918		$	4,771

Intangible assets:
De-recognition of historical intangible asset balances recognized under Swiss law	$	—		$	—		$	—		$	—
Recognition of intangible assets under U.S. GAAP	3,336			3,734			—			7,070
Total adjustment	$	3,336		$	3,734		$	—		$	7,070

Amortization expense:
Reversal of historical amortization of goodwill recorded under Swiss law	$	(2,182	)	$	(2,224	)	$	(510	)	$	(4,916	)
Intangible asset amortization expense under U.S. GAAP	516			746			328			1,590
Total adjustment	$	(1,666	)	$	(1,478	)	$	(182	)	$	(3,326	)

Additionally, a portion of the purchase price of 4-Text was contingent upon the achievement of certain financial metrics during the earnout period. Under U.S. GAAP, the contingent consideration is required to be fair valued as of the acquisition date, with any subsequent changes to the fair value being recorded through current period earnings. The application of this method under U.S. GAAP resulted in accretion of the contingent consideration of $282,000 during 2014.

Swiss tax rules allow the recognition of general allowances for bad debt up to certain thresholds, without evidence or past history of impairment. This policy has been adopted in the CLS’s Swiss law consolidated financial statements for receivables of the Swiss entities but is not allowed under U.S. GAAP, therefore the historical allowance has been reversed.

(d) Revenue and cost recognition

Based on the nature of the services being delivered and the contracts with its customers, CLS applies a completed contract revenue recognition model under U.S. GAAP. The work in progress balance in the CLS’s Swiss law consolidated financial statements represents the direct and certain indirect overhead costs associated with certain unfinished projects, for which revenue is recognized on the basis of the completed contract method. Under U.S. GAAP, CLS defers only direct cost with regard to such projects, resulting in a decrease of $95,000 to its assets. Additionally, certain jurisdictions apply a proportional-performance model for revenue recognition, which have been adjusted to completed contract for U.S. GAAP presentation, resulting in a $179,000 increase to assets to record deferred costs for projects that had not been completed as of December 31, 2014 and a $251,000 decrease to assets to remove the unbilled revenue associated with these projects that had originally been recorded under the proportional-performance revenue recognition model.

(e) Recognition and depreciation of IT and communications equipment

For the purpose of preparing Swiss law consolidated financial statements, purchases of items of equipment are generally expensed as incurred if the purchase price for an individual item does not exceed a specific threshold. This threshold varies among CLS’s subsidiaries and is usually based on local tax rules. Under U.S. GAAP, CLS applies a lower capitalization threshold that is consistent across all subsidiaries, resulting in a cumulative increase to Property and equipment as of December 31, 2014 of $126,000. For the year ended December 31, 2014, application of the U.S. GAAP thresholds resulted in additional depreciation expense of $139,000 and a decrease to general and administrative of expenses of $72,000 for equipment capitalized under the lower threshold.

(f) Treasury shares

CLS held treasury shares which it has purchased back from shareholders in the past. In Swiss law consolidated financial statements, treasury shares are recorded at cost and presented as non-current investment. Under U.S. GAAP, purchases of treasury shares are recorded as reductions of shareholders’ equity.

(g) Capitalized costs for raising additional capital

CLS has historically capitalized and amortized certain start-up costs in its Swiss law consolidated financial statements. Under U.S. GAAP, start-up costs are expensed as incurred.

(h) Uncertain tax positions

CLS evaluated whether it had any uncertain tax positions in accordance with ASC 740-10 under U.S. GAAP and determined that as of January 1, 2014 there existed approximately $1.5 million of uncertain tax positions relating to various jurisdictions. During 2014, certain of these liabilities were deemed no longer likely to occur as a result of the sale of one of its subsidiaries, resulting in the recognition of income from discontinued operations of approximately $1.4 million. In order to show pro forma income from continuing operations this income from discontinued operations was excluded from U.S. GAAP adjustments. Income from discontinued operations from the sale of the subsidiary that was not a result of this uncertain tax position was not material. The remaining uncertain tax positions are related to jurisdictions that are part of continuing operations of CLS and are deemed more likely than not to occur.

(i) Lease expense

Some of the CLS’s office leases include periods of free rent or step-rent provisions. Lease expense for some of these leases is recognized at an amount equal to the amount of actual lease payments in the Swiss law consolidated financial statements. U.S. GAAP requires that lease expense be recognized on a straight-line basis over the lease term for these leases.

(j) Accrual for Jubilee awards

CLS is obliged to provide Jubilee (or anniversary) awards to certain employees after completion of specified service periods. Measurement of the liability is based on an estimate of jubilee awards that will occur in the respective following calendar year in the Swiss law consolidated financial statements. Under U.S. GAAP, such programs are accounted for in a way similar to the accounting for defined benefit post-retirement benefits, which includes determination of the portion of an award that an employee has already earned as of the balance sheet date based on past service.

(k) Tax impact

To record the estimated current and deferred tax impact of the adjustments using estimated local statutory rates.


4.	Pro Forma Adjustments

The tables below set forth the pro forma adjustments to the combined financial statements:



	Preliminary acquisition accounting			Reversal of CLS historical acquisition accounting			Debt accounting		Deferred financing costs			Amortization expense		Interest expense		Capitalized software		Acquisition-related expenses		Tax impact		Elimination of CLS opening equity balances			Total adjustments
(In thousands)	(1)			(2)			(3)		(4)			(5)		(6)		(7)		(8)		(9)		(10)
Balance Sheet:
ASSETS
Current assets:
Cash and cash equivalents	$	(72,731	)	$	—		$	79,352	$	(1,731	)	$	—	$	—	$	—	$	—	$	—	$	—		$	4,890
Accounts receivable	—			—			—		—			—		—		—		—		—		—			—
Unbilled receivables	—			—			—		—			—		—		—		—		—		—			—
Other current assets	—			—			—		346			—		—		—		—		—		—			346
Total current assets	(72,731		)	—			79,352		(1,385		)	—		—		—		—		—		—			5,236
Property and equipment, net	(1,593		)	66			—		—			—		—		—		—		—		—			(1,527		)
Goodwill	44,795			(13,819		)	—		—			—		—		—		—		—		—			30,976
Acquisition-related intangible assets, net	37,180			(7,070		)	—		—			—		—		—		—		—		—			30,110
Other assets	—			—			—		1,385			—		—		—		—		—		—			1,385
Total assets	$	7,651		$	(20,823	)	$	79,352	$	—		$	—	$	—	$	—	$	—	$	—	$	—		$	66,180
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term notes payable	$	3,085		$	—		$	—	$	—		$	—	$	—	$	—	$	—	$	—	$	—		$	3,085
Accounts payable	—			—			—		—			—		—		—		—		—		—			—
Accrued compensation and benefits	—			—			—		—			—		—		—		—		—		—			—
Accrued outsourcing	—			—			—		—			—		—		—		—		—		—			—
Accrued restructuring	—			—			—		—			—		—		—		—		—		—			—
Accrued expenses and other current liabilities	—			—			—		—			—		—		—		—		—		—			—
Income taxes payable	—			—			—		—			—		—		—		—		—		—			—
Deferred revenue	—			—			—		—			—		—		—		—		—		—			—
Total current liabilities	3,085			—			—		—			—		—		—		—		—		—			3,085
Long-term debt	—			—			79,352		—			—		—		—		—		—		—			79,352
Deferred income taxes, net of current portion	4,648			(1,911		)	—		—			—		—		—		—		—		—			2,737
Other long-term liabilities	—			(17		)	—		—			—		—		—		—		—		—			(17		)
Total liabilities	7,733			(1,928		)	79,352		—			—		—		—		—		—		—			85,157
Stockholders’ equity:
Preferred stock	—			—			—		—			—		—		—		—		—		—			—
Common stock	—			—			—		—			—		—		—		—		—		(2,684		)	(2,684		)
Additional paid-in capital	1,511			569			—		—			—		—		—		—		—		(26,055		)	(23,975		)
Accumulated deficit	(1,593		)	(26,239		)	—		—			—		—		—		—		—		28,065			233
Accumulated other comprehensive income	—			6,775			—		—			—		—		—		—		—		674			7,449
Total stockholders’ equity	(82		)	(18,895		)	—		—			—		—		—		—		—		—			(18,977		)
Total liabilities and stockholders’ equity	$	7,651		$	(20,823	)	$	79,352	$	—		$	—	$	—	$	—	$	—	$	—	$	—		$	66,180



	Preliminary acquisition accounting		Reversal of CLS historical acquisition accounting		Debt accounting		Deferred financing costs			Amortization expense			Interest expense			Capitalized software			Acquisition-related expenses			Tax impact			Elimination of CLS opening equity balances		Total adjustments
(In thousands)	(1)		(2)		(3)		(4)			(5)			(6)			(7)			(8)			(9)			(10)
Statement of Operations:
Revenue	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—
Operating expenses:																											—
Cost of revenue (exclusive of depreciation and amortization)	—		—		—		—			—			—			—			—			—			—		—
Sales and marketing	—		—		—		—			—			—			—			—			—			—		—
General and administrative	—		—		—		—			—			—			—			—			—			—		—
Research and development	—		—		—		—			—			—			—			—			—			—		—
Depreciation and amortization	—		—		—		—			—			—			(793		)	—			—			—		(793		)
Amortization of acquisition-related intangible assets	—		—		—		—			251			—			—			—			—			—		251
Restructuring, impairment and other charges	—		—		—		—			—			—			—			(2,016		)	—			—		(2,016		)
Total operating expenses	—		—		—		—			251			—			(793		)	(2,016		)	—			—		(2,558		)
Income from operations	—		—		—		—			(251		)	—			793			2,016			—			—		2,558
Interest expense:
Interest on outstanding debt	—		—		—		—			—			1,480			—			—			—			—		1,480
Amortization of deferred financing costs	—		—		—		346			—			—			—			—			—			—		346
Interest income	—		—		—		—			—			—			—			—			—			—		—
Other (income) expense, net	—		—		—		—			—			—			—			—			—			—		—
Income from continuing operations before income taxes	—		—		—		(346		)	(251		)	(1,480		)	793			2,016			—			—		732
Provision for income taxes	—		—		—		—			—			—			—			—			157			—		157
Net income from continuing operations	$	—	$	—	$	—	$	(346	)	$	(251	)	$	(1,480	)	$	793		$	2,016		$	(157	)	$	—	$	575

(1)Preliminary acquisition accounting

To record the preliminary acquisition accounting for CLS, including estimated deferred tax liabilities associated with intangible assets, as if it the acquisition had occurred on December 31, 2014. These estimates also take into account prevailing exchange rates as of December 31, 2014, therefore the pro forma amount paid differs slightly from the actual cash paid on January 7, 2015.

(2)Reversal of historical CLS acquisition accounting

To reverse CLS’s historical goodwill and intangible asset balances recorded under U.S. GAAP for Lexi-Tech, 4-Text and CLS DK as these balances are replaced with Lionbridge’s valuation of CLS.

(3)Debt accounting

To record Lionbridge’s borrowing of funds which were utilized to acquire CLS. Lionbridge borrowed approximately $79.4 million, of which $72.7 million was used to purchase CLS and $6.7 million was used to pay off acquired debt balances from CLS which did not occur at closing. These estimates also take into account prevailing exchange rates as of December 31, 2014, therefore the pro forma amount borrowed differs slightly from the actual borrowings in January 2015.

(4)Deferred financing costs

To record deferred financing costs associated with Lionbridge’s debt borrowings. For pro forma balance sheet presentation, if the acquisition had occurred as of December 31, 2014, Lionbridge would have recorded $1.7 million of deferred financing costs on its balance sheet, to be amortized over the term of the debt agreement. For purposes of the pro forma statement of operations, Lionbridge would have recorded $346,000 of amortization expense during 2014 if the acquisition occurred on January 1, 2014.

(5)Amortization expense

To record amortization expense associated with Lionbridge’s preliminary acquisition accounting of CLS as if the acquisition had occurred on January 1, 2014, offset by the reversal of amortization from CLS’s historical acquisitions of Lexi-Tech, 4-Text and CLS DK, as shown in the table below:



(In thousands)	CLS acquisition of Lexi-Tech			CLS acquisition of 4-Text			CLS acquisition of DK			Lionbridge acquisition of CLS		Total
To eliminate historical U.S. GAAP amortization associated with Lexi-Tech, 4-Text and CLS DK acquisitions	$	(516	)	$	(746	)	$	(328	)	$	—	$	(1,590	)
To record amortization expense associated with Lionbridge acquisition of CLS	—			—			—			1,841		1,841
Total adjustment	$	(516	)	$	(746	)	$	(328	)	$	1,841	$	251

(6)Interest expense

To record estimated interest expense related to Lionbridge’s debt borrowings as if the debt had been outstanding since January 1, 2014, offset by interest expense relief related to CLS’s historical debt which would have been paid off in January 2014 if the acquisition had occurred on January 1, 2014, as shown in the table below:



(In thousands)
To record interest expense on Lionbridge's outstanding debt	$	1,533
To reverse interest expense incurred by CLS	(53		)
Total adjustment	$	1,480

(7)Capitalized software

To reverse amortization expense related to CLS historical capitalized internal-use software. If the acquisition had occurred on January 1, 2014, the intangible assets would have included an estimated fair value of CLS’s software-related assets. As such, the net book value of internal-use software as of January 1, 2014 would have been replaced with this fair value and CLS would not have incurred amortization expense during 2014 related to its legacy book value of these assets.

(8)Acquisition-related expenses

If the acquisition had occurred on January 1, 2014, certain costs incurred by Lionbridge and CLS during 2014 would have theoretically been incurred during 2013. Therefore, the pro forma results of operations exclude these costs from the 2014 statement of operations.

(9)Tax impact

To record the estimated current and deferred tax impact of the adjustments using estimated local statutory rates.

(10)Elimination of CLS opening equity balances

To eliminate CLS’s historical equity balances.

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