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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2011

OR



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

For the transition period from             to

Commission File Number 000-26933





LIONBRIDGE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)







|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 04-3398462                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

1050 Winter Street, Waltham, MA 02451

(Address of Principal Executive
Offices)

Registrants Telephone Number, Including Area Code: 781-434-6000





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act)    Yes   ̈    No  x

The number of shares outstanding of the registrants common stock, par value $0.01 per share, as of April 30, 2011 was
61,594,289.









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LIONBRIDGE TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

TABLE OF CONTENTS



|                              |  |                                                                                                                |    |      |    | 
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                              |  |                                                                                                                |    | Page |   
|PART I: FINANCIAL INFORMATION |  |                                                                                                                |    |     
|                              |  |                                                                                                               
|ITEM 1                        |  | Condensed Consolidated Financial Statements:                                                                   |    |      | 3  | 
|                              |  |                                                                                                               
|                              |  | Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2011 and December 31, 2010                   |    |      | 3  | 
|                              |  |                                                                                                               
|                              |  | Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2011 and 2010 |    |      | 4  | 
|                              |  |                                                                                                               
|                              |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2011 and 2010 |    |      | 5  | 
|                              |  |                                                                                                               
|                              |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                               |    |      | 6  | 
|                              |  |                                                                                                               
|ITEM 2                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                          |    |      | 14 | 
|                              |  |                                                                                                               
|ITEM 3                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                     |    |      | 25 | 
|                              |  |                                                                                                               
|ITEM 4                        |  | Controls and Procedures                                                                                        |    |      | 25 | 
|                              | 
|PART II: OTHER INFORMATION    |  |                                                                                                                |    |     
|                              |  |                                                                                                               
|ITEM 1                        |  | Legal Proceedings                                                                                              |    |      | 26 | 
|                              |  |                                                                                                               
|ITEM 1A                       |  | Risk Factors                                                                                                   |    |      | 27 | 
|                              |  |                                                                                                               
|ITEM 2                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                    |    |      | 27 | 
|                              |  |                                                                                                               
|ITEM 6                        |  | Exhibits                                                                                                       |    |      | 28 | 
|                              | 
|SIGNATURE                     |  |                                                                                                                | 29 |     



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PART I. FINANCIAL INFORMATION



|Item 1. | Consolidated Financial Statements
|------- | ---------------------------------

LIONBRIDGE TECHNOLOGIES, INC.

CONDENSED
CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)



|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                            |  | March 31,2011 |          |   | December 31,2010 |  
|                                                                                                                                                                            |  | (unaudited)   |          |   |                  |  
|ASSETS                                                                                                                                                                      |  |               |          |   |                  |  
|Current assets:                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                                   |  | $             | 25,346   |   |                  | $ | 28,206   |  
|Accounts receivable, net of allowance of $500 at March 31, 2011 and December 31, 2010                                                                                       |  |               | 53,926   |   |                  |   | 57,763   |  
|Unbilled receivables                                                                                                                                                        |  |               | 21,077   |   |                  |   | 17,471   |  
|Other current assets                                                                                                                                                        |  |               | 11,468   |   |                  |   | 9,585    |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total current assets                                                                                                                                                        |  |               | 111,817  |   |                  |   | 113,025  |  
|Property and equipment, net                                                                                                                                                 |  |               | 17,827   |   |                  |   | 16,394   |  
|Goodwill                                                                                                                                                                    |  |               | 9,675    |   |                  |   | 9,675    |  
|Other intangible assets, net                                                                                                                                                |  |               | 9,005    |   |                  |   | 9,588    |  
|Other assets                                                                                                                                                                |  |               | 8,321    |   |                  |   | 8,294    |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total assets                                                                                                                                                                |  | $             | 156,645  |   |                  | $ | 156,976  |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|                                                                                                                                                                            |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                        |  |               |          |   |                  |  
|Current liabilities:                                                                                                                                                        |  |               |          |   |                  |   |          |  
|Accounts payable                                                                                                                                                            |  | $             | 21,796   |   |                  | $ | 18,185   |  
|Accrued compensation and benefits                                                                                                                                           |  |               | 17,968   |   |                  |   | 17,080   |  
|Accrued outsourcing                                                                                                                                                         |  |               | 10,953   |   |                  |   | 9,506    |  
|Accrued restructuring                                                                                                                                                       |  |               | 3,937    |   |                  |   | 5,036    |  
|Income taxes payable                                                                                                                                                        |  |               | 1,270    |   |                  |   | 763      |  
|Accrued expenses and other current liabilities                                                                                                                              |  |               | 8,755    |   |                  |   | 10,587   |  
|Deferred revenue                                                                                                                                                            |  |               | 11,100   |   |                  |   | 11,073   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                                   |  |               | 75,779   |   |                  |   | 72,230   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Long-term debt                                                                                                                                                              |  |               | 24,700   |   |                  |   | 24,700   |  
|Deferred income taxes, long-term                                                                                                                                            |  |               | 730      |   |                  |   | 730      |  
|Other long-term liabilities                                                                                                                                                 |  |               | 14,391   |   |                  |   | 14,142   |  
|Contingencies (Note 11)                                                                                                                                                     |  |               |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding                                                                             |  |               |         |   |                  |   |         |  
|Common stock, $0.01 par value; 100,000,000 shares authorized; 61,591,977 and 60,084,269 shares issued and outstanding at
March 31, 2011 and December 31, 2010, respectively |  |               | 616      |   |                  |   | 601      |  
|Additional paid-in capital                                                                                                                                                  |  |               | 263,721  |   |                  |   | 262,540  |  
|Accumulated deficit                                                                                                                                                         |  |               | (242,150 | ) |                  |   | (236,704 | )
|Accumulated other comprehensive income                                                                                                                                      |  |               | 18,858   |   |                  |   | 18,737   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                  |  |               | 41,045   |   |                  |   | 45,174   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                  |  | $             | 156,645  |   |                  | $ | 156,976  |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



3



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LIONBRIDGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands, except per share data)



|                                                                            |  |                             |         |   |      |   |         | 
|--------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | 
|                                                                            |  | Three Months EndedMarch 31, |        
|                                                                            |  | 2011                        |         |   | 2010 |  
|Revenue                                                                     |  | $                           | 99,652  |   |      | $ | 100,780 | 
|Operating expenses:                                                         |  |                             |         |   |      |   |         | 
|Cost of revenue (exclusive of depreciation and amortization included below) |  |                             | 71,736  |   |      |   | 68,945  | 
|Sales and marketing                                                         |  |                             | 8,278   |   |      |   | 6,968   | 
|General and administrative                                                  |  |                             | 18,625  |   |      |   | 18,792  | 
|Research and development                                                    |  |                             | 1,396   |   |      |   | 758     | 
|Depreciation and amortization                                               |  |                             | 1,291   |   |      |   | 1,130   | 
|Amortization of acquisition-related intangible assets                       |  |                             | 583     |   |      |   | 1,223   | 
|Restructuring charges                                                       |  |                             | 2,103   |   |      |   | 1,189   | 
|                                                                            |  |                             |         |   |      |   |         | 
|Total operating expenses                                                    |  |                             | 104,012 |   |      |   | 99,005  | 
|                                                                            |  |                             |         |   |      |   |         | 
|Income (loss) from operations                                               |  |                             | (4,360  | ) |      |   | 1,775   | 
|Interest expense:                                                           |  |                             |         |   |      |   |         | 
|Interest on outstanding debt                                                |  |                             | 149     |   |      |   | 297     | 
|Amortization of deferred financing costs                                    |  |                             | 25      |   |      |   | 44      | 
|Interest income                                                             |  |                             | 17      |   |      |   | 25      | 
|Other expense, net                                                          |  |                             | 458     |   |      |   | 274     | 
|                                                                            |  |                             |         |   |      |   |         | 
|Income (loss) before income taxes                                           |  |                             | (4,975  | ) |      |   | 1,185   | 
|Provision for income taxes                                                  |  |                             | 471     |   |      |   | 708     | 
|                                                                            |  |                             |         |   |      |   |         | 
|Net income (loss)                                                           |  | $                           | (5,446  | ) |      | $ | 477     | 
|                                                                            |  |                             |         |   |      |   |         | 
|Net income (loss) per share of common stock:                                |  |                             |         |   |      |   |         | 
|Basic                                                                       |  | $                           | (0.09   | ) |      | $ | 0.01    | 
|Diluted                                                                     |  | $                           | (0.09   | ) |      | $ | 0.01    | 
|Weighted average number of common shares outstanding:                       |  |                             |         |   |      |   |         | 
|Basic                                                                       |  |                             | 57,523  |   |      |   | 56,367  | 
|Diluted                                                                     |  |                             | 57,523  |   |      |   | 58,221  | 

The accompanying notes
are an integral part of the condensed consolidated financial statements.



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LIONBRIDGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)



|                                                                                                   |  |                             |        |   |      |   |        |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                   |  | Three Months EndedMarch 31, |       
|                                                                                                   |  | 2011                        |        |   | 2010 |  
|Cash flows from operating activities:                                                              |  |                             |        |   |      |   |        |  
|Net income (loss)                                                                                  |  | $                           | (5,446 | ) |      | $ | 477    |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                             |        |   |      |   |        |  
|Stock-based compensation                                                                           |  |                             | 1,091  |   |      |   | 895    |  
|Amortization of deferred financing charges                                                         |  |                             | 25     |   |      |   | 44     |  
|Depreciation and amortization                                                                      |  |                             | 1,291  |   |      |   | 1,130  |  
|Amortization of acquisition-related intangible assets                                              |  |                             | 583    |   |      |   | 1,223  |  
|Deferred income taxes                                                                              |  |                             | 23     |   |      |   | 55     |  
|Net realized foreign currency loss on forward contracts                                            |  |                             | 635    |   |      |   |       |  
|Other                                                                                              |  |                             | (22    | ) |      |   | 3      |  
|Changes in operating assets and liabilities:                                                       |  |                             |        |   |      |   |        |  
|Accounts receivable                                                                                |  |                             | 5,607  |   |      |   | 4,291  |  
|Unbilled receivables                                                                               |  |                             | (3,233 | ) |      |   | (6,988 | )
|Other current assets                                                                               |  |                             | (1,906 | ) |      |   | (3,499 | )
|Other assets                                                                                       |  |                             | (23    | ) |      |   | (815   | )
|Accounts payable                                                                                   |  |                             | 1,914  |   |      |   | 1,677  |  
|Income tax payable                                                                                 |  |                             | 512    |   |      |   | (743   | )
|Accrued compensation and benefits                                                                  |  |                             | (294   | ) |      |   | 1,082  |  
|Accrued outsourcing                                                                                |  |                             | 1,171  |   |      |   | 613    |  
|Accrued restructuring                                                                              |  |                             | (1,229 | ) |      |   | 377    |  
|Accrued expenses and other liabilities                                                             |  |                             | (1,303 | ) |      |   | 1,339  |  
|Deferred revenue                                                                                   |  |                             | (343   | ) |      |   | (604   | )
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net cash provided by (used in) operating activities                                                |  |                             | (947   | ) |      |   | 557    |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash flows from investing activities:                                                              |  |                             |        |   |      |   |        |  
|Purchases of property and equipment                                                                |  |                             | (2,945 | ) |      |   | (4,160 | )
|Payments of forward contracts                                                                      |  |                             | (635   | ) |      |   |       |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net cash used in investing activities                                                              |  |                             | (3,580 | ) |      |   | (4,160 | )
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash flows from financing activities:                                                              |  |                             |        |   |      |   |        |  
|Proceeds from issuance of short-term debt                                                          |  |                             | 3,000  |   |      |   |       |  
|Payments of short-term debt                                                                        |  |                             | (3,000 | ) |      |   |       |  
|Proceeds from issuance of common stock under stock option plans                                    |  |                             | 78     |   |      |   | 17     |  
|Payments of capital lease obligations                                                              |  |                             | (3     | ) |      |   | (2     | )
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net cash provided by financing activities                                                          |  |                             | 75     |   |      |   | 15     |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Net decrease in cash and cash equivalents                                                          |  |                             | (4,452 | ) |      |   | (3,588 | )
|Effects of exchange rate changes on cash and cash equivalents                                      |  |                             | 1,592  |   |      |   | (766   | )
|Cash and cash equivalents at beginning of period                                                   |  |                             | 28,206 |   |      |   | 27,432 |  
|                                                                                                   |  |                             |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                         |  | $                           | 25,346 |   |      | $ | 23,078 |  
|                                                                                                   |  |                             |        |   |      |   |        |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS
OF PRESENTATION

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 consolidated financial statements include all adjustments, all of a normal nature,
necessary for their fair presentation. Interim results are not necessarily indicative of results expected for a full year. The accompanying unaudited 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. The
year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the U.S. These statements should be read in conjunction
with the Companys Annual Report on Form 10-K for the year ended December 31, 2010.

The Companys preparation
of financial statements in conformity with generally accepted accounting principles 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 when accounting for collectibility 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.

Out of Period Adjustment

During the three-month interim period ended March 31, 2011, the Company identified two out of period immaterial errors related to revenue recognition in the fourth quarter of 2010 and certain gross
receipts taxes for the period of 2007 through 2010. The Company corrected these errors during the three-month interim period ended March 31, 2011, which had the effect of reducing net income by $320,000, comprised of a $108,000 reduction
in revenue, a $30,000 increase in cost of revenue and a $182,000 increase in general and administrative expenses. The Company has evaluated these errors and does not believe the amounts are material to any periods impacted.

Reclassification

Certain prior period cash flow amounts have been reclassified to conform to current year presentation.

2. STOCKHOLDERS EQUITY AND STOCK-BASED COMPENSATION

Stock
Option Plans

The Company has stock-based compensation plans for salaried employees and non-employee members of the
Board of Directors. The plans provide for discretionary grants of stock options, restricted stock and stock units, and other stock-based awards. The plans are administered by the Nominating and Compensation Committee of the Board of Directors, which
consists of non-employee directors.

In November 2005, the stockholders of Lionbridge Technologies, Inc. approved the
Lionbridge 2005 Stock Incentive Plan (the 2005 Plan), which had been previously adopted by the Lionbridge Board of Directors on October 7, 2005, for officers, employees, non-employee directors and other key persons of Lionbridge and
its subsidiaries. On May 1, 2009, the stockholders of the Company approved an amendment to the 2005 Plan increasing the maximum number of shares of common stock available for issuance under the 2005 Plan by 4,500,000 shares to 8,500,000 shares.
At March 31, 2011, there were 401,022 options available for future grant under the 2005 Plan. Options to purchase common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally,
stock options vest over a four-year period: 25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally expire five to seven years
from the date of grant under the 2005 Plan. Under the terms of the 2005 Plan, the exercise price of incentive and non-qualified stock option grants must not be less than 100% of the fair market value of the common stock on the date of grant. Options
are amortized using a straight-line basis over the option vesting period.

Shortly after the end of the first quarter, on
May 3, 2011, the stockholders of Lionbridge Technologies, Inc. approved the Lionbridge 2011 Stock Incentive Plan (the 2011 Plan), which had been previously adopted by the Lionbridge Board of Directors on January 27, 2011. The
2011 Plan provides for the issuance of 4,500,000 shares of common stock to officers, employees, non-employee directors and other key persons of Lionbridge and its subsidiaries in the form of stock options, shares of restricted stock, restricted
stock units and other forms of equity. No further grants of equity under the 2005 Plan will be made. Options to purchase common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally,
stock options vest over a four-year period: 25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally expire five to seven years
from the date of grant under the 2011 Plan. Under the terms of the 2011 Plan, the exercise price of incentive and non-qualified stock option grants must not be less than 100% of the fair market value of the common stock on the date of grant. Options
are amortized using a straight-line basis over the option vesting period.



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Lionbridges 1998 Stock Plan (the 1998 Plan) provides for the issuance of
incentive and nonqualified stock options. The maximum number of shares of common stock available for issuance under the Plan is 11,722,032 shares and the 1998 Plan expired on January 26, 2008. At March 31, 2011 there were no options
available for future grant under the 1998 Plan. Options to purchase common stock under the 1998 Plan had been granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally, stock options granted under
the 1998 Plan vested over a four-year period: 25% of the option shares vested one year from the date of grant and the remaining option shares vested at the rate of 12.5% each six month period thereafter. Stock options granted under the 1998 Plan
generally expire ten years (five years in certain cases) from the date of grant. Under the terms of the 1998 Plan, the exercise price of incentive stock options granted must not be less than 100% (110% in certain cases) of the fair market value of
the common stock on the date of grant, as determined by the Board of Directors. The exercise price of nonqualified stock options may be less than the fair market value of the common stock on the date of grant, as determined by the Board of
Directors, but in no case may the exercise price be less than the statutory minimum, the par value per share of Lionbridges common stock.

Restricted Stock Awards

Lionbridge issued 1,576,500 and 83,000
shares of restricted common stock and restricted stock units, respectively, under the Companys 2005 Stock Incentive Plan, during the three-month period ended March 31, 2011 with a fair market value of $6.5 million. Of the total 1,659,500
shares of restricted common stock and restricted stock units issued in the three-month period ended March 31, 2011, 1,319,500 have restrictions on disposition which lapse over four years from the date of grant and 340,000 restricted shares were
granted to certain employees through the long-term incentive plan (the LTIP) as long-term performance-based stock incentive awards under the Corporations 2005 Stock Incentive Plan. Pursuant to the terms of the LTIP, restrictions
with respect to the stock will lapse upon the achievement of revenue and/or profitability targets within the two calendar years from and including the year of grant. The grant date fair value of the shares is recognized over the requisite period of
performance once achievement of criteria is deemed probable. On a quarterly basis, the Company estimates the likelihood of achieving performance goals and records expense accordingly. Actual results, and future changes in estimates, may differ
substantially from the Companys current estimates. If the targets are not achieved, the shares will be forfeited by the employee.

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 of Accounting Standards Codification (ASC) 718, Compensation  Stock Compensation. Total
compensation expense related to stock options, market-based restricted stock awards and time-based restricted stock awards was $1.1 million and $895,000 for the three-month periods ended March 31, 2011 and 2010, respectively, classified in the
statement of operations line items as follows:



|                                       |  |                             |           |  |      |   |         | 
|-------------------------------------- |  | --------------------------- | --------- |  | ---- | - | ------- | 
|                                       |  | Three Months EndedMarch 31, |          
|                                       |  | 2011                        |           |  | 2010 |  
|Cost of revenue                        |  | $                           | 24,000    |  |      | $ | 19,000  | 
|Sales and marketing                    |  |                             | 197,000   |  |      |   | 151,000 | 
|General and administrative             |  |                             | 852,000   |  |      |   | 699,000 | 
|Research and development               |  |                             | 18,000    |  |      |   | 26,000  | 
|                                       |  |                             |           |  |      |   |         | 
|Total stock-based compensation expense |  | $                           | 1,091,000 |  |      | $ | 895,000 | 
|                                       |  |                             |           |  |      |   |         | 

As of March 31, 2011, 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 3.0 years. Lionbridge currently expects to amortize $9.3 million of unamortized compensation in connection with restricted
stock awards outstanding as of March 31, 2011 over an estimated weighted average period of approximately 2.9 years.

3. UNBILLED
RECEIVABLES

Unbilled receivables represent revenue recognized not yet billed. Unbilled receivables are calculated for each
individual project based on the proportional delivery of services at the balance sheet date. Billing of amounts in unbilled receivables occurs according to customer-agreed payment schedules or upon completion of specified project milestones. All of
Lionbridges projects in unbilled receivables are expected to be billed and collected within one year.



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4. DEBT

On September 30, 2010, the Company entered into Amendment No. 3 (the Amendment) with HSBC Bank USA, National Association (HSBC) to extend the term for an additional four
years to 2014 on its revolving credit agreement dated as of December 31, 2006, as the amended to date (the Credit Agreement), which had been scheduled to expire in December 2011. In addition, under the terms of the Amendment, the
Credit Agreement was amended to reflect that HSBC is the sole lender under the Credit Agreement. The Credit Agreement provides for a $50.0 million revolving credit facility and establishes interest rates in the range of LIBOR plus 1.75% 
2.50%, depending on certain conditions. At March 31, 2011, $24.7 million was outstanding with an interest rate of 2.0%. The Company is required to maintain leverage and fixed charge coverage ratios and to comply with other covenants in its
revolving credit agreement. The leverage ratio is calculated by dividing the Companys total outstanding indebtedness at each quarter end by its adjusted earnings before interest, taxes, depreciation and certain other non-cash expenses during
the four consecutive quarterly periods then ended. The fixed charge coverage ratio is calculated by dividing the Companys adjusted earnings before interest, taxes, depreciation and certain other non-cash expenses minus capital expenditures for
each consecutive four quarterly periods by its interest paid and cash paid on taxes during each such consecutive four quarterly periods. The Company was in compliance with both of these ratios as well as all other bank covenants as of March 31,
2011.

5. COMPREHENSIVE INCOME (LOSS)

Total comprehensive income (loss) consists of net income (loss), the net change in the funded status of defined benefit postretirement plans, unrealized gains and losses on a cash flow hedge and the net
change in foreign currency translation adjustment. Total comprehensive loss was $4.8 million for the three-month period ended March 31, 2011 and total comprehensive gain was $6,000 for the three-month period ended March 31, 2010.

6. NET INCOME (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. For the purposes of calculating diluted earnings per share, the
denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and unvested restricted stock, as determined using the treasury stock method.

Shares used in calculating basic and diluted earnings per share for the three-month periods ended March 31, 2011 and
2010, respectively, are as follows:



|                                                                           |  |                             |            |  |      |  |            | 
|-------------------------------------------------------------------------- |  | --------------------------- | ---------- |  | ---- |  | ---------- | 
|                                                                           |  | Three Months EndedMarch 31, |           
|                                                                           |  | 2011                        |            |  | 2010 | 
|Weighted average number of shares of common stock outstanding  basic      |  |                             | 57,523,000 |  |      |  | 56,367,000 | 
|Dilutive common stock equivalents relating to options and restricted stock |  |                             |           |  |      |  | 1,854,000  | 
|                                                                           |  |                             |            |  |      |  |            | 
|Weighted average number of shares of common stock outstanding  diluted    |  |                             | 57,523,000 |  |      |  | 58,221,000 | 
|                                                                           |  |                             |            |  |      |  |            | 

Options and unvested restricted stock to purchase 8,154,000 and 4,184,000 shares of common stock for the
three-month periods ended March 31, 2011 and 2010, respectively, were not included in the calculation of diluted net income per share, as their effect would be anti-dilutive.

7. RESTRUCTURING CHARGES

During the three-month period ended
March 31, 2011, Lionbridge recorded $2.1 million of restructuring charges. The $2.1 million of restructuring charges recorded in the three-month period ended March 31, 2011 included $1.9 million for workforce reductions in Europe, the
Americas and Asia consisting of 14 technical staff, 2 administrative staff and 1 sales staff, $106,000 recorded for vacated facilities and associated site closure costs, $59,000 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, recorded pursuant to the guidance of ASC 420, Exit or Disposal Cost Obligations (ASC 420) and ASC 712,
CompensationNonretirement Postemployment Benefits (ASC 712), and related literature. Of these charges, $2.1 million related to the Companys Global Language and Content (GLC) segment and $9,000 related
to the Interpretation segment. The Company made $3.1 million of cash payments in the three-month period ended March 31, 2011 with $3.1 million and $9,000 related to the GLC and Interpretation segments, respectively.

During the three-month period ended March 31, 2010, Lionbridge recorded $1.2 million of restructuring charges. The $1.2 million of
restructuring charges recorded in the three-month period ended March 31, 2010 included $1.1 million for workforce reductions in Europe, the Americas and Asia consisting of 10 technical staff, 1 administrative staff and 1 sales staff, and
$95,000 recorded for vacated facilities, recorded pursuant to the guidance of ASC 420, ASC 712, and related literature. The total $1.2 million of these charges related to the Companys GLC segment. The Company made $1.3 million of cash payments
in the three-month period ended March 31, 2010 with $1.3 million and $2,000 related to the GLC and GDT segments, respectively.



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The following table summarizes the accrual activity for the three months ended
March 31, 2011 and 2010, respectively, by initiative:



|                                                                                   |  |      |            |   |      |   |           |  
|---------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                                                   |  | 2011 |            |   | 2010 |  
|Beginning balance, January 1                                                       |  | $    | 6,607,000  |   |      | $ | 3,261,000 |  
|Employee severance:                                                                |  |      |            |   |      |   |           |  
|Restructuring charges recorded                                                     |  |      | 1,935,000  |   |      |   | 1,073,000 |  
|Cash payments related to liabilities recorded on exit or disposal activities       |  |      | (3,015,000 | ) |      |   | (800,000  | )
|                                                                                   |  |      |            |   |      |   |           |  
|                                                                                   |  |      | (1,080,000 | ) |      |   | 273,000   |  
|                                                                                   |  |      |            |   |      |   |           |  
|Vacated facility/Lease termination:                                                |  |      |            |   |      |   |           |  
|Restructuring charges recorded                                                     |  |      | 106,000    |   |      |   | 42,000    |  
|Revision of estimated liabilities                                                  |  |      | 59,000     |   |      |   | 52,000    |  
|Cash payments related to liabilities assumed and recorded on business combinations |  |      |           |   |      |   | (30,000   | )
|Cash payments related to liabilities recorded on exit or disposal activities       |  |      | (100,00    | ) |      |   | (489,000  | )
|                                                                                   |  |      |            |   |      |   |           |  
|                                                                                   |  |      | 65,000     |   |      |   | (425,000  | )
|                                                                                   |  |      |            |   |      |   |           |  
|Ending balance, March 31                                                           |  | $    | 5,592,000  |   |      | $ | 3,109,000 |  
|                                                                                   |  |      |            |   |      |   |           |  

At March 31, 2011, the Companys consolidated balance sheet includes accruals totaling $5.6
million primarily related to employee termination costs and vacated facilities. Lionbridge currently anticipates that $3.9 million of these will be fully paid within twelve months. The remaining $1.7 million relates to lease obligations on unused
facilities expiring through 2026 and is included in long-term liabilities.

8. INCOME TAXES

The provision for income taxes for the three-month periods ended March 31, 2011 and 2010 was $471,000 and $708,000, respectively. The
tax provision for the three-month period ended March 31, 2011 consists primarily of taxes on income in foreign jurisdictions, a deferred tax benefit related to the recognition of deferred tax assets and a reduction in deferred tax liabilities
in certain foreign jurisdictions, as well as a foreign tax benefit of $415,000 related to a refund received for an amended 2008 tax filing, and taxes, interest and penalties recorded in relation to the Companys uncertain tax positions.

The tax provision for the three-month period ended March 31, 2010 consists primarily of taxes on income in foreign
jurisdictions, a deferred tax benefit related to the recognition of deferred tax assets and a reduction in deferred tax liabilities in certain foreign jurisdictions, and taxes, interest and penalties recorded in relation to the companys
uncertain tax positions.

The balance of unrecognized tax benefits at March 31, 2011, not including interest and
penalties, was $6.0 million, which, if recognized, would affect the effective income tax rate in future periods. Lionbridge also recognizes interest and penalties related to unrecognized tax benefits in tax expense. At March 31, 2011,
Lionbridge had approximately $2.2 million of interest and penalties accrued related to unrecognized tax benefits.

In
connection with the Companys 2005 acquisition of Bowne Global Solutions (BGS), Bowne & Co., Inc. (Bowne) agreed to indemnify the Company for any tax liabilities accruing on or prior to the acquisition date of
September 1, 2005. At March 31, 2011 $1.5 million of the gross unrecognized tax benefits and $538,000 of the accrued interest and penalties related to the acquisition of BGS are subject to indemnification. The Company believes that it is
reasonably possible that approximately $442,000 of its unrecognized tax benefits, consisting of several items in various jurisdictions, may be recognized within the next twelve months.

The Company conducts business globally and in the normal course of business is subject to examination by local, state and federal
jurisdictions in the United States as well as in multiple foreign jurisdictions. Currently, no Internal Revenue Service audits are underway and audits in foreign jurisdictions are in varying stages of completion. Open audit years are dependent upon
the tax jurisdiction and range from 2003 to 2010.

At March 31, 2011, no provision for U.S. income and foreign
withholding taxes has been made for unrepatriated foreign earnings because it is expected that such earnings will be reinvested indefinitely.

Through March 31, 2011, Lionbridges Indian subsidiary had a tax holiday granted by the Indian government and was exempt from corporate income tax on its operating profits. This tax holiday
expired at the end of the Indian subsidiarys March 31, 2011 tax year, and the Indian subsidiary is subject to corporate income tax effective April 1, 2011.



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Under the provisions of the Internal Revenue Code, certain substantial changes in
Lionbridges ownership may limit in the future the amount of net operating loss carryforwards that could be used annually to offset future taxable income and income tax liability.

9. SEGMENT INFORMATION

Lionbridge has determined that its operating
segments are those that are based on its method of internal reporting, which separately presents its business based on the service performed by individual geographical location. The Company is reporting its results among the following three business
segments:

Global Language and Content (GLC)this segment includes solutions and software services that
enable the translation, localization and worldwide multilingual release of clients products, content and related technical support, training materials, and sales and marketing information. Lionbridge GLC solutions involve
translating, localizing and adapting content and products to meet the language and cultural requirements of users throughout the world. As part of its GLC solutions, Lionbridge also develops technical documentation and eLearning content. Lionbridge
GLC solutions are based on the Companys Software-as-a-Service (SaaS)-based language technology platforms and applications, and its global service delivery model which make the translation and localization processes more efficient
for Lionbridge clients and subscribers.

Global Development and Testing (GDT)this segment includes
Lionbridges development, engineering and testing services for software, hardware, websites, search engines and content. Specifically, through its GDT solutions, Lionbridge develops, optimizes and maintains IT applications and performs testing
to ensure the quality, interoperability, usability and performance of clients software, search engines, consumer technology products, web sites, and content. Lionbridges testing services, which are offered under the VeriTest brand, also
include product certification and competitive analysis. Lionbridge has deep domain experience developing, testing and maintaining applications in a cost-efficient, blended on-site and offshore model. Lionbridge also provides professional global
crowdsourcing including specialized search relevance testing, keyword optimization and related services for clients with global search engines and online marketing initiatives.

Interpretationthis segment includes interpretation services for government and business organizations that require experienced
linguists to facilitate communication. Lionbridge provides interpretation communication services in more than 360 languages and dialects, including onsite interpretation, over-the-phone interpretation and interpreter testing, training, and
assessment services.

The Companys internal reporting does not include the allocation of certain expenses to the
operating segments but instead includes those other expenses in unallocated other expense. Unallocated expenses consist of depreciation and amortization, interest expense and income tax. Other unallocated items primarily include corporate expenses,
such as merger and restructuring, foreign exchange gains and losses and governance expenses, as well as finance, information technology, human resources, legal, treasury and marketing expenses. The Company determines whether a cost is charged to a
particular business segment or is retained as an unallocated cost based on whether the cost relates to a corporate function or to a direct expense associated with the particular business segment. For example, corporate finance, corporate information
technology and corporate human resource expenses are unallocated, whereas operating segment finance, information technology and human resource expenses are charged to the applicable operating segment.



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The table below presents information about the reported net income (loss) of the Company for
the three-month periods ended March 31, 2011 and 2010. Asset information by reportable segment is not reported, since the Company does not produce such information internally.



|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|------------------------------------------------------------ |  | --- | ---------- |  | --- | - | ---------- | -------------- |  | - | ------------------ | - |  | ----- | ---------- | - |  | - | ----------- | -
|                                                             |  | GLC |            |  | GDT |   |            | Interpretation |  |   | Corporate andOther |   |  | Total |           
|Three Months Ended March 31, 2011                            |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|External revenue                                             |  | $   | 69,107,000 |  |     | $ | 24,710,000 |                |  | $ | 5,835,000          |   |  | $     |           |   |  | $ | 99,652,000  |  
|Cost of revenue (exclusive of depreciation and amortization) |  |     | 49,071,000 |  |     |   | 17,527,000 |                |  |   | 5,138,000          |   |  |       |           |   |  |   | 71,736,000  |  
|Depreciation and amortization                                |  |     | 932,000    |  |     |   | 184,000    |                |  |   | 27,000             |   |  |       | 730,000    |   |  |   | 1,873,000   |  
|Other operating expenses                                     |  |     | 18,456,000 |  |     |   | 3,356,000  |                |  |   | 668,000            |   |  |       |           |   |  |   | 22,480,000  |  
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Segment contribution                                         |  |     | 648,000    |  |     |   | 3,643,000  |                |  |   | 2,000              |   |  |       | (730,000   | ) |  |   | 3,563,000   |  
|Interest expense and other unallocated items                 |  |     |           |  |     |   |           |                |  |   |                   |   |  |       | (8,538,000 | ) |  |   | (8,538,000  | )
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Income (loss) before income taxes                            |  |     | 648,000    |  |     |   | 3,643,000  |                |  |   | 2,000              |   |  |       | (9,268,000 | ) |  |   | (4,975,000  | )
|Provision for from income taxes                              |  |     |           |  |     |   |           |                |  |   |                   |   |  |       | (471,000   | ) |  |   | (471,000    | )
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Net income (loss)                                            |  |     | 648,000    |  |     |   | 3,643,000  |                |  |   | 2,000              |   |  |       | (9,739,000 | ) |  |   | (5,446,000  | )
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Three Months Ended March 31, 2010                            |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|External revenue                                             |  | $   | 72,538,000 |  |     | $ | 23,346,000 |                |  | $ | 4,896,000          |   |  | $     |           |   |  | $ | 100,780,000 |  
|Cost of revenue (exclusive of depreciation and amortization) |  |     | 49,183,000 |  |     |   | 15,288,000 |                |  |   | 4,474,000          |   |  |       |           |   |  |   | 68,945,000  |  
|Depreciation and amortization                                |  |     | 756,000    |  |     |   | 237,000    |                |  |   | 35,000             |   |  |       | 1,325,000  |   |  |   | 2,353,000   |  
|Other operating expenses                                     |  |     | 17,792,000 |  |     |   | 2,867,000  |                |  |   | 536,000            |   |  |       |           |   |  |   | 21,195,000  |  
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Segment contribution                                         |  |     | 4,807,000  |  |     |   | 4,954,000  |                |  |   | (149,000           | ) |  |       | (1,325,000 | ) |  |   | 8,287,000   |  
|Interest expense and other unallocated items                 |  |     |           |  |     |   |           |                |  |   |                   |   |  |       | (7,102,000 | ) |  |   | (7,102,000  | )
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Income (loss) before income taxes                            |  |     | 4,807,000  |  |     |   | 4,954,000  |                |  |   | (149,000           | ) |  |       | (8,427,000 | ) |  |   | 1,185,000   |  
|Provision for income taxes                                   |  |     |           |  |     |   |           |                |  |   |                   |   |  |       | (708,000   | ) |  |   | (708,000    | )
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  
|Net income (loss)                                            |  |     | 4,807,000  |  |     |   | 4,954,000  |                |  |   | (149,000           | ) |  |       | (9,135,000 | ) |  |   | 477,000     |  
|                                                             |  |     |            |  |     |   |            |                |  |   |                    |   |  |       |            |   |  |   |             |  

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, 2010, 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, 2010. There were no events or changes in circumstances during the first quarter of 2011 which indicated that an assessment of the impairment of goodwill and other intangible assets was required.

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 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 BGS in September 2005) include a worsening in customer attrition rates compared to historical attrition rates, or lower than initially anticipated cash flows associated with customer relationships.

Other intangible assets arose from the acquisition of BGS and consisted of BGS customer relationships, which are being amortized using an
economic consumption method over an estimated useful life of 3 to 12 years.



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The following table summarizes other intangible assets at March 31, 2011 and
December 31, 2010, respectively.



|                                    |  |                    |            |  |                         |   |             |         |  |   |                    |  |  |                         |            |  |         |   |             |   |  |   |           | 
|----------------------------------- |  | ------------------ | ---------- |  | ----------------------- | - | ----------- | ------- |  | - | ------------------ |  |  | ----------------------- | ---------- |  | ------- | - | ----------- | - |  | - | --------- | 
|                                    |  | March 31, 2011     |            |  | December 31, 2010       |  
|                                    |  | GrossCarryingValue |            |  | AccumulatedAmortization |   |             | Balance |  |   | GrossCarryingValue |  |  | AccumulatedAmortization |            |  | Balance |  
|BGS acquired customer relationships |  | $                  | 32,000,000 |  |                         | $ | (22,995,000 | )       |  | $ | 9,005,000          |  |  | $                       | 32,000,000 |  |         | $ | (22,412,000 | ) |  | $ | 9,588,000 | 
|                                    |  |                    |            |  |                         |   |             |         |  |   |                    |  |  |                         |            |  |         |   |             |   |  |   |           | 
|                                    |  | $                  | 32,000,000 |  |                         | $ | (22,995,000 | )       |  | $ | 9,005,000          |  |  | $                       | 32,000,000 |  |         | $ | (22,412,000 | ) |  | $ | 9,588,000 | 
|                                    |  |                    |            |  |                         |   |             |         |  |   |                    |  |  |                         |            |  |         |   |             |   |  |   |           | 

Lionbridge currently expects to amortize the following remaining amounts of intangible assets held at
March 31, 2011 in the fiscal periods as follows:



|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Year ending December 31, |  |   |          
|2011                     |  | $ | 1,750,000 | 
|2012                     |  |   | 1,921,000 | 
|2013                     |  |   | 1,583,000 | 
|2014                     |  |   | 1,304,000 | 
|2015                     |  |   | 1,075,000 | 
|Thereafter               |  |   | 1,372,000 | 
|                         |  |   |           | 
|                         |  | $ | 9,005,000 | 
|                         |  |   |           | 

11. CONTINGENCIES

On or about July 24, 2001, a purported securities class action lawsuit captioned Samet v. Lionbridge Technologies, Inc. et al. (01-CV-6770) was filed in the United States District Court
for the Southern District of New York (the Court) against the Company, certain of its officers and directors, and certain underwriters involved in the Companys initial public offering. The complaint in this action asserted, among
other things, that omissions regarding the underwriters alleged conduct in allocating shares in Lionbridges initial public offering to the underwriters customers. In March 2002, the United States District Court for the Southern
District of New York entered an order dismissing without prejudice the claims against Lionbridge and its officers and directors (the case remained pending against the underwriter defendants).

On April 19, 2002, the plaintiffs filed an amended complaint naming as defendants not only the underwriter defendants but also
Lionbridge and certain of its officers and directors. The amended complaint asserts claims under both the registration and antifraud provisions of the federal securities laws relating to, among other allegations, the underwriters alleged
conduct in allocating shares in the Companys initial public offering and the disclosures contained in the Companys registration statement. On July 15, 2002, the Company, together with the other issuers named as defendants in
these coordinated proceedings, filed a collective motion to dismiss the complaint on various legal grounds common to all or most of the issuer defendants. In October 2002, the claims against officers and directors were dismissed without prejudice.
In February 2003, the Court issued its ruling on the motion to dismiss, ruling that the claims under the antifraud provisions of the securities laws could proceed against the Company and a majority of the other issuer defendants.

In June 2003, Lionbridge elected to participate in a proposed settlement agreement with the plaintiffs in this litigation. If the
proposed settlement had been approved by the Court, it would have resulted in the dismissal, with prejudice, of all claims in the litigation against Lionbridge and against any other of the issuer defendants who elected to participate in the proposed
settlement, together with the current or former officers and directors of participating issuers who were named as individual defendants. This proposed settlement was conditioned on, among other things, a ruling by the District Court that the claims
against Lionbridge and against the other issuers who had agreed to the settlement would be certified for class action treatment for purposes of the proposed settlement, such that all investors included in the proposed classes in these cases would be
bound by the terms of the settlement unless an investor opted to be excluded from the settlement.

On December 5, 2006,
the U.S. Court of Appeals for the Second Circuit issued a decision in In re Initial Public Offering Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against the
Company may not be certified as class actions due, in part, to the Appeals Courts determination that individual issues of reliance and knowledge would predominate over issues common to the proposed classes. On January 8, 2007, the
plaintiffs filed a petition seeking rehearing en banc of the Second Circuit Court of Appeals decision. On April 6, 2007 the Court of Appeals denied the plaintiffs petition for rehearing of the Courts December 5,
2006 ruling but noted that the plaintiffs remained free to ask the District Court to certify classes different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its
December 5, 2006 decision. In light of the Court of Appeals December 5, 2006 decision regarding certification of the plaintiffs claims, the District Court entered an order on June 25, 2007 terminating the proposed
settlement between the plaintiffs and the issuers, including Lionbridge.

On August 14, 2007, the plaintiffs filed
amended complaints in the six focus cases. The issuer defendants and the underwriter defendants separately moved to dismiss the claims against them in the amended complaints in the six focus cases. On March 26, 2008, the District Court issued
an order in which it denied in substantial part the motions to dismiss the amended complaints in the six focus cases.



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On February 25, 2009, the parties advised the District Court that they had reached an
agreement-in-principle to settle the litigation in its entirety. A stipulation of settlement was filed with the District Court on April 2, 2009. On June 9, 2009, the District Court preliminarily approved the proposed global settlement.
Notice was provided to the class, and a settlement fairness hearing, at which members of the class had an opportunity to object to the proposed settlement, was held on September 10, 2009. On October 6, 2009, the District Court issued an
order granting final approval to the settlement. Ten appeals have been filed objecting to the definition of the settlement class and fairness of the settlement, five of which have been dismissed with prejudice. Two appeal briefs have been filed by
the remaining five objector groups, and those appeals remain pending. The litigation process is inherently uncertain and unpredictable, however, and there can be no guarantee as to the ultimate outcome of this pending lawsuit. While Lionbridge
cannot guarantee the outcome of these proceedings, the Company believes that the final result of this lawsuit will have no material effect on its consolidated financial condition, results of operations, or cash flows.

The Company does not expect any liability from these proceedings, if any, to have a material adverse effect on its financial position,
results of operations or liquidity.

12. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and
requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in
an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels
of inputs required by the standard that Lionbridge uses to measure fair value, as well as the assets and liabilities that the Company values using those levels of inputs.



|Level 1: | Quoted prices in active markets for identical assets or liabilities. The Company did not have any financial assets and liabilities at either March 31, 2011 or
December 31, 2010 designated as Level 1.
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Level 2: | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Lionbridges Level 2 assets and liabilities are an interest rate swap and foreign exchange forward contracts
whose fair value were determined using pricing models predicated upon observable market spot and forward rates. The interest rate swap is designated as a cash flow hedge under the guidance of ASC 815, Derivatives and Hedging (ASC
815) and changes in the fair value are recorded to other comprehensive income. On July 31, 2010, the Companys interest rate swap matured. Changes in the fair value of foreign exchange forward contracts are recorded in the
Companys earnings as other (income) expense. The Company did not have any foreign exchange forward contracts outstanding at either March 31, 2011 or December 31, 2010.
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Level 3: | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company did not have
any financial assets and liabilities at either March 31, 2011 or December 31, 2010 designated as Level 3.
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13.
RECENT ACCOUNTING PRONOUNCEMENTS

In December 2010, the Financial Accounting Standards Board (FASB) issued ASU
2010-29, Business Combinations: Disclosure of Supplementary Pro Forma Information for Business Combinations, (ASU 2010-29), an amendment to goodwill impairment testing. The amendment modifies Step 1 of the goodwill impairment
test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining
whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance
and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying
amount. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The adoption of this guidance did not have an impact on the Company since it did not
have any reporting units with zero or negative carrying amounts at March 31, 2011.

In January
2010, the FASB issued ASU 2010-06, Value Measurements and Disclosures  Improving Disclosures about Fair Value Measurements (ASU 2010-06), that amends ASC Subtopic 820-10, Fair Value Measurements and Disclosures
 Overall, and requires reporting entities to disclose (1) the amount of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers, and (2) separate information
about purchases, sales, issuance and settlements in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). ASU 2010-06 also requires reporting entities to provide fair value measurement disclosures for
each class of assets and liabilities and disclose the inputs and valuation techniques for fair value measurements that fall within Levels 2 and 3 of the fair value hierarchy. These disclosures and clarification were effective for interim and
annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuance, and settlements in the rollforward of activity in Level 3 fair value measurements. These additional disclosures were
effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company adopted the further provisions of ASU 2010-06 on January 1, 2011 which did not have a material impact on its
consolidated financial statements.

In October 2009, the Emerging Issues Task Force (EITF) reached final consensus
on ASU 2009-13, Revenue Recognition: Multiple-Deliverable Revenue Arrangements, (ASU 2009-13), which addresses the issue related to revenue arrangements with multiple deliverables. This issue addresses how to determine
whether an arrangement involving multiple deliverables contains more than one unit of accounting and how arrangement consideration should be measured and allocated to the separate units of accounting. This issue is effective for the Companys
revenue arrangements entered into or materially modified on or after January 1, 2011. The Company adopted this guidance and concluded it did not have a material impact on its financial statements.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The matters discussed in this Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are
neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances many of which Lionbridge has little or no control over. A number of important risks and uncertainties, including those identified
under the caption Risk Factors in Lionbridges Annual Report on Form 10-K, filed March 15, 2011 (SEC File No. 000-26933) and subsequent filings as well as risks and uncertainties discussed elsewhere in this Form 10-Q could
cause Lionbridges actual results to differ materially from those in the forward-looking statements. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected. The forward-looking statements in this Form 10-Q are made as of the date of this filing only, and Lionbridge does not undertake to update or supplement these statements due to changes in
circumstances or otherwise, except as required by law.

Introduction

Lionbridge is a leading provider of language, development and testing solutions that enable clients to develop, release, manage and
maintain their technology applications and content globally. Lionbridge Global Language and Content (GLC) solutions enable the translation, localization and worldwide multilingual release of clients products, content and
related technical support, training materials, and sales and marketing information. Lionbridge GLC solutions involve translating, localizing and adapting content and products to meet the language and cultural requirements of users throughout the
world. As part of its GLC solutions, Lionbridge also develops technical documentation and eLearning content. Lionbridge GLC solutions are based on the Companys Web-based language technology platforms and global service delivery model which
make the translation and localization processes more efficient for Lionbridge clients and translators. Certain of these Web-based language technologies are also available on a subscription basis to translators, enterprises and other third parties.

Through its Global Development and Testing (GDT) solutions, Lionbridge develops, optimizes and maintains IT
applications and performs testing to ensure the quality, interoperability, usability, relevance and performance of clients software, consumer technology products, web sites and content. Lionbridge has deep domain experience developing, testing
and maintaining applications in a cost-efficient, blended on-site and offshore model. Lionbridge also provides professional global crowdsourcing including specialized search relevance testing, keyword optimization and related services for clients
with global search engines and online marketing initiatives.

Lionbridge also provides interpretation services to government
organizations and businesses that require human interpreters for non-English speaking individuals.

Lionbridge provides a full
suite of language, testing and development solutions to businesses in diverse end markets including technology, mobile and telecommunications, internet and media, life sciences, government, automotive, retail and aerospace. Lionbridges
solutions include: translation and localization; interpretation; language technology; technical authoring and eLearning; product engineering; application development and maintenance and testing; and global professional crowdsourcing.
Lionbridges services enable global organizations to increase market penetration and speed adoption of global content and products, enhance return on enterprise application investments, increase workforce productivity and reduce costs.

During 2010 and continuing in the first quarter of 2011, Lionbridge invested in technology development, infrastructure, sales
and marketing to support the development and commercialization of GeoFluent, a SaaS-based, customizable, real-time automated translation technology that instantly translates content and communications into multiple languages. GeoFluent is
based on IBMs machine translation engine and is the result of a technology partnership between Lionbridge and IBM. GeoFluent offers enterprises the ability to increase their multilingual communications through an easy-to-use application that
translates online chat sessions, Websites and documents in real-time. Lionbridge has secured several beta customers for GeoFluent and expects to market GeoFluent on a broader scale in 2011. The Company has also continued to develop and market
Translation Workspace, its SaaS-based translation productivity technology for translators and agencies. By introducing GeoFluent as a real time automated translation application and continuing to enhance Translation Workspace, Lionbridge
believes it will effectively reach its goals of transforming the Lionbridge business to incorporate both services and technology, which in turn may allow it to expand its market leadership and increase growth opportunities.

For the three-month period ended March 31, 2011, Lionbridges loss from operations was $4.4 million, with a net loss of $5.4
million. For the year ended December 31, 2010, the Companys income from operations was $3.0 million with a net loss of $1.3 million. As of March 31, 2011, the Company had an accumulated deficit of $242.2 million.

Certain segments of Lionbridges business, its GLC segment in particular, are sensitive to fluctuations in the value of the
U.S. Dollar relative to the Euro and other currencies, as a large portion of its cost of revenue and general and administrative expenses are payable in Euros and other currencies, while the majority of its revenues are recorded in U.S. Dollars.
During the quarter ended March 31, 2011, the value of the U.S. Dollar relative to other currencies weakened from the quarter ended March 31, 2010. This resulted in a small favorable foreign currency impact on revenue for the three
months ended March 31, 2011, particularly in the GLC segment. In addition, the Companys operating income and net income for the three-month period ended March 31, 2011 were negatively impacted by weakening in the U.S. Dollar
against other currencies as compared to the corresponding period of 2010.



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Revenue Recognition

Lionbridge recognizes revenue as services are performed and amounts are earned in accordance with ASC 605-20, Services
(ASC 605-20). Lionbridge considers amounts to be earned when (1) persuasive evidence of an arrangement has been obtained; (2) services are delivered; (3) the fee is fixed or determinable; and (4) collectibility is
reasonably assured. Determination of criteria (3) and (4) are based on managements judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectibility of those fees.

Lionbridges revenue is recorded from the provision of services to customers for GLC, GDT and Interpretation services which include
content development, product and content globalization, interpretation, software and hardware testing, product certification and application development and maintenance.

Content development, software and hardware testing, interpretations and application development and maintenance projects are normally time and expense priced contracts, and revenue is recognized using a
time and expense basis over the period of performance, primarily based on labor costs incurred to date.

Product and content
globalization and product certification projects are fixed price contracts and revenue is recognized as services are delivered. Depending on specific contractual provisions and nature of the deliverable, revenue is recognized on (1) a
proportional performance model based on level of effort, (2) as milestones are achieved or (3) when final deliverables have been met. Amounts billed in excess of revenue recognized are recorded as deferred revenue.

The delivery of Lionbridges GLC services involves and is dependent on the translation and development of content by subcontractors
and in-house employees. As the time and cost to translate or produce each word of content within a project is relatively uniform, labor input is reflective of the delivery of the contracted service and an appropriate metric for the measurement of
proportional performance in delivering such services. The use of a proportional performance assessment of service delivery requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of
time to complete the project, the nature and complexity of the work to be performed, anticipated increases in employee wages and prices for subcontractor services, and the availability of subcontractor services. When adjustments in estimated project
costs are identified, anticipated losses, if any, are recognized in the period in which they are determined.

Lionbridges GLC agreements with its customers may provide the customer with a fixed and limited time period following delivery
during which Lionbridge will attempt to address any non-conformity to previously agreed upon objective specifications relating to the work, either in the form of a limited acceptance period or a post-delivery warranty period. Management believes
recognition of revenue at the time the services are delivered is appropriate, because its obligations under such provisions are limited in time, limited in scope, and historically have not involved significant costs. In the future, if the post
delivery acceptance or warranty provisions become more complex or include subjective acceptance criteria, Lionbridge may have to revise its revenue recognition policy appropriately, which could affect the timing of revenue recognition.

Lionbridges GLC segment includes Translation Workspace, the Companys hosted proprietary, internet-architected translation
memory application that simplifies translation management. This SaaS application is available to translators on a subscription basis. Access revenue is billed in advance and generally recognized over the subscription period. Incremental overage fees
are recognized in the period incurred.

Lionbridge provides integrated full-service offerings throughout a clients
product and content lifecycle, including GLC and GDT services. Such multiple-element service offerings are governed by ASC 605-25, Multiple-Element Arrangements (ASC 605-25). For these arrangements where the GLC and GDT
services have independent value to the customer, and there is evidence of fair value for each service, the combined service arrangement is bifurcated into separate units for accounting treatment. In instances where it is not possible to bifurcate a
project, direct and incremental costs attributable to each component are deferred and recognized together with the service revenue upon delivery. The determination of fair value requires the use of significant judgment. Lionbridge determines the
fair value of service revenues based upon its recent pricing for those services when sold separately and/or prevailing market rates for similar services. Upon adoption of ASU 2009-13, Revenue Recognition: Multiple-Deliverable Revenue
Arrangements, there has been no material change to the determination of units of accounting or timing of revenue recognition.

Revenue includes reimbursement of travel and out-of-pocket expenses with equivalent amounts of expense recorded in cost of revenue.

Estimates for incentive rebates and other allowances are recorded as a reduction of revenues in the period the related revenues are
recorded. These estimates are based upon contracted terms, historical experience and information currently available to management with respect to business and economic trends. Revisions of these estimates are recorded in the period in which the
facts that give rise to the revision become known.



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Valuation of 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, 2010, 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, 2010. Estimating future cash flows requires management to make projections that can materially differ from actual results. There were no events or
changes in circumstances during the first quarter of 2011 which indicated that an assessment of the impairment of goodwill and other intangible assets was required.

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 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 BGS in September 2005) include a worsening
in customer attrition rates compared to historical attrition rates, or lower than initially anticipated cash flows associated with customer relationships.

Restructuring Charges

During the three-month period ended March 31,
2011, Lionbridge recorded $2.1 million of restructuring charges. The $2.1 million of restructuring charges recorded in the three-month period ended March 31, 2011 included $1.9 million for workforce reductions in Europe, the Americas and Asia
consisting of 14 technical staff, 2 administrative staff and 1 sales staff, $106,000 recorded for vacated facilities and associated site closure costs, $59,000 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, recorded pursuant to the guidance of ASC 420 and ASC 712, and related literature. Of these charges, $2.1 million related to the Companys Global Language
and Content (GLC) segment and $9,000 related to the Interpretation segment. The Company made $3.1 million of cash payments in the three-month period ended March 31, 2011 with $3.1 million and $9,000 related to the GLC and
Interpretation segments, respectively.

During the three-month period ended March 31, 2010, Lionbridge recorded $1.2
million of restructuring charges. The $1.2 million of restructuring charges recorded in the three-month period ended March 31, 2010 included $1.1 million for workforce reductions in Europe, the Americas and Asia consisting of 10 technical
staff, 1 administrative staff and 1 sales staff, and $95,000 recorded for vacated facilities, recorded pursuant to the guidance of ASC 420, ASC 712, and related literature. The total $1.2 million of these charges related to the Companys GLC
segment. The Company made $1.3 million of cash payments in the three-month period ended March 31, 2010 with $1.3 million and $2,000 related to the GLC and GDT segments, respectively.

Stock Option Plans

The Company has stock-based compensation plans for salaried employees and non-employee members of the Board of Directors. The plans provide for discretionary grants of stock options, restricted stock and
stock units, and other stock-based awards. The plans are administered by the Nominating and Compensation Committee of the Board of Directors, which consists of non-employee directors.

In November 2005, the stockholders of Lionbridge Technologies, Inc. approved the Lionbridge 2005 Stock Incentive Plan (the 2005
Plan), which had been previously adopted by the Lionbridge Board of Directors on October 7, 2005, for officers, employees, non-employee directors and other key persons of Lionbridge and its subsidiaries. On May 1, 2009, the
stockholders of the Company approved an amendment to the 2005 Plan increasing the maximum number of shares of common stock available for issuance under the 2005 Plan by 4,500,000 shares to 8,500,000 shares. At March 31, 2011, there were 401,022
options available for future grant under the 2005 Plan. Options to purchase common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally, stock options vest over a four-year period:
25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally expire five to seven years from the date of grant under the 2005 Plan.
Under the terms of the 2005 Plan, the exercise price of incentive and non-qualified stock option grants must not be less than 100% of the fair market value of the common stock on the date of grant. Options are amortized using a straight-line basis
over the option vesting period.



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Shortly after the end of the first quarter, on May 3, 2011, the stockholders of
Lionbridge Technologies, Inc. approved the Lionbridge 2011 Stock Incentive Plan (the 2011 Plan), which had been previously adopted by the Lionbridge Board of Directors on January 27, 2011. The 2011 Plan provides for the issuance of
4,500,000 shares of common stock to officers, employees, non-employee directors and other key persons of Lionbridge and its subsidiaries in the form of stock options, shares of restricted stock, restricted stock units and other forms of equity. No
further grants of equity under the 2005 Plan will be made. Options to purchase common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally, stock options vest over a four-year period:
25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally expire five to seven years from the date of grant under the 2011 Plan.
Under the terms of the 2011 Plan, the exercise price of incentive and non-qualified stock option grants must not be less than 100% of the fair market value of the common stock on the date of grant. Options are amortized using a straight-line basis
over the option vesting period.

Lionbridges 1998 Stock Plan (the 1998 Plan) provides for the issuance of
incentive and nonqualified stock options. The maximum number of shares of common stock available for issuance under the Plan is 11,722,032 shares and the 1998 Plan expired on January 26, 2008. At March 31, 2011 there were no options
available for future grant under the 1998 Plan. Options to purchase common stock under the 1998 Plan had been granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally, stock options granted under
the 1998 Plan vested over a four-year period: 25% of the option shares vested one year from the date of grant and the remaining option shares vested at the rate of 12.5% each six month period thereafter. Stock options granted under the 1998 Plan
generally expire ten years (five years in certain cases) from the date of grant. Under the terms of the 1998 Plan, the exercise price of incentive stock options granted must not be less than 100% (110% in certain cases) of the fair market value of
the common stock on the date of grant, as determined by the Board of Directors. The exercise price of nonqualified stock options may be less than the fair market value of the common stock on the date of grant, as determined by the Board of
Directors, but in no case may the exercise price be less than the statutory minimum, the par value per share of Lionbridges common stock.

Restricted Stock Awards

Lionbridge issued 1,576,500 and 83,000 shares of
restricted common stock and restricted stock units, respectively, under the Companys 2005 Stock Incentive Plan, during the three-month period ended March 31, 2011 with a fair market value of $6.5 million. Of the total 1,659,500 shares of
restricted common stock and restricted stock units issued in the three-month period ended March 31, 2011, 1,319,500 have restrictions on disposition which lapse over four years from the date of grant and 340,000 restricted shares were granted
to certain employees through the long-term incentive plan (the LTIP) as long-term performance-based stock incentive awards under the Corporations 2005 Stock Incentive Plan. Pursuant to the terms of the LTIP, restrictions with
respect to the stock will lapse upon the achievement of revenue and/or profitability targets within the two calendar years from and including the year of grant. The grant date fair value of the shares is recognized over the requisite period of
performance once achievement of criteria is deemed probable. On a quarterly basis, the Company estimates the likelihood of achieving performance goals and records expense accordingly. Actual results, and future changes in estimates, may differ
substantially from the Companys current estimates. If the targets are not achieved, the shares will be forfeited by the employee.

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 of ASC 718. Total compensation expense related to stock options, market-based restricted stock awards and time-based restricted
stock awards was $1.1 million and $895,000 for the three-month periods ended March 31, 2011 and 2010, respectively, classified in the statement of operations line items as follows:



|                                       |  |                             |           |  |      |   |         | 
|-------------------------------------- |  | --------------------------- | --------- |  | ---- | - | ------- | 
|                                       |  | Three Months EndedMarch 31, |          
|                                       |  | 2011                        |           |  | 2010 |  
|Cost of revenue                        |  | $                           | 24,000    |  |      | $ | 19,000  | 
|Sales and marketing                    |  |                             | 197,000   |  |      |   | 151,000 | 
|General and administrative             |  |                             | 852,000   |  |      |   | 699,000 | 
|Research and development               |  |                             | 18,000    |  |      |   | 26,000  | 
|                                       |  |                             |           |  |      |   |         | 
|Total stock-based compensation expense |  | $                           | 1,091,000 |  |      | $ | 895,000 | 
|                                       |  |                             |           |  |      |   |         | 

As of March 31, 2011, 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 3.0 years. Lionbridge currently expects to amortize $9.3 million of unamortized compensation in connection with restricted
stock awards outstanding as of March 31, 2011 over an estimated weighted average period of approximately 2.9 years.



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##### Table of Contents

Results of Operations

The following table sets forth for the periods indicated certain unaudited consolidated financial data as a percentage of total revenue.



|                                                                            |  |                             |       |    |      |  |       |  
|--------------------------------------------------------------------------- |  | --------------------------- | ----- | -- | ---- |  | ----- | -
|                                                                            |  | Three Months EndedMarch 31, |      
|                                                                            |  | 2011                        |       |    | 2010 | 
|Revenue                                                                     |  |                             | 100.0 | %  |      |  | 100.0 | %
|Operating expenses:                                                         |  |                             |       |    |      |  |       |  
|Cost of revenue (exclusive of depreciation and amortization included below) |  |                             | 72.0  |    |      |  | 68.4  |  
|Sales and marketing                                                         |  |                             | 8.3   |    |      |  | 6.9   |  
|General and administrative                                                  |  |                             | 18.7  |    |      |  | 18.6  |  
|Research and development                                                    |  |                             | 1.4   |    |      |  | 0.8   |  
|Depreciation and amortization                                               |  |                             | 1.3   |    |      |  | 1.1   |  
|Amortization of acquisition-related intangible assets                       |  |                             | 0.6   |    |      |  | 1.2   |  
|Restructuring charges                                                       |  |                             | 2.1   |    |      |  | 1.2   |  
|                                                                            |  |                             |       |    |      |  |       |  
|Total operating expenses                                                    |  |                             | 104.4 |    |      |  | 98.2  |  
|                                                                            |  |                             |       |    |      |  |       |  
|Income (loss) from operations                                               |  |                             | (4.4  | )  |      |  | 1.8   |  
|Interest expense:                                                           |  |                             |       |    |      |  |       |  
|Interest on outstanding debt                                                |  |                             | 0.1   |    |      |  | 0.3   |  
|Amortization of deferred financing costs                                    |  |                             |      |    |      |  |      |  
|Interest income                                                             |  |                             |      |    |      |  |      |  
|Other expense, net                                                          |  |                             | 0.5   |    |      |  | 0.3   |  
|                                                                            |  |                             |       |    |      |  |       |  
|Income (loss) before income taxes                                           |  |                             | (5.0  | )  |      |  | 1.2   |  
|Provision for income taxes                                                  |  |                             | 0.5   |    |      |  | 0.7   |  
|                                                                            |  |                             |       |    |      |  |       |  
|Net income (loss)                                                           |  |                             | (5.5  | )% |      |  | 0.5   | %
|                                                                            |  |                             |       |    |      |  |       |  



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##### Table of Contents

Revenue. The following table shows GLC, GDT, and Interpretation revenues in dollars
and as a percentage of total revenue for the three months ended March 31, 2011 and 2010, respectively:



|               |  |                             |            |  |      |  |     |   |  |   |             |  |  |  |     |  
|-------------- |  | --------------------------- | ---------- |  | ---- |  | --- | - |  | - | ----------- |  |  |  | --- | -
|               |  | Three Months EndedMarch 31, |           
|               |  | 2011                        |            |  | 2010 | 
|GLC            |  | $                           | 69,107,000 |  |      |  | 69  | % |  | $ | 72,538,000  |  |  |  | 72  | %
|GDT            |  |                             | 24,710,000 |  |      |  | 25  | % |  |   | 23,346,000  |  |  |  | 23  | %
|Interpretation |  |                             | 5,835,000  |  |      |  | 6   | % |  |   | 4,896,000   |  |  |  | 5   | %
|               |  |                             |            |  |      |  |     |   |  |   |             |  |  |  |     |  
|Total revenue  |  | $                           | 99,652,000 |  |      |  | 100 | % |  | $ | 100,780,000 |  |  |  | 100 | %
|               |  |                             |            |  |      |  |     |   |  |   |             |  |  |  |     |  

Revenue for the quarter ended March 31, 2011 was $99.7 million, a decrease of $1.1 million, or 1.1%,
from $100.8 million for the quarter ended March 31, 2010. A significant portion of Lionbridges revenue is linked to the product release cycles and production schedules of a limited number of large clients in the technology sector. During
the first quarter of 2011, the Companys 1.1% year-over-year revenue decline was primarily attributable to a decline in the scope and frequency of projects from a certain large customer in the technology sector, particularly in its GLC segment,
and was partially offset by an increase in revenue related to new client programs. Although Lionbridge conducts a large portion of its business in international markets, the Companys revenue for the quarter ended March 31, 2011 was not
materially impacted by fluctuations in foreign currency exchange rates as compared to the corresponding period of the prior year.

Revenue from the Companys GLC segment was $69.1 million for the quarter ended March 31, 2011, a decrease of $3.4 million, or 4.7%, from $72.5 million for the quarter ended March 31, 2010.
The decrease in GLC revenue for the quarter ended March 31, 2011 as compared to the corresponding period of the prior year was primarily due to decreased revenue from a certain large customer in the technology sector. Revenue in the GLC segment
for the quarter ended March 31, 2011 was not materially impacted by fluctuations in foreign currency exchange rates as compared to the corresponding period of the prior year.

Revenue from the Companys GDT segment was $24.7 million for the quarter ended March 31, 2011, an increase of $1.4 million, or
5.8%, from $23.3 million for the quarter ended March 31, 2010. The period-over-period increase in GDT revenue was primarily due to expanded relationships with existing customers. Revenue in the GDT segment is not materially impacted by
fluctuations in foreign currency exchange rates.

Revenue from the Companys Interpretation segment was $5.8 million for
the quarter ended March 31, 2011, an increase of $939,000, or 19.2%, from $4.9 million for the quarter ended March 31, 2010. The increase in Interpretation revenue for the quarter ended March 31, 2011 was primarily due to increased
revenue from one large customer engagement. Revenue in the Interpretation segment is not materially impacted by fluctuations in foreign currency exchange rates.

Cost of Revenue. Cost of revenue, excluding depreciation and amortization, consists primarily of expenses incurred for translation services provided by third parties as well as salaries and
associated employee benefits for personnel related to client engagements. The following table shows GLC, GDT and Interpretation cost of revenues, the percentage change from the three-month period of the prior year and as a percentage of revenue for
the three months ended March 31, 2011 and 2010, respectively:



|                      |  |                                |            |   |                        |  |      |                                |  |   |            |  
|--------------------- |  | ------------------------------ | ---------- | - | ---------------------- |  | ---- | ------------------------------ |  | - | ---------- | -
|                      |  | Three MonthsEndedMarch 31,2011 |            |   | % ChangeQ1 10 to Q1 11 |  |      | Three MonthsEndedMarch 31,2010 | 
|GLC:                  |  |                                |            |   |                        |  |      |                                |  |   |            |  
|Cost of revenue       |  | $                              | 49,071,000 |   |                        |  | (0.2 | )%                             |  | $ | 49,183,000 |  
|Percentage of revenue |  |                                | 71.0       | % |                        |  |      |                                |  |   | 67.8       | %
|GDT:                  |  |                                |            |   |                        |  |      |                                |  |   |            |  
|Cost of revenue       |  |                                | 17,527,000 |   |                        |  | 14.7 | %                              |  |   | 15,288,000 |  
|Percentage of revenue |  |                                | 70.9       | % |                        |  |      |                                |  |   | 65.5       | %
|Interpretation:       |  |                                |            |   |                        |  |      |                                |  |   |            |  
|Cost of revenue       |  |                                | 5,138,000  |   |                        |  | 14.8 | %                              |  |   | 4,474,000  |  
|Percentage of revenue |  |                                | 88.1       | % |                        |  |      |                                |  |   | 91.4       | %
|                      |  |                                |            |   |                        |  |      |                                |  |   |            |  
|Total cost of revenue |  | $                              | 71,736,000 |   |                        |  |      |                                |  | $ | 68,945,000 |  
|                      |  |                                |            |   |                        |  |      |                                |  |   |            |  
|Percentage of revenue |  |                                | 72.0       | % |                        |  |      |                                |  |   | 68.4       | %



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For the quarter ended March 31, 2011, as a percentage of revenue, cost of revenue
increased to 72.0% as compared to 68.4% for the quarter ended March 31, 2010. This increase was primarily the result of decreased revenue levels in the Companys GLC segment, customer and work mix changes in the Companys GLC and GDT
segments, and the weakening of the U.S. Dollar against certain foreign currencies. The increased cost of revenue percentage was partially offset by cost saving initiatives implemented in 2010 in its GLC segment, and continued benefits realized
from the deployment and use of Lionbridges language management technology platform.

For the quarter ended
March 31, 2011, cost of revenue increased $2.8 million, or 4.1%, to $71.7 million as compared to $68.9 million for the corresponding period of the prior year. This increase was primarily the result of customer and work mix changes and
approximately $601,000 of the increase is attributable to the depreciation of the U.S. Dollars exchange rate against most foreign currencies, as compared to the quarter ended March 31, 2010.

For the quarter ended March 31, 2011, cost of revenue as a percentage of revenue in the Companys GLC segment increased to
71.0% as compared to 67.8% for the quarter ended March 31, 2010, primarily due to decreased revenue levels, increases in expense for translation outsourcing and internal labor due to work mix changes and the weakening of the U.S. Dollar
against certain foreign currencies. For the quarter ended March 31, 2011, GLC cost of revenue decreased $112,000 to $49.1 million as compared to $49.2 million for the corresponding period of the prior year. This decrease was primarily the
result of cost saving initiatives implemented in 2010 and continued benefits realized from the deployment and use of Lionbridges language management technology platform, partially offset by approximately $545,000 attributable to the weakening
of the U.S. Dollar against certain foreign currencies and increases in expenses for outsourcing and internal labor as a result of changes in customer and work mix, as compared to the corresponding period of the prior year.

For the quarter ended March 31, 2011, cost of revenue as a percentage of revenue in the Companys GDT segment increased to
70.9% as compared to 65.5% for the quarter ended March 31, 2010. For the quarter ended March 31, 2011, GDT cost of revenue increased $2.2 million, or 14.7%, to $17.5 million as compared to $15.3 million for the corresponding period of the
prior year. This increase was primarily attributable to the $1.4 million increase in revenue and customer work mix variances period-over-period.

For the quarter ended March 31, 2011, cost of revenue as a percentage of revenue in the Companys Interpretation segment decreased to 88.1% as compared to 91.4% for the quarter ended
March 31, 2010. This decrease is primarily due to pricing and work mix variations in services, partially offset by increased revenue period-over-period. For the quarter ended March 31, 2011, Interpretation cost of revenue increased
$664,000, or 14.8%, to $5.1 million as compared to $4.5 million for the corresponding period of the prior year. The increase is primarily due to increased revenue levels, partially offset by pricing and work mix variations in services as compared to
the prior year. The Companys Interpretation segment is not materially impacted by foreign currency exchange rate fluctuations.

Sales and Marketing.Sales and marketing expenses consist primarily of salaries, commissions and associated employee benefits, travel expenses of sales and marketing personnel, promotional
expenses, sales force automation expense, training, and the costs of programs aimed at increasing revenue, such as advertising, trade shows, public relations and other market development programs. The following table shows sales and marketing
expenses in dollars, the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2011 and 2010, respectively:



|                                   |  |                              |           |   |      |   |           |  
|---------------------------------- |  | ---------------------------- | --------- | - | ---- | - | --------- | -
|                                   |  | Three Months Ended March 31, |          
|                                   |  | 2011                         |           |   | 2010 |  
|Total sales and marketing expenses |  | $                            | 8,278,000 |   |      | $ | 6,968,000 |  
|Increase from prior year           |  |                              | 1,310,000 |   |      |   |           |  
|Percentage of revenue              |  |                              | 8.3       | % |      |   | 6.9       | %

Sales and marketing
expenses increased $1.3 million, or 18.8%, for the three months ended March 31, 2011 as compared to the corresponding period of 2010. As a percentage of revenue, sales and marketing expenses increased to 8.3% for the three months ended
March 31, 2011 as compared to 6.9% for the three months ended March 31, 2010. These increases are primarily attributable to increased compensation related to the Companys investment in future sales and marketing. Sales and marketing
expenses were not materially impacted by fluctuations in foreign currency exchange rates period-over-period.

General and
Administrative. General and administrative expenses consist of salaries of the management, purchasing, process and technology, finance and administrative groups, and associated employee benefits and travel; facilities costs; information systems
costs; professional fees; business reconfiguration costs and all other site and corporate costs. The following table shows general and administrative expenses in dollars, the dollar change from the three-month period of the prior year and as a
percentage of revenue for the three months ended March 31, 2011 and 2010, respectively:



|                                          |  |                              |            |   |      |   |            |  
|----------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                          |  | Three Months Ended March 31, |           
|                                          |  | 2011                         |            |   | 2010 |  
|Total general and administrative expenses |  | $                            | 18,625,000 |   |      | $ | 18,792,000 |  
|Decrease from prior year                  |  |                              | 167,000    |   |      |   |            |  
|Percentage of revenue                     |  |                              | 18.7       | % |      |   | 18.6       | %



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General and administrative expenses decreased $167,000, or 0.9%, for the three months ended
March 31, 2011 as compared to the corresponding period of 2010. This decrease is primarily a result of the favorable benefit of the restructuring and cost saving initiatives implemented in 2010, partially offset by approximately $164,000 of
increased expenses due to the depreciation of the U.S. Dollar against certain foreign exchange currencies as compared to the corresponding period of 2010. As a percentage of revenue, general and administrative expenses increased to 18.7% for
the quarter ended March 31, 2011, as compared to 18.6%, for the same period of the prior year. This increase is primarily due to the items noted above and the decrease in revenue period-over-period.

Research and Development. Research and development expenses relate primarily to the Companys web-based hosted language
management technology platform used in the globalization process and the research and development of a globalization management system, its Translation Workspace SaaS-based offering, and development of GeoFluent based on automated machine
translation technology licensed from IBM. The cost consists primarily of salaries and associated employee benefits and third-party contractor expenses. The following table shows research and development expense in dollars, the dollar change from the
three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2011 and 2010, respectively:



|                                       |  |                              |           |   |      |   |         |  
|-------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ------- | -
|                                       |  | Three Months Ended March 31, |          
|                                       |  | 2011                         |           |   | 2010 |  
|Total research and development expense |  | $                            | 1,396,000 |   |      | $ | 758,000 |  
|Increase from prior year               |  |                              | 638,000   |   |      |   |         |  
|Percentage of revenue                  |  |                              | 1.4       | % |      |   | 0.8     | %

Research and development
expenses increased $638,000 for the three months ended March 31, 2011 as compared to the corresponding period of 2010. This increase is primarily attributable to increase headcount to support the development of the Companys web-based
hosted language management technology platform, its Translation Workspace Software-as-a-Service offering and development of automated machine translation technology licensed from IBM. Research and development expenses were not materially impacted by
fluctuations in foreign currency exchange rates period-over-period.

Depreciation and Amortization.Depreciation and
amortization consist of the expense related to property and equipment that is being depreciated over the estimated useful lives of the assets using the straight-line method. The following table shows depreciation and amortization expense in dollars,
the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2011 and 2010, respectively:



|                                            |  |                              |           |   |      |   |           |  
|------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | --------- | -
|                                            |  | Three Months Ended March 31, |          
|                                            |  | 2011                         |           |   | 2010 |  
|Total depreciation and amortization expense |  | $                            | 1,291,000 |   |      | $ | 1,130,000 |  
|Increase from prior year                    |  |                              | 161,000   |   |      |   |           |  
|Percentage of revenue                       |  |                              | 1.3       | % |      |   | 1.1       | %

Depreciation and
amortization expense increased by $161,000 for the three months ended March 31, 2011 as compared to the corresponding period of 2010. This increase is primarily the result of the depreciation of increased internal and external capitalized costs
for the development of the Companys web-based hosted management technology platform and SaaS-based offering. Capitalized costs related to the Companys customizable real-time automated machine translation technology (known as GeoFluent)
licensed from IBM have not yet been amortized as the commercial version of the technology is under development and not ready for its intended use. Depreciation and amortization expense was not materially impacted by fluctuations in foreign currency
exchange rates period-over-period.

Amortization of Acquisition-related Intangible Assets.Amortization of
acquisition-related intangible assets consists of the amortization of identifiable intangible assets resulting from acquired businesses. Amortization expense for the three months ended March 31, 2011 and 2010 of $583,000 and $1.2 million,
respectively, relates solely to the amortization of identifiable intangible assets acquired from BGS in 2005.

Interest
Expense.Interest expense primarily represents interest paid or payable on debt and the amortization of deferred financing costs. Interest expense for the quarter ended March 31, 2011 of $174,000 decreased $167,000 from $341,000 for the
quarter ended March 31, 2010. This decrease reflects the impact of the maturity of the Companys interest rate swap in July 2010. Interest expense for the quarter ended March 31, 2010 included $124,000 for the Companys interest
rate swap.

Other Expense, Net.Other expense, net primarily reflects the foreign currency transaction gains or losses
arising from exchange rate fluctuations on transactions denominated in currencies other than the functional currencies of the countries in which the transactions are recorded. The Company recognized $458,000 in other expense, net, in the three
months ended March 31, 2011 as compared to $274,000 in the corresponding period of 2010. The variations are primarily attributable to the variances in the Euro against other currencies in the periods, as compared to the net position and
variance during the corresponding periods of the prior year in addition, to a net realized and unrealized foreign currency loss of $635,000 on forward contracts recorded in the three-month period ended March 31, 2011.



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Provision for Income Taxes. The following table shows the provision for income taxes
expense in dollars, the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2011 and 2010, respectively:



|                                 |  |                              |         |   |      |   |         |  
|-------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                 |  | Three Months Ended March 31, |        
|                                 |  | 2011                         |         |   | 2010 |  
|Total provision for income taxes |  | $                            | 471,000 |   |      | $ | 708,000 |  
|Decrease from prior year         |  |                              | 237,000 |   |      |   |         |  
|Percentage of revenue            |  |                              | 0.5     | % |      |   | 0.7     | %

The provision for income
taxes consists primarily of taxes resulting from profits in foreign jurisdictions, taxes, interest and penalties associated with uncertain tax positions, a deferred tax benefit for the recognition of deferred tax assets and a reduction of deferred
tax liabilities related to the intangible assets from the BGS acquisition. The tax provision increased $237,000 to $471,000 for the quarter ended March 31, 2011 from $708,000 in the corresponding period of 2010. These decreases are primarily
due to lower foreign profits which are subject to tax by the foreign jurisdictions due to treatment of the foreign subsidiaries as service providers that earn a profit based on a cost-plus model as well as a foreign tax benefit of $415,000 related
to a refund received for an amended 2008 tax filing.

Out of Period Adjustment

During the three-month interim period ended March 31, 2011, the Company identified two out of period immaterial errors related to
revenue recognition in the fourth quarter of 2010 and certain gross receipts taxes for the period of 2007 through 2010. The Company corrected these errors during the three-month interim period ended March 31, 2011, which had the effect of
reducing net income by $320,000, comprised of a $108,000 reduction in revenue, a $30,000 increase in cost of revenue and a $182,000 increase in general and administrative expenses. The Company has evaluated these errors and does not believe the
amounts are material to any periods impacted.

Liquidity and Capital Resources

On September 30, 2010, the Company entered into Amendment No. 3 (the Amendment) with HSBC Bank USA, National
Association (HSBC) to extend the term for an additional four years to 2014 on its revolving credit agreement dated as of December 31, 2006, as the amended to date (the Credit Agreement), which had been scheduled to
expire in December 2011. In addition, under the terms of the Amendment, the Credit Agreement was amended to reflect that HSBC is the sole lender under the Credit Agreement. The Credit Agreement provides for a $50.0 million revolving credit facility
and establishes interest rates in the range of LIBOR plus 1.75%  2.50%, depending on certain conditions. At March 31, 2011, $24.7 million was outstanding with an interest rate of 2.0%. The Company is required to maintain leverage and
fixed charge coverage ratios and to comply with other covenants in its revolving credit agreement. The leverage ratio is calculated by dividing the Companys total outstanding indebtedness at each quarter end by its adjusted earnings before
interest, taxes, depreciation and certain other non-cash expenses during the four consecutive quarterly periods then ended. The fixed charge coverage ratio is calculated by dividing the Companys adjusted earnings before interest, taxes,
depreciation and certain other non-cash expenses minus capital expenditures for each consecutive four quarterly periods by its interest paid and cash paid on taxes during each such consecutive four quarterly periods. The Company was in compliance
with both of these ratios as well as all other bank covenants as of March 31, 2011.

The following table shows cash and
cash equivalents and working capital at March 31, 2011 and at December 31, 2010:



|                          |  |                |            |  |                   |   |            | 
|------------------------- |  | -------------- | ---------- |  | ----------------- | - | ---------- | 
|                          |  | March 31, 2011 |            |  | December 31, 2010 |  
|Cash and cash equivalents |  | $              | 25,346,000 |  |                   | $ | 28,206,000 | 
|Working capital           |  |                | 36,038,000 |  |                   |   | 40,795,000 | 

Lionbridges
working capital decreased $4.8 million to $36.0 million at March 31, 2011, as compared to $40.8 million at December 31, 2010; accounts receivable and unbilled receivables totaled $75.0 million, an increase of $231,000 as compared to
December 31, 2010; and other current assets increased by $1.9 million as compared to December 31, 2010. Current liabilities totaled $75.8 million at March 31, 2011, an increase of $3.5 million from December 31, 2010.



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The following table shows the net cash provided by (used in) operating activities, net cash
used in investing activities, and net cash provided by financing activities for the three months ended March 31, 2011 and 2010, respectively:



|                                                    |  |                              |            |   |      |   |            |  
|--------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                    |  | Three Months Ended March 31, |           
|                                                    |  | 2011                         |            |   | 2010 |  
|Net cash provided by (used in) operating activities |  | $                            | (947,000   | ) |      | $ | 557,000    |  
|Net cash used in investing activities               |  |                              | (3,580,000 | ) |      |   | (4,160,000 | )
|Net cash provided by financing activities           |  |                              | 75,000     |   |      |   | 15,000     |  

Net cash used in
operating activities was $947,000 for the three months ended March 31, 2011, as compared to net cash provided by operating activities of $557,000 for the corresponding period of 2010. The $947,000 cash used in operating activities was due to a
net loss of $5.4 million (inclusive of $3.6 million in depreciation, amortization, stock-based compensation and other non-cash expenses), a $2.4 million net decrease in accounts receivable and unbilled receivables, a $1.9 million increase in other
operating assets, a $771,000 increase in accounts payable, accrued expenses and other operating liabilities, and a $343,000 decrease in deferred revenue. Lionbridge has not experienced any significant trends in accounts receivable and unbilled
receivables other than changes relative to the change in revenue, as previously noted. Fluctuations in accounts receivable from period to period relative to changes in revenue are a result of timing of customer invoicing and receipt of payments from
customers.

Net cash used in investing activities decreased $580,000 to $3.6 million for the three months ended March 31,
2011, as compared to $4.2 million for the corresponding period of 2010. The primary investing activity in the three months ended March 31, 2011 was $2.9 million for the purchase of property and equipment and $635,000 for payments of forward
contracts.

In the three months ended March 31, 2010, net cash used in investing activities was $4.2 million, primarily
for the purchase of property and equipment.

Net cash provided by financing activities for the three months ended
March 31, 2011 was $75,000, an increase of $60,000 as compared to $15,000 for the corresponding period of 2010. Cash provided by financing activities consisted of $78,000 of proceeds from the issuance of common stock under option plans, $3,000
for payments of capital lease obligations, $3.0 million proceeds from the issuance of short-term debt and $3.0 million payments of short-term debt.

In the three months ended March 31, 2010, net cash provided by financing activities was $15,000. Cash provided by financing activities consisted of $17,000 of proceeds from the issuance of common
stock under option plans and $2,000 for payments of capital lease obligations.

On May 5, 2010, Lionbridge filed with the
Securities and Exchange Commission a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended (SEC File No. 333-166529), covering the registration of debt and equity securities (the Securities), in
an aggregate amount of $100.0 million. The registration statement was declared effective by the Commission on May 13, 2010. The Company may offer these Securities from time to time in amounts, at prices and on terms to be determined at the time
of sale. The Company believes that with this Registration Statement, it has additional financing flexibility to meet potential future funding requirements and the ability to take advantage of potentially attractive capital market conditions.

Lionbridge anticipates that its present cash and cash equivalents position and available financing under its Credit Agreement
should provide adequate cash to fund its currently anticipated cash needs for the at least the next twelve months.

Contractual Obligations

As of March 31, 2011, there were no material changes in Lionbridges contractual obligations as disclosed in the
Companys Annual Report on Form 10-K for the year ended December 31, 2010. Tax provisions during the three months ended March 31, 2011, primarily related to taxes and accrued interest, have increased the balance of unrecognized tax
benefits by $158,000 to $8.3 million.

Approximately $2.0 million of this balance is related to tax liabilities accruing on or
prior to the acquisition of BGS on September 1, 2005. Bowne & Co., Inc. has agreed to indemnify Lionbridge for these amounts. The Company believes that it is reasonably possible that approximately $442,000 of its unrecognized tax
benefits, consisting of several items in various jurisdictions, may be recognized within the next twelve months.

Off-Balance Sheet
Arrangements

The Company does not have any special purpose entities or off-balance sheet financing arrangements.



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##### Table of Contents

In December 2010, the Financial Accounting Standards Board (FASB) issued ASU
2010-29, Business Combinations: Disclosure of Supplementary Pro Forma Information for Business Combinations, (ASU 2010-29), an amendment to goodwill impairment testing. The amendment modifies Step 1 of the goodwill impairment
test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining
whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance
and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying
amount. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The adoption of this guidance did not have an impact on the Company since it did not
have any reporting units with zero or negative carrying amounts at March 31, 2011.

In January 2010, the FASB issued ASU
2010-06, Value Measurements and Disclosures  Improving Disclosures about Fair Value Measurements (ASU 2010-06), that amends ASC Subtopic 820-10, Fair Value Measurements and Disclosures  Overall, and
requires reporting entities to disclose (1) the amount of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers, and (2) separate information about purchases, sales,
issuance and settlements in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). ASU 2010-06 also requires reporting entities to provide fair value measurement disclosures for each class of assets and
liabilities and disclose the inputs and valuation techniques for fair value measurements that fall within Levels 2 and 3 of the fair value hierarchy. These disclosures and clarification were effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about purchases, sales, issuance, and settlements in the rollforward of activity in Level 3 fair value measurements. These additional disclosures were effective for fiscal years
beginning after December 15, 2010 and for interim periods within those fiscal years. The Company adopted the further provisions of ASU 2010-06 on January 1, 2011 which did not have a material impact on its consolidated financial
statements.

In October 2009, the Emerging Issues Task Force (EITF) reached final consensus on ASU 2009-13,
Revenue Recognition: Multiple-Deliverable Revenue Arrangements, (ASU 2009-13), which addresses the issue related to revenue arrangements with multiple deliverables. This issue addresses how to determine whether an arrangement
involving multiple deliverables contains more than one unit of accounting and how arrangement consideration should be measured and allocated to the separate units of accounting. This issue is effective for the Companys revenue arrangements
entered into or materially modified on or after January 1, 2011. The Company adopted this guidance and concluded it did not have a material impact on its financial statements.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Lionbridge conducts its business globally and its earnings and cash flows are exposed to market risk from changes in interest rates and currency exchange rates. The Company manages its risk to foreign
currency transaction exposure and interest rates through risk management programs that include the use of derivative financial instruments. Lionbridge operates these programs pursuant to documented corporate risk management policies. Lionbridge does
not enter into any derivative transactions for speculative purposes. Gains and losses on derivative financial instruments substantially offset gains and losses on underlying hedged exposures.

Interest Rate Risk. Lionbridge is exposed to market risk from changes in interest rates with respect to its revolving loan
facility which bears interest at Prime or LIBOR (at the Companys discretion) plus an applicable margin based on certain financial covenants. As of March 31, 2011, $24.7 million was outstanding under this facility. A hypothetical 10%
increase or decrease in interest rates would have approximately a $49,000 impact on the Companys interest expense based on the $24.7 million outstanding at March 31, 2011 with an interest rate of 2.0%. On July 20, 2007, the Company
entered into a three-year amortizing interest rate swap with a notional amount of $20.0 million that corresponds to a portion of the Companys floating rate credit facility. On July 31, 2010, the interest rate swap matured. The notional
amount effectively converted that portion of the Companys total floating rate credit facility to fixed rate debt. Additionally, Lionbridge is exposed to market risk through its investing activities. The Companys portfolio consists
primarily of short-term time deposits with investment grade banks and maturities less than 90 days. A hypothetical 10% increase or decrease in interest rates would not have a material impact on the carrying value of Lionbridges investments due
to their immediately available liquidity.

Foreign Currency Exchange Rate Risk. Lionbridge conducts a large portion of
its business in international markets. Although a majority of Lionbridges contracts with clients are denominated in U.S. Dollars, 64% and 66% of its costs and expenses for the three-month period ended March 31, 2011 and 2010,
respectively, were denominated in foreign currencies, primarily operating expenses associated with cost of revenue, sales and marketing and general and administrative. In addition, 15% and 17% of the Companys consolidated tangible assets were
subject to foreign currency exchange fluctuations as of March 31, 2011 and December 31, 2010, respectively, while 15% and 16% of its consolidated liabilities were exposed to foreign currency exchange fluctuations as of March 31, 2011
and December 31, 2010, respectively. In addition, net inter-company balances denominated in currencies other than the functional currency of the respective entity were approximately $59.6 million and $57.9 million as of March 31, 2011 and
December 31, 2010, respectively. The principal foreign currency applicable to our business is the Euro. The Company has implemented a risk management program that partially mitigates its exposure to assets or liabilities (primarily cash,
accounts receivable, accounts payable and inter-company balances) denominated in currencies other than the functional currency of the respective entity which includes the use of derivative financial instruments principally foreign exchange forward
contracts. These foreign exchange forward contracts generally have less than 90-day terms and do not qualify for hedge accounting under the ASC 815 guidance. The Company had no foreign exchange forward contracts outstanding at March 31, 2011.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures. Lionbridge maintains disclosure controls and procedures designed to provide
reasonable assurance that information required to be disclosed in the Companys filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported accurately within the time periods specified in the Securities and
Exchange Commissions rules and forms and that such information is accumulated and communicated to management as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of the end
of the period covered by this report, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of
the Companys disclosure controls and procedures (pursuant to Exchange Act Rule 13a-15). Based upon this evaluation, the CEO and CFO concluded that the Companys disclosure controls and procedures were effective at the reasonable assurance
level as of March 31, 2011.

Changes in internal control over financial reporting. There were no changes in the
Companys internal control over financial reporting that occurred during the quarter ended March 31, 2011 that materially affected, or are reasonably likely to materially affect, the Companys internal control over financial
reporting.



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##### Table of Contents

LIONBRIDGE TECHNOLOGIES, INC.

PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

On or
about July 24, 2001, a purported securities class action lawsuit captioned Samet v. Lionbridge Technologies, Inc. et al. (01-CV-6770) was filed in the United States District Court for the Southern District of New York (the
Court) against the Company, certain of its officers and directors, and certain underwriters involved in the Companys initial public offering. The complaint in this action asserted, among other things, that omissions regarding the
underwriters alleged conduct in allocating shares in Lionbridges initial public offering to the underwriters customers. In March 2002, the United States District Court for the Southern District of New York entered an order
dismissing without prejudice the claims against Lionbridge and its officers and directors (the case remained pending against the underwriter defendants).

On April 19, 2002, the plaintiffs filed an amended complaint naming as defendants not only the underwriter defendants but also Lionbridge and certain of its officers and directors. The amended
complaint asserts claims under both the registration and antifraud provisions of the federal securities laws relating to, among other allegations, the underwriters alleged conduct in allocating shares in the Companys initial public
offering and the disclosures contained in the Companys registration statement. On July 15, 2002, the Company, together with the other issuers named as defendants in these coordinated proceedings, filed a collective motion to dismiss
the complaint on various legal grounds common to all or most of the issuer defendants. In October 2002, the claims against officers and directors were dismissed without prejudice. In February 2003, the Court issued its ruling on the motion to
dismiss, ruling that the claims under the antifraud provisions of the securities laws could proceed against the Company and a majority of the other issuer defendants.

In June 2003, Lionbridge elected to participate in a proposed settlement agreement with the plaintiffs in this litigation. If the proposed settlement had been approved by the Court, it would have resulted
in the dismissal, with prejudice, of all claims in the litigation against Lionbridge and against any other of the issuer defendants who elected to participate in the proposed settlement, together with the current or former officers and directors of
participating issuers who were named as individual defendants. This proposed settlement was conditioned on, among other things, a ruling by the District Court that the claims against Lionbridge and against the other issuers who had agreed to the
settlement would be certified for class action treatment for purposes of the proposed settlement, such that all investors included in the proposed classes in these cases would be bound by the terms of the settlement unless an investor opted to be
excluded from the settlement.

On December 5, 2006, the U.S. Court of Appeals for the Second Circuit issued a decision in
In re Initial Public Offering Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against the Company may not be certified as class actions due, in part, to the Appeals
Courts determination that individual issues of reliance and knowledge would predominate over issues common to the proposed classes. On January 8, 2007, the plaintiffs filed a petition seeking rehearing en banc of the Second Circuit
Court of Appeals decision. On April 6, 2007 the Court of Appeals denied the plaintiffs petition for rehearing of the Courts December 5, 2006 ruling but noted that the plaintiffs remained free to ask the District Court to
certify classes different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its December 5, 2006 decision. In light of the Court of Appeals December 5,
2006 decision regarding certification of the plaintiffs claims, the District Court entered an order on June 25, 2007 terminating the proposed settlement between the plaintiffs and the issuers, including Lionbridge.

On August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The issuer defendants and the underwriter
defendants separately moved to dismiss the claims against them in the amended complaints in the six focus cases. On March 26, 2008, the District Court issued an order in which it denied in substantial part the motions to dismiss the amended
complaints in the six focus cases.

On February 25, 2009, the parties advised the District Court that they had reached an
agreement-in-principle to settle the litigation in its entirety. A stipulation of settlement was filed with the District Court on April 2, 2009. On June 9, 2009, the District Court preliminarily approved the proposed global settlement.
Notice was provided to the class, and a settlement fairness hearing, at which members of the class had an opportunity to object to the proposed settlement, was held on September 10, 2009. On October 6, 2009, the District Court issued an
order granting final approval to the settlement. Ten appeals have been filed objecting to the definition of the settlement class and fairness of the settlement, five of which have been dismissed with prejudice. Two appeal briefs have been filed by
the remaining five objector groups, and those appeals remain pending. The litigation process is inherently uncertain and unpredictable, however, and there can be no guarantee as to the ultimate outcome of this pending lawsuit. While Lionbridge
cannot guarantee the outcome of these proceedings, the Company believes that the final result of this lawsuit will have no material effect on its consolidated financial condition, results of operations, or cash flows.



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The Company does not expect any liability from these proceedings, if any, to have a material
adverse effect on its financial position, results of operations or liquidity.



|Item 1A. | Risk Factors
|-------- | ------------

The matters
discussed in this Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances many of which
Lionbridge has little or no control over. A number of important risks and uncertainties, including those identified under the caption Risk Factors in Lionbridges Annual Report on Form 10-K, filed March 15, 2011 (SEC File No.
000-26933) (the 2010 Annual Report) and subsequent filings as well as risks and uncertainties discussed elsewhere in this Form 10-Q, could cause Lionbridges actual results to differ materially from those in the forward-looking
statements. There have been no material changes in Lionbridges risk factors from those disclosed in Lionbridges 2010 Annual Report.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

During the quarter ended March 31, 2011, the Company withheld 135,917 restricted shares from certain employees to cover certain withholding taxes due from the employees at the time the shares vested.
The following table provides information about Lionbridges purchases of equity securities for the quarter ended March 31, 2011:



|                                     |  |                                  |         |  |                              |   |      | 
|------------------------------------ |  | -------------------------------- | ------- |  | ---------------------------- | - | ---- | 
|Period                               |  | Total Number ofShares 
Purchased |         |  | Average PricePaid Per 
Share |  
|January 1, 2011  January 31, 2011   |  |                                  | 123,853 |  |                              | $ | 3.87 | 
|February 1, 2011  February 28, 2011 |  |                                  | 11,389  |  |                              | $ | 3.64 | 
|March 1, 2011  March 31, 2011       |  |                                  | 675     |  |                              | $ | 3.68 | 
|                                     |  |                                  |         |  |                              |   |      | 
|Total                                |  |                                  | 135,917 |  |                              | $ | 3.85 | 
|                                     |  |                                  |         |  |                              |   |      | 

In addition, upon the termination of employees during the quarter ended March 31, 2011, 10,875 unvested
restricted shares were forfeited. The following table provides information about Lionbridges forfeited restricted shares for the quarter ended March 31, 2011:



|                                   |  |                                  |        | 
|---------------------------------- |  | -------------------------------- | ------ | 
|Period                             |  | Total Number ofShares 
Forfeited |       
|January 1, 2011  January 31, 2011 |  |                                  | 8,250  | 
|March 1, 2011  March 31, 2011     |  |                                  | 2,625  | 
|                                   |  |                                  |        | 
|Total                              |  |                                  | 10,875 | 
|                                   |  |                                  |        | 



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|Item 6. | Exhibits
|------- | --------



| | (a) | Exhibits.
| | --- | ---------

|        |  |                                                                                                                                                                                                                                                     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|10.1*   |  | Deed of Lease effective January 26, 2011 between Ascendas IT Park (Chennai) Limited and Lionbridge Technologies Private Limited.                                                                                                                    
|        | 
|10.2*   |  | Agreement for Services effective January 26, 2011 between Ascendas IT Park (Chennai) Limited and Lionbridge Technologies Private Limited.                                                                                                           
|        | 
|10.3*   |  | Lease Agreement dated February 1, 2011 between Taifun Real sp.zo.o. and Lionbridge Poland Sp. zo.o.                                                                                                                                                 
|        | 
|10.4*   |  | Sub-lease dated February 4, 2011 between Frontline the International Foundation for the Protection of Human Rights Defenders Trust and Lionbridge International.                                                                                    
|        | 
|10.5*   |  | Office Lease dated February 24, 2011 between Columbia Tech Center LLC and Lionbridge Technologies, Inc.                                                                                                                                             
|        | 
|10.6*   |  | Office Lease Agreement No. Chor Or 2554/008 dated March 1, 2011 between Silom Building and Service Co., Ltd. and Lionbridge (Thailand) Ltd.                                                                                                         
|        | 
|10.7*   |  | Service Agreement No. Chor Or (Bor) 2554/008 dated March 1, 2011 between Silom Building and Service Co., Ltd. and Lionbridge (Thailand) Ltd.                                                                                                        
|        | 
|10.8    |  | Form of Management Incentive Plan Agreement (Filed as Exhibit 10.1 to the Current Report on Form 8-K (File Number: 000-26933) filed on February 1, 2011), and incorporated herein by
reference.                                                     
|        | 
|10.9    |  | Form of 2011 Long-Term Performance-based Stock Incentive Award Agreement (LTIP) (Filed as Exhibit 10.2 to the Current Report Form 8-K (File Number: 000-26933) filed on February 1,
2011) and incorporated herein by reference.                     
|        | 
|31.1 *  |  | Certification of Rory J. Cowan, the Companys principal executive officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.             
|        | 
|31.2 *  |  | Certification of Donald M. Muir, the Companys principal financial officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.            
|        | 
|32.1 * |  | Certifications of Rory J. Cowan, the Companys principal executive officer, and Donald M. Muir, the Companys principal financial officer, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Filed herewith.
|- | ---------------

| | Furnished herewith.
|- | -------------------



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LIONBRIDGE TECHNOLOGIES, INC.

SIGNATURE

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 thereunto duly authorized.



LIONBRIDGE TECHNOLOGIES, INC.By:

/s/    DONALD M.
MUIRDonald M. MuirChief Financial Officer (Duly Authorized Officer and Principal Financial
Officer)


Dated: May 9, 2011



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