##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the three months ended July 3, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 333-145355
 
 VANGENT, INC.
 Delaware
    
    20-1961427(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 4250 North Fairfax Drive
Suite 1200
Arlington, Virginia 22203
(703) 284-5600
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o þ




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##### 



VANGENT, INC.
Table of Contents
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of July 3, 2010 and
December 31, 2009 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the three
and six months ended July 3, 2010 and June 27, 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of Stockholders Equity and
Comprehensive Loss for the six months ended July 3, 2010 and June
27, 2009 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the six
months ended July 3, 2010 and June 27, 2009 (Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4T. Controls and Procedures
    
    
    34PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    36Signature
    
    
    36EX-31.1EX-31.2EX-32.1EX-32.2
  Forward-Looking Statements
 Risk Factors
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 Vangent, Inc.
 
 Condensed Consolidated Balance Sheets

(Unaudited)
  July 3,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    37,533
    
    
    $
    44,638Trade receivables, net
    
    
    140,212
    
    
    
    109,846Prepaid expenses and other assets
    
    
    10,492
    
    
    
    7,424Deferred contract costs
    
    
    1,358
    
    
    
    2,929Assets of discontinued operations
    
    
    6,718
    
    
    
    15,036Total current assets
    
    
    196,313
    
    
    
    179,873Property and equipment, net
    
    
    22,914
    
    
    
    25,124Intangible assets, net
    
    
    140,948
    
    
    
    151,860Goodwill
    
    
    267,401
    
    
    
    268,212Deferred debt financing costs and other
    
    
    7,355
    
    
    
    8,433Assets of discontinued operations
    
    
    
    
    
    
    6,727Total assets
    
    $
    634,931
    
    
    $
    640,229Liabilities and Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    13,534Accounts payable and accrued liabilities
    
    
    75,422
    
    
    
    64,849Accrued interest payable
    
    
    7,950
    
    
    
    8,186Deferred tax liability
    
    
    4,412
    
    
    
    5,628Deferred revenue
    
    
    4,288
    
    
    
    3,976Liabilities of discontinued operations
    
    
    5,631
    
    
    
    7,521Total current liabilities
    
    
    97,703
    
    
    
    103,694Long-term debt, net of current portion
    
    
    406,754
    
    
    
    406,832Other long-term liabilities
    
    
    5,009
    
    
    
    7,194Deferred tax liability
    
    
    16,286
    
    
    
    12,144Liabilities of discontinued operations
    
    
    199
    
    
    
    502Total liabilities
    
    
    525,951
    
    
    
    530,366Commitments and contingencies (Note 10)Stockholders equity:Common stock, $0.01 par value, 1,000 shares authorized, 100 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    207,875
    
    
    
    207,376Accumulated other comprehensive loss
    
    
    (13,815
    )
    
    
    (14,949
    )Accumulated deficit
    
    
    (85,080
    )
    
    
    (82,564
    )Total stockholders equity
    
    
    108,980
    
    
    
    109,863Total liabilities and stockholders equity
    
    $
    634,931
    
    
    $
    640,229
   3




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##### Table of Contents



Vangent, Inc.
 
 Condensed Consolidated Statements of Operations

 (Unaudited)
  Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue
    
    $
    214,846
    
    
    $
    135,115
    
    
    $
    409,043
    
    
    $
    267,988Cost of revenue
    
    
    182,459
    
    
    
    115,918
    
    
    
    340,685
    
    
    
    223,284Gross profit
    
    
    32,387
    
    
    
    19,197
    
    
    
    68,358
    
    
    
    44,704General and administrative expenses
    
    
    11,494
    
    
    
    9,547
    
    
    
    23,684
    
    
    
    19,237Selling and marketing expenses
    
    
    5,447
    
    
    
    4,386
    
    
    
    11,122
    
    
    
    8,529Operating income
    
    
    15,446
    
    
    
    5,264
    
    
    
    33,552
    
    
    
    16,938Interest expense, net
    
    
    7,362
    
    
    
    8,533
    
    
    
    15,598
    
    
    
    16,884Income (loss) from continuing operations
before income taxes
    
    
    8,084
    
    
    
    (3,269
    )
    
    
    17,954
    
    
    
    54Provision for income taxes
    
    
    1,851
    
    
    
    1,694
    
    
    
    3,685
    
    
    
    3,438Income (loss) from continuing operations
    
    
    6,233
    
    
    
    (4,963
    )
    
    
    14,269
    
    
    
    (3,384
    )Loss from discontinued operations,
net of tax
    
    
    (14,348
    )
    
    
    (1,149
    )
    
    
    (16,785
    )
    
    
    (1,764
    )Net loss
    
    $
    (8,115
    )
    
    $
    (6,112
    )
    
    $
    (2,516
    )
    
    $
    (5,148
    )
   4




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##### Table of Contents



Vangent, Inc.
 
 Condensed Consolidated
 Statements of Stockholders Equity and Comprehensive Loss

(Unaudited)
  AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Deficit
    
    
    EquityBalance, December 31,
2008
    
    
    100
    
    
    $
    
    
    
    $
    206,328
    
    
    $
    (13,135
    )
    
    $
    (48,556
    )
    
    $
    144,637Effect of hedging
activities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    905
    
    
    
    
    
    
    
    905Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    
    
    
    
    1,250Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,148
    )
    
    
    (5,148
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,993
    )Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    511
    
    
    
    
    
    
    
    
    
    
    
    511Balance, June 27, 2009
    
    
    100
    
    
    $
    
    
    
    $
    206,839
    
    
    $
    (10,980
    )
    
    $
    (53,704
    )
    
    $
    142,155Balance, December 31,
2009
    
    
    100
    
    
    $
    
    
    
    $
    207,376
    
    
    $
    (14,949
    )
    
    $
    (82,564
    )
    
    $
    109,863Effect of hedging
activities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,466
    
    
    
    
    
    
    
    2,466Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,332
    )
    
    
    
    
    
    
    (1,332
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,516
    )
    
    
    (2,516
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,382
    )Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    499
    
    
    
    
    
    
    
    
    
    
    
    499Balance, July 3, 2010
    
    
    100
    
    
    $
    
    
    
    $
    207,875
    
    
    $
    (13,815
    )
    
    $
    (85,080
    )
    
    $
    108,980
  5




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##### Table of Contents



Vangent, Inc.
 
 Condensed Consolidated Statements of Cash Flows

(Unaudited)
  Six Months      EndedJuly 3,
    
    
    June 27,2010
    
    
    2009Cash flows from operating activitiesNet loss
    
    $
    (2,516
    )
    
    $
    (5,148
    )Less: Loss from discontinued operations, net of tax
    
    
    (16,785
    )
    
    
    (1,764
    )Income (loss) from continuing operations
    
    
    14,269
    
    
    
    (3,384
    )Adjustments to reconcile income (loss) from continuing operations
to net cash provided by operating activities:Amortization of intangible assets
    
    
    10,540
    
    
    
    10,587Depreciation and amortization
    
    
    5,901
    
    
    
    5,565Amortization of deferred debt financing costs
    
    
    1,126
    
    
    
    1,126Equity-based compensation expense
    
    
    499
    
    
    
    511Deferred income taxes
    
    
    3,360
    
    
    
    3,028Changes in operating assets and liabilities:Trade receivables
    
    
    (30,544
    )
    
    
    6,400Prepaid expenses and other assets
    
    
    (4,339
    )
    
    
    (4,682
    )Accounts payable and other liabilities
    
    
    13,045
    
    
    
    (9,502
    )Continuing operations, net
    
    
    13,857
    
    
    
    9,649Discontinued operations, net
    
    
    (2,870
    )
    
    
    (2,574
    )Net cash provided by operating activities
    
    
    10,987
    
    
    
    7,075Cash flows from investing activitiesCapital expenditures, continuing operations
    
    
    (3,526
    )
    
    
    (4,779
    )Discontinued operations, net
    
    
    (811
    )
    
    
    (1,760
    )Net cash used in investing activities
    
    
    (4,337
    )
    
    
    (6,539
    )Cash flows from financing activitiesRepayment of senior secured term loan
    
    
    (13,612
    )
    
    
    Other
    
    
    (53
    )
    
    
    (163
    )Net cash used in financing activities, continuing operations
    
    
    (13,665
    )
    
    
    (163
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (170
    )
    
    
    258Net increase (decrease) in cash and cash equivalents
    
    
    (7,185
    )
    
    
    631Total cash and cash equivalents, beginning of period
    
    
    45,584
    
    
    
    21,134Total cash and cash equivalents, end of period
    
    
    38,399
    
    
    
    21,765Less: Cash and cash equivalents, discontinued operations
    
    
    866
    
    
    
    1,601Cash and cash equivalents, continuing operations
    
    $
    37,533
    
    
    $
    20,164Supplemental noncash investing and financing activitiesLeasehold improvements provided by lessor under operating leases
    
    $
    773
    
    
    $
    347Supplemental cash flow informationInterest paid, continuing operations
    
    $
    15,226
    
    
    $
    16,446Income taxes paid:Continuing operations
    
    
    135
    
    
    
    377Discontinued operations
    
    
    299
    
    
    
    247
   6




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##### Table of Contents



Vangent, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
  1. Organization and Basis of Presentation
 Basis of Presentation
    Nature of Operations
  Variable Interest Entities
  Fiscal Year and Quarterly Periods
   7




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##### Table of Contents



2. Discontinued Operations
   July 3,
    
    
    December 31,2010
    
    
    2009Balance Sheet DataCash
    
    $
    866
    
    
    $
    946Trade receivables
    
    
    10,236
    
    
    
    9,323Other assets
    
    
    5,526
    
    
    
    4,767Allowance for expected loss on disposal
    
    
    (9,910
    )
    
    
    Total current assets
    
    
    6,718
    
    
    
    15,036Property and equipment , net
    
    
    
    
    
    
    4,744Deferred income taxes and other
    
    
    
    
    
    
    1,983Total assets
    
    
    6,718
    
    
    
    21,763Current liabilities
    
    
    5,631
    
    
    
    7,521Long-term liabilities
    
    
    199
    
    
    
    502Net assets of discontinued operations
    
    $
    888
    
    
    $
    13,740
 Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Statements of Operations DataRevenue
    
    $
    7,075
    
    
    $
    5,895
    
    
    $
    14,210
    
    
    $
    10,494Costs and expenses
    
    
    7,346
    
    
    
    7,529
    
    
    
    14,846
    
    
    
    12,842Expected loss on disposal
    
    
    15,277
    
    
    
    
    
    
    
    17,895
    
    
    
    Other (income) expense, net
    
    
    7
    
    
    
    (38
    )
    
    
    (746
    )
    
    
    (18
    )Loss from discontinued operations
before income taxes
    
    
    (15,555
    )
    
    
    (1,596
    )
    
    
    (17,785
    )
    
    
    (2,330
    )Provision (benefit) for income taxes
    
    
    (1,207
    )
    
    
    (447
    )
    
    
    (1,000
    )
    
    
    (566
    )Loss from discontinued operations, net of tax
    
    $
    (14,348
    )
    
    $
    (1,149
    )
    
    $
    (16,785
    )
    
    $
    (1,764
    )
    8




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##### Table of Contents



Discontinued Operations in Venezuela  Designation of Venezuelan Economy as Highly Inflationary
  Discontinued Operations in Argentina  Variable Interest Entity
  3. Recent Accounting Pronouncements
 Multiple-Deliverable Revenue Arrangements,
 Certain Revenue Arrangements that Include Software
Elements
 Improving Disclosures about Fair Value Measurements,
 Revenue Recognition  Milestone Method
  9




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##### Table of Contents



Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses,
 4. Trade Receivables
  July 3,
    
    
    December 31,2010
    
    
    2009Billed trade receivables
    
    $
    96,710
    
    
    $
    74,929Billable trade receivables
    
    
    35,452
    
    
    
    26,798Unbilled trade receivables pending completion of milestones,
contract authorizations, or retainage
    
    
    7,992
    
    
    
    7,432Other
    
    
    217
    
    
    
    840140,371
    
    
    
    109,999Allowance for doubtful accounts
    
    
    (159
    )
    
    
    (153
    )Trade receivables, net
    
    $
    140,212
    
    
    $
    109,846Trade accounts receivable from major customersDepartment of Commerce
    
    
    31
    %
    
    
    *
    %Department of Health and Human Services
    
    
    28
    %
    
    
    34
    %Department of Education
    
    
    13
    %
    
    
    16
    %
 
 *
    
    Less than 10%.  10




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##### Table of Contents



5. Intangible Assets
  WeightedAverage Life
    
    July 3,
    
    
    December 31,(in years)
    
    2010
    
    
    2009Indefinite-life intangible assetsIntellectual property
    
    Indefinite
    
    $
    10,328
    
    
    $
    10,328Definite-life intangible assetsCustomer relationships
    
    10.7
    
    
    200,729
    
    
    
    201,101Other
    
    4
    
    
    658
    
    
    
    658201,387
    
    
    
    201,759Accumulated amortization
    
    
    
    
    (70,767
    )
    
    
    (60,227
    )Definite-life intangible assets, net
    
    
    
    
    130,620
    
    
    
    141,532Intangible assets, net
    
    
    
    $
    140,948
    
    
    $
    151,860
  Years Ending December 312010 (remaining six months)
    
    $
    10,4972011
    
    
    20,7022012
    
    
    20,5392013
    
    
    20,5392014
    
    
    11,897Thereafter
    
    
    46,446$
    130,620
 . Long-Term Debt
  July 3,
    
    
    December 31,2010
    
    
    2009Term loan, due February 14, 2013, with interest at variable rates
(2.50% at July 3, 2010)
    
    $
    216,754
    
    
    $
    230,3669 5/8% Senior subordinated fixed rate notes, due February 15, 2015
    
    
    190,000
    
    
    
    190,000406,754
    
    
    
    420,366Less: current portion of term loan
    
    
    
    
    
    
    (13,534
    )Long-term debt, net of current portion
    
    $
    406,754
    
    
    $
    406,832
  2011
    
    $
    2012
    
    
    1,7112013
    
    
    215,0432014
    
    
    2015
    
    
    190,000$
    406,754
 Senior Secured Credit Facility
   11




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##### Table of Contents



9 5/8% Senior Subordinated Notes
    12




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##### Table of Contents



7. Accumulated Other Comprehensive Loss
  July 3,
    
    
    December 31,2010
    
    
    2009Accumulated other comprehensive lossEffect of hedging activities, net of tax:Continuing operations   Interest rate swap agreements
    
    $
    (2,481
    )
    
    $
    (4,634
    )Discontinued operations  Foreign currency forward contracts
    
    
    (79
    )
    
    
    (392
    )(2,560
    )
    
    
    (5,026
    )Foreign currency cumulative translation adjustments:Continuing operations
    
    
    (6,642
    )
    
    
    (5,287
    )Discontinued operations
    
    
    (4,613
    )
    
    
    (4,636
    )(11,255
    )
    
    
    (9,923
    )Total accumulated other comprehensive loss
    
    $
    (13,815
    )
    
    $
    (14,949
    )
 Hedging ActivitiesContinuing
    
    
    DiscontinuedOperations
    
    
    OperationsForeignInterest
    
    
    CurrencySummary of changes in accumulated other
    
    Rate
    
    
    Forwardcomprehensive loss for hedging activities
    
    Swaps
    
    
    Contracts
    
    
    TotalBalance, December 31, 2009
    
    $
    (4,634
    )
    
    $
    (392
    )
    
    $
    (5,026
    )Change in fair value
    
    
    (622
    )
    
    
    (8
    )
    
    
    (630
    )Reclassification of loss to interest expense
    
    
    2,775
    
    
    
    
    
    
    
    2,775Reclassification of loss to discontinued
operations  cost of revenue
    
    
    
    
    
    
    321
    
    
    
    321Balance, July 3, 2010
    
    $
    (2,481
    )
    
    $
    (79
    )
    
    $
    (2,560
    )
 8. Derivative Instruments, Hedging Activities and Financial Instruments
   Interest Rate Swap Agreements on Variable-Rate Term Loan
   13




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##### Table of Contents



Discontinued Operations  Foreign Currency Contracts
   Derivative Instruments and Hedging Activities
  Balance Sheet DataFair Value ofLiability DerivativesJuly 3,
    
    
    December 31,Derivative  Contracts
    
    Balance Sheet Location
    
    2010
    
    
    2009Derivatives that qualify as
cash flow hedgesInterest rate swap agreements
    
    Accrued liabilities
    
    $
    2,481
    
    
    $
    4,657Foreign currency forward contracts
    
    Accrued liabilities, discontinued operations
    
    
    
    
    
    
    251Derivatives that do not qualify
as cash flow hedgesForeign currency forward contracts
    
    Accrued liabilities, discontinued operations
    
    
    
    
    
    
    88
  14




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##### Table of Contents



Statements of Operations DataAmount of Gain(Loss) RecognizedAmount of Gain
    
    
    
    
    
    
    
    
    
    
    in Income on(Loss)
    
    
    
    
    
    
    
    
    Location of Gain (Loss)
    
    DerivativeRecognized in
    
    
    
    
    Amount of Gain
    
    
    Recognized in Income on
    
    (IneffectiveOCI on
    
    
    Location of Gain (Loss)
    
    (Loss) Reclassified
    
    
    Derivative (Ineffective
    
    Portion andDerivative
    
    
    Reclassified from
    
    from Accumulated
    
    
    Portion and Amount
    
    Amount Excluded(Effective
    
    
    Accumulated OCI into
    
    OCI into Income
    
    
    Excluded from Effectiveness
    
    from EffectivenessDerivative Contracts
    
    Portion)
    
    
    Income (Effective Portion)
    
    (Effective Portion)
    
    
    Testing)
    
    Testing)Three Months Ended July 3, 2010Derivatives that qualify as
cash flow hedgesInterest rate swap agreements
    
    
    $10
    
    
    Interest expense
    
    
    $(1,108
    )
    
    Interest expense
    
    
    $Foreign currency forward contracts
    
    
    
    
    
    Cost of revenue, 
discontinued operations
    
    
    (13
    )
    
    
    
    
    Derivatives that do not qualify
as cash flow hedgesForeign currency forward contracts
    
    
    
    
    
    
    
    
    
    
    
    Cost of revenue, 
discontinued operations
    
    
    Three Months Ended June 27, 2009Derivatives that qualify as cash
flow hedgesInterest rate swap agreements
    
    
    806
    
    
    Interest expense
    
    
    (1,585
    )
    
    Interest expense
    
    
    23Foreign currency forward contracts
    
    
    (480
    )
    
    Cost of revenue
    
    
    (27
    )
    
    
    
    
    Six Months Ended July 3, 2010Derivatives that qualify as cash
flow hedgesInterest rate swap agreements
    
    
    (622
    )
    
    Interest expense
    
    
    2,775
    
    
    Interest expense
    
    
    23Foreign currency forward contracts
    
    
    (8
    )
    
    Cost of revenue, 
discontinued operations
    
    
    (321
    )
    
    
    
    
    Derivatives that do not qualify
as cash flow hedgesForeign currency forward contracts
    
    
    
    
    
    
    
    
    
    
    
    Cost of revenue, 
discontinued operations
    
    
    (89
    )Six Months Ended June 27, 2009Derivatives that qualify as
cash flow hedgesInterest rate swap agreements
    
    
    (1,152
    )
    
    Interest expense
    
    
    (2,793
    )
    
    Interest expense
    
    
    48Foreign currency forward contracts
    
    
    (763
    )
    
    Cost of revenue
    
    
    (27
    )
    
    
    
    
    
  15




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##### Table of Contents



Fair Value Measurements
  July 3,
    
    
    December 31,2010
    
    
    2009LiabilitiesLevel 1 - Quoted prices in active markets for identical items
    
    $
    
    
    
    $
    Level 2 - Significant other observable inputs:Interest rate swap agreements
    
    
    2,481
    
    
    
    4,657Foreign currency forward contracts
    
    
    
    
    
    
    339Level 3 - Significant unobservable inputs
    
    
    
    
    
    
    
 Financial Instruments
  CarryingAmount
    
    
    Fair ValueLong-term debtVariable-rate term loan under the senior secured credit facility
    
    $
    216,754
    
    
    $
    216,7549 5/8% senior subordinated notes, due February 15, 2015
    
    
    190,000
    
    
    
    181,212$
    406,754
    
    
    $
    397,966Interest rate swap agreements to pay fixed and receive variableAccrued liabilities
    
    $
    2,481
    
    
    $
    2,481
  9. Income Taxes
      16




---



##### Table of Contents



10. Commitments and Contingencies
  11. Equity-Based Compensation
    Class B
    
    
    
    
    
    
    Fair Value ofMembership
    
    
    
    
    
    
    Class BInterests
    
    
    
    
    
    
    MembershipAvailable for
    
    
    Class B Interests
    
    
    Interests at Date ofGrant
    
    
    Outstanding
    
    
    GrantBalance, December 31, 2009
    
    
    2.0
    %
    
    
    5.6
    %
    
    $
    5,602Granted
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    0.2
    
    
    
    (0.3
    )
    
    
    (178
    )Balance, July 3, 2010
    
    
    2.2
    %
    
    
    5.3
    %
    
    $
    5,424At July 3, 2010:Vested
    
    
    
    
    
    
    2.9
    %Not yet vested
    
    
    
    
    
    
    2.45.3
    %
  17




---



##### Table of Contents



Years Ending December 312010 (remaining six months)
    
    $
    4912011
    
    
    9812012
    
    
    3212013
    
    
    1202014
    
    
    14$
    1,927
 12. Related Party Transactions
      13. Business Segments and Major Customers
    18




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue by business segmentGovernment Group
    
    $
    198,677
    
    
    $
    115,581
    
    
    $
    375,914
    
    
    $
    233,347International Group
    
    
    11,148
    
    
    
    10,539
    
    
    
    22,973
    
    
    
    20,258Human Capital Group
    
    
    5,834
    
    
    
    10,364
    
    
    
    11,969
    
    
    
    16,857Elimination
    
    
    (813
    )
    
    
    (1,369
    )
    
    
    (1,813
    )
    
    
    (2,474
    )Total revenue
    
    $
    214,846
    
    
    $
    135,115
    
    
    $
    409,043
    
    
    $
    267,988Operating income (loss) by business segmentGovernment Group
    
    $
    15,966
    
    
    $
    6,057
    
    
    $
    34,835
    
    
    $
    18,351International Group
    
    
    8
    
    
    
    (111
    )
    
    
    70
    
    
    
    (110
    )Human Capital Group
    
    
    (522
    )
    
    
    (669
    )
    
    
    (1,342
    )
    
    
    (1,285
    )Corporate
    
    
    (6
    )
    
    
    (13
    )
    
    
    (11
    )
    
    
    (18
    )Total operating income
    
    
    15,446
    
    
    
    5,264
    
    
    
    33,552
    
    
    
    16,938Interest expense, net
    
    
    7,362
    
    
    
    8,533
    
    
    
    15,598
    
    
    
    16,884Income (loss) from continuing operations
before income taxes
    
    $
    8,084
    
    
    $
    (3,269
    )
    
    $
    17,954
    
    
    $
    54Depreciation and amortizationGovernment Group
    
    $
    7,183
    
    
    $
    6,891
    
    
    $
    14,488
    
    
    $
    13,903International Group
    
    
    568
    
    
    
    771
    
    
    
    1,295
    
    
    
    1,498Human Capital Group
    
    
    333
    
    
    
    368
    
    
    
    658
    
    
    
    740Total depreciation and amortization
    
    $
    8,084
    
    
    $
    8,030
    
    
    $
    16,441
    
    
    $
    16,141Revenue from major customers as a percent
of total revenueDepartment of Commerce
    
    
    42
    %
    
    
    *
    
    
    
    34
    %
    
    
    *Department of Health and Human Services
    
    
    25
    %
    
    
    42
    %
    
    
    30
    %
    
    
    44
    %Department of Education
    
    
    11
    %
    
    
    16
    %
    
    
    13
    %
    
    
    18
    %Department of Defense
    
    
    *
    
    
    
    12
    %
    
    
    *
    
    
    
    10
    %
 
 *
    
    Less than 10%. 14. Condensed Issuer and Non-Guarantor Financial Information
   19




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##### Table of Contents



Issuer and Non-Guarantor Financial Information

Condensed Combining Balance Sheets (Unaudited)
 July 3, 2010
    
    
    December 31, 2009Non-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Guar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    34,662
    
    
    $
    2,871
    
    
    $
    
    
    
    $
    37,533
    
    
    $
    41,098
    
    
    $
    3,540
    
    
    $
    
    
    
    $
    44,638Trade receivables, net
    
    
    133,754
    
    
    
    6,458
    
    
    
    
    
    
    
    140,212
    
    
    
    101,410
    
    
    
    8,436
    
    
    
    
    
    
    
    109,846Prepaid expenses and other
    
    
    9,705
    
    
    
    2,145
    
    
    
    
    
    
    
    11,850
    
    
    
    8,594
    
    
    
    1,759
    
    
    
    
    
    
    
    10,353Assets of discontinued operations
    
    
    
    
    
    
    6,718
    
    
    
    
    
    
    
    6,718
    
    
    
    
    
    
    
    15,036
    
    
    
    
    
    
    
    15,036Total current assets
    
    
    178,121
    
    
    
    18,192
    
    
    
    
    
    
    
    196,313
    
    
    
    151,102
    
    
    
    28,771
    
    
    
    
    
    
    
    179,873Property and equipment, net
    
    
    20,877
    
    
    
    2,037
    
    
    
    
    
    
    
    22,914
    
    
    
    22,499
    
    
    
    2,625
    
    
    
    
    
    
    
    25,124Intangible assets, net
    
    
    134,450
    
    
    
    6,498
    
    
    
    
    
    
    
    140,948
    
    
    
    144,764
    
    
    
    7,096
    
    
    
    
    
    
    
    151,860Goodwill
    
    
    258,905
    
    
    
    8,496
    
    
    
    
    
    
    
    267,401
    
    
    
    258,905
    
    
    
    9,307
    
    
    
    
    
    
    
    268,212Deferred debt financing costs and other
    
    
    7,301
    
    
    
    54
    
    
    
    
    
    
    
    7,355
    
    
    
    8,379
    
    
    
    54
    
    
    
    
    
    
    
    8,433Investment in and advances to
Non-Guarantor subsidiaries
    
    
    20,698
    
    
    
    
    
    
    
    (20,698
    )
    
    
    
    
    
    
    37,299
    
    
    
    
    
    
    
    (37,299
    )
    
    
    Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,727
    
    
    
    
    
    
    
    6,727Total assets
    
    $
    620,352
    
    
    $
    35,277
    
    
    $
    (20,698
    )
    
    $
    634,931
    
    
    $
    622,948
    
    
    $
    54,580
    
    
    $
    (37,299
    )
    
    $
    640,229Liabilities and Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,534
    
    
    $
    
    
    
    $
    
    
    
    $
    13,534Accounts payable and other liabilities
    
    
    85,257
    
    
    
    6,815
    
    
    
    
    
    
    
    92,072
    
    
    
    74,655
    
    
    
    8,154
    
    
    
    (170
    )
    
    
    82,639Liabilities of discontinued operations
    
    
    53
    
    
    
    9,806
    
    
    
    (4,228
    )
    
    
    5,631
    
    
    
    1,230
    
    
    
    9,564
    
    
    
    (3,273
    )
    
    
    7,521Total current liabilities
    
    
    85,310
    
    
    
    16,621
    
    
    
    (4,228
    )
    
    
    97,703
    
    
    
    89,419
    
    
    
    17,718
    
    
    
    (3,443
    )
    
    
    103,694Long-term debt, net of current portion
    
    
    406,754
    
    
    
    
    
    
    
    
    
    
    
    406,754
    
    
    
    406,832
    
    
    
    
    
    
    
    
    
    
    
    406,832Other long-term liabilities
    
    
    4,959
    
    
    
    50
    
    
    
    
    
    
    
    5,009
    
    
    
    7,132
    
    
    
    62
    
    
    
    
    
    
    
    7,194Deferred tax liability
    
    
    14,349
    
    
    
    1,937
    
    
    
    
    
    
    
    16,286
    
    
    
    9,702
    
    
    
    2,442
    
    
    
    
    
    
    
    12,144Liabilities of discontinued operations
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    502
    
    
    
    
    
    
    
    502Total liabilities
    
    
    511,372
    
    
    
    18,807
    
    
    
    (4,228
    )
    
    
    525,951
    
    
    
    513,085
    
    
    
    20,724
    
    
    
    (3,443
    )
    
    
    530,366Total stockholders equity
    
    
    108,980
    
    
    
    16,470
    
    
    
    (16,470
    )
    
    
    108,980
    
    
    
    109,863
    
    
    
    33,856
    
    
    
    (33,856
    )
    
    
    109,863Total liabilities and stockholders equity
    
    $
    620,352
    
    
    $
    35,277
    
    
    $
    (20,698
    )
    
    $
    634,931
    
    
    $
    622,948
    
    
    $
    54,580
    
    
    $
    (37,299
    )
    
    $
    640,229
  20




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##### Table of Contents



Issuer and Non-Guarantor Financial Information  Condensed Combining Statements of Operations (Unaudited)
 Three Months Ended July 3, 2010
    
    
    Three Months Ended June 27, 2009Non
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NonGuar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalRevenue
    
    $
    203,765
    
    
    $
    11,081
    
    
    $
    
    
    
    $
    214,846
    
    
    $
    124,737
    
    
    $
    10,378
    
    
    $
    
    
    
    $
    135,115Cost of revenue
    
    
    172,792
    
    
    
    9,667
    
    
    
    
    
    
    
    182,459
    
    
    
    106,555
    
    
    
    9,363
    
    
    
    
    
    
    
    115,918Gross profit
    
    
    30,973
    
    
    
    1,414
    
    
    
    
    
    
    
    32,387
    
    
    
    18,182
    
    
    
    1,015
    
    
    
    
    
    
    
    19,197General and
administrative
expenses
    
    
    10,439
    
    
    
    1,055
    
    
    
    
    
    
    
    11,494
    
    
    
    9,137
    
    
    
    410
    
    
    
    
    
    
    
    9,547Selling and marketing
expenses
    
    
    4,972
    
    
    
    475
    
    
    
    
    
    
    
    5,447
    
    
    
    3,945
    
    
    
    441
    
    
    
    
    
    
    
    4,386Operating income
    
    
    15,562
    
    
    
    (116
    )
    
    
    
    
    
    
    15,446
    
    
    
    5,100
    
    
    
    164
    
    
    
    
    
    
    
    5,264Interest expense, net
    
    
    7,483
    
    
    
    (121
    )
    
    
    
    
    
    
    7,362
    
    
    
    8,562
    
    
    
    (29
    )
    
    
    
    
    
    
    8,533Equity in net income
(loss) of
Non-Guarantor subsidiaries
    
    
    (15,394
    )
    
    
    
    
    
    
    15,394
    
    
    
    
    
    
    
    (758
    )
    
    
    
    
    
    
    758
    
    
    
    Income (loss) from
continuing
operations before
income taxes
    
    
    (7,315
    )
    
    
    5
    
    
    
    15,394
    
    
    
    8,084
    
    
    
    (4,220
    )
    
    
    193
    
    
    
    758
    
    
    
    (3,269
    )Provision for income
taxes
    
    
    1,715
    
    
    
    136
    
    
    
    
    
    
    
    1,851
    
    
    
    1,645
    
    
    
    49
    
    
    
    
    
    
    
    1,694Income (loss) from
continuing
operations
    
    
    (9,030
    )
    
    
    (131
    )
    
    
    15,394
    
    
    
    6,233
    
    
    
    (5,865
    )
    
    
    144
    
    
    
    758
    
    
    
    (4,963
    )Income (loss) from discontinued
operations, net
of tax
    
    
    915
    
    
    
    (15,263
    )
    
    
    
    
    
    
    (14,348
    )
    
    
    (247
    )
    
    
    (902
    )
    
    
    
    
    
    
    (1,149
    )Net loss
    
    $
    (8,115
    )
    
    $
    (15,394
    )
    
    $
    15,394
    
    
    $
    (8,115
    )
    
    $
    (6,112
    )
    
    $
    (758
    )
    
    $
    758
    
    
    $
    (6,112
    )
 Six Months Ended July 3, 2010
    
    
    Six Months Ended June 27, 2009Non
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NonGuar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalRevenue
    
    $
    386,188
    
    
    $
    22,855
    
    
    $
    
    
    
    $
    409,043
    
    
    $
    247,974
    
    
    $
    20,014
    
    
    $
    
    
    
    $
    267,988Cost of revenue
    
    
    320,942
    
    
    
    19,743
    
    
    
    
    
    
    
    340,685
    
    
    
    205,465
    
    
    
    17,819
    
    
    
    
    
    
    
    223,284Gross profit
    
    
    65,246
    
    
    
    3,112
    
    
    
    
    
    
    
    68,358
    
    
    
    42,509
    
    
    
    2,195
    
    
    
    
    
    
    
    44,704General and
administrative
expenses
    
    
    22,027
    
    
    
    1,657
    
    
    
    
    
    
    
    23,684
    
    
    
    18,468
    
    
    
    769
    
    
    
    
    
    
    
    19,237Selling and marketing
expenses
    
    
    10,103
    
    
    
    1,019
    
    
    
    
    
    
    
    11,122
    
    
    
    7,597
    
    
    
    932
    
    
    
    
    
    
    
    8,529Operating income
    
    
    33,116
    
    
    
    436
    
    
    
    
    
    
    
    33,552
    
    
    
    16,444
    
    
    
    494
    
    
    
    
    
    
    
    16,938Interest expense, net
    
    
    15,768
    
    
    
    (170
    )
    
    
    
    
    
    
    15,598
    
    
    
    16,915
    
    
    
    (31
    )
    
    
    
    
    
    
    16,884Equity in net income
(loss) of
Non-Guarantor
subsidiaries
    
    
    (17,070
    )
    
    
    
    
    
    
    17,070
    
    
    
    
    
    
    
    (887
    )
    
    
    
    
    
    
    887
    
    
    
    Income (loss) from
continuing
operations before
income taxes
    
    
    278
    
    
    
    606
    
    
    
    17,070
    
    
    
    17,954
    
    
    
    (1,358
    )
    
    
    525
    
    
    
    887
    
    
    
    54Provision for income
taxes
    
    
    3,430
    
    
    
    255
    
    
    
    
    
    
    
    3,685
    
    
    
    3,282
    
    
    
    156
    
    
    
    
    
    
    
    3,438Income (loss) from
continuing
operations
    
    
    (3,152
    )
    
    
    351
    
    
    
    17,070
    
    
    
    14,269
    
    
    
    (4,640
    )
    
    
    369
    
    
    
    887
    
    
    
    (3,384
    )Income (loss) from discontinued
operations, net
of tax
    
    
    636
    
    
    
    (17,421
    )
    
    
    
    
    
    
    (16,785
    )
    
    
    (508
    )
    
    
    (1,256
    )
    
    
    
    
    
    
    (1,764
    )Net loss
    
    $
    (2,516
    )
    
    $
    (17,070
    )
    
    $
    17,070
    
    
    $
    (2,516
    )
    
    $
    (5,148
    )
    
    $
    (887
    )
    
    $
    887
    
    
    $
    (5,148
    )
  21




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##### Table of Contents



Issuer and Non-Guarantor Financial Information
Condensed Combining Statements of Cash Flows (Unaudited)
 Six Months Ended July 3, 2010
    
    
    Six Months Ended June 27, 2009 (1)Non
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NonGuar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalCash flows from operating activitiesContinuing operations, net
    
    $
    10,960
    
    
    $
    2,897
    
    
    $
    
    
    
    
    13,857
    
    
    $
    8,392
    
    
    $
    1,257
    
    
    $
    
    
    
    $
    9,649Discontinued operations, net
    
    
    
    
    
    
    (2,870
    )
    
    
    
    
    
    
    (2,870
    )
    
    
    
    
    
    
    (2,574
    )
    
    
    
    
    
    
    (2,574
    )Net cash used in operating activities
    
    
    10,960
    
    
    
    27
    
    
    
    
    
    
    
    10,987
    
    
    
    8,392
    
    
    
    (1,317
    )
    
    
    
    
    
    
    7,075Cash flows from investing activitiesLoans from Vangent, Inc. to Vangent
Mexico, net
    
    
    (850
    )
    
    
    
    
    
    
    850
    
    
    
    
    
    
    
    (1,245
    )
    
    
    
    
    
    
    1,245
    
    
    
    Capital expenditures
    
    
    (2,933
    )
    
    
    (593
    )
    
    
    
    
    
    
    (3,526
    )
    
    
    (4,614
    )
    
    
    (165
    )
    
    
    
    
    
    
    (4,779
    )Continuing operations, net
    
    
    (3,783
    )
    
    
    (593
    )
    
    
    850
    
    
    
    (3,526
    )
    
    
    (5,859
    )
    
    
    (165
    )
    
    
    1,245
    
    
    
    (4,779
    )Discontinued operations, net
    
    
    
    
    
    
    (811
    )
    
    
    
    
    
    
    (811
    )
    
    
    
    
    
    
    (1,760
    )
    
    
    
    
    
    
    (1,760
    )Net cash used in
investing activities
    
    
    (3,783
    )
    
    
    (1,404
    )
    
    
    850
    
    
    
    (4,337
    )
    
    
    (5,859
    )
    
    
    (1,925
    )
    
    
    1,245
    
    
    
    (6,539
    )Cash flows from financing activitiesRepayment of senior secured loan
    
    
    (13,612
    )
    
    
    
    
    
    
    
    
    
    
    (13,612
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    (130
    )Continuing operations, net
    
    
    (13,665
    )
    
    
    
    
    
    
    
    
    
    
    (13,665
    )
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    (130
    )Discontinued operations, net
    
    
    
    
    
    
    850
    
    
    
    (850
    )
    
    
    
    
    
    
    
    
    
    
    1,212
    
    
    
    (1,245
    )
    
    
    (33
    )Net cash provided by (used in)
financing activities
    
    
    (13,665
    )
    
    
    850
    
    
    
    (850
    )
    
    
    (13,665
    )
    
    
    (130
    )
    
    
    1,212
    
    
    
    (1,245
    )
    
    
    (163
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    51
    
    
    
    (221
    )
    
    
    
    
    
    
    (170
    )
    
    
    
    
    
    
    258
    
    
    
    
    
    
    
    258Net increase (decrease) in cash
and cash equivalents
    
    
    (6,437
    )
    
    
    (748
    )
    
    
    
    
    
    
    (7,185
    )
    
    
    2,403
    
    
    
    (1,772
    )
    
    
    
    
    
    
    631Total cash and cash equivalents,
beginning of period
    
    
    41,099
    
    
    
    4,485
    
    
    
    
    
    
    
    45,584
    
    
    
    15,519
    
    
    
    5,615
    
    
    
    
    
    
    
    21,134Total cash and cash equivalents,
end of period
    
    
    34,662
    
    
    
    3,737
    
    
    
    
    
    
    
    38,399
    
    
    
    17,922
    
    
    
    3,843
    
    
    
    
    
    
    
    21,765Less: Cash and cash equivalents,
discontinued operations
    
    
    
    
    
    
    866
    
    
    
    
    
    
    
    866
    
    
    
    
    
    
    
    1,601
    
    
    
    
    
    
    
    1,601Cash and cash equivalents,
continuing operations
    
    $
    34,662
    
    
    $
    2,871
    
    
    $
    
    
    
    $
    37,533
    
    
    $
    17,922
    
    
    $
    2,242
    
    
    $
    
    
    
    $
    20,164
 
 (1)
    
    Certain amounts previously reported for cash flows for the Issuer and for the Non-Guarantor subsidiaries for the six months ended June 27, 2009, have been reclassified. 15. Subs quent Events
 Senior Secured Credit Facility
  Acquisition
  22




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of our consolidated financial condition and results of
operations should be read in conjunction with the unaudited condensed consolidated financial
statements contained elsewhere in this quarterly report on Form 10-Q and the Managements
Discussion and Analysis of Financial Condition and Results of Operations and the audited
consolidated financial statements and notes thereto, included in our annual report on Form 10-K for
the year ended December 31, 2009.
 Overview
      Discontinued Operations
   23




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##### Table of Contents



Nature of Our Contracts
   Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Cost-plus
    
    
    72
    %
    
    
    51
    %
    
    
    69
    %
    
    
    51
    %Fixed-price
    
    
    24
    %
    
    
    44
    %
    
    
    27
    %
    
    
    44
    %Time and materials
    
    
    4
    %
    
    
    5
    %
    
    
    4
    %
    
    
    5
    %100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Contract Backlog
  July 3, 2010
    
    
    December 31, 2009Total
    
    
    Funded
    
    
    Total
    
    
    FundedGovernment Group
    
    $
    1,410.8
    
    
    $
    136.7
    
    
    $
    1,782.6
    
    
    $
    313.4International Group
    
    
    264.9
    
    
    
    181.4
    
    
    
    291.2
    
    
    
    196.8Human Capital Group
    
    
    10.3
    
    
    
    10.3
    
    
    
    7.1
    
    
    
    7.1Discontinued operations
    
    
    58.3
    
    
    
    58.3
    
    
    
    44.9
    
    
    
    44.9$
    1,744.3
    
    
    $
    386.7
    
    
    $
    2,125.8
    
    
    $
    562.2
  Critical Accounting Policies
   24




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##### Table of Contents



Goodwill and Indefinite-Life Intangible Asset
  Tax Valuation Allowance
  Recent Accounting Pronouncements
   25




---



##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    Increase
    
    
    July 3,
    
    
    June 27,
    
    
    Increase2010
    
    
    2009
    
    
    (Decrease)
    
    
    2010
    
    
    2009
    
    
    (Decrease)Statements of Operations DataRevenue
    
    $
    214,846
    
    
    $
    135,115
    
    
    $
    79,731
    
    
    $
    409,043
    
    
    $
    267,988
    
    
    $
    141,055Cost of revenue
    
    
    182,459
    
    
    
    115,918
    
    
    
    66,541
    
    
    
    340,685
    
    
    
    223,284
    
    
    
    117,401Gross profit
    
    
    32,387
    
    
    
    19,197
    
    
    
    13,190
    
    
    
    68,358
    
    
    
    44,704
    
    
    
    23,654General and administrative expenses
    
    
    11,494
    
    
    
    9,547
    
    
    
    1,947
    
    
    
    23,684
    
    
    
    19,237
    
    
    
    4,447Selling and marketing expenses
    
    
    5,447
    
    
    
    4,386
    
    
    
    1,061
    
    
    
    11,122
    
    
    
    8,529
    
    
    
    2,593Operating income
    
    
    15,446
    
    
    
    5,264
    
    
    
    10,182
    
    
    
    33,552
    
    
    
    16,938
    
    
    
    16,614Interest expense, net
    
    
    7,362
    
    
    
    8,533
    
    
    
    (1,171
    )
    
    
    15,598
    
    
    
    16,884
    
    
    
    (1,286
    )Income (loss) from continuing
operations before income taxes
    
    
    8,084
    
    
    
    (3,269
    )
    
    
    11,353
    
    
    
    17,954
    
    
    
    54
    
    
    
    17,900Provision for income taxes
    
    
    1,851
    
    
    
    1,694
    
    
    
    157
    
    
    
    3,685
    
    
    
    3,438
    
    
    
    247Income (loss) from continuing operations
    
    
    6,233
    
    
    
    (4,963
    )
    
    
    11,196
    
    
    
    14,269
    
    
    
    (3,384
    )
    
    
    17,653Loss from discontinued operations,
net of tax
    
    
    (14,348
    )
    
    
    (1,149
    )
    
    
    (13,199
    )
    
    
    (16,785
    )
    
    
    (1,764
    )
    
    
    (15,021
    )Net loss
    
    $
    (8,115
    )
    
    $
    (6,112
    )
    
    $
    (2,003
    )
    
    $
    (2,516
    )
    
    $
    (5,148
    )
    
    $
    2,632Statements of Operations
Data as a Percent of RevenueRevenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    84.9
    
    
    
    85.8
    
    
    
    
    
    
    
    83.3
    
    
    
    83.3Gross profit margin
    
    
    15.1
    
    
    
    14.2
    
    
    
    
    
    
    
    16.7
    
    
    
    16.7General and administrative expenses
    
    
    5.3
    
    
    
    7.1
    
    
    
    
    
    
    
    5.8
    
    
    
    7.2Selling and marketing expenses
    
    
    2.5
    
    
    
    3.2
    
    
    
    
    
    
    
    2.7
    
    
    
    3.2Operating income margin
    
    
    7.2
    
    
    
    3.9
    
    
    
    
    
    
    
    8.2
    
    
    
    6.3Interest expense, net
    
    
    3.5
    
    
    
    6.3
    
    
    
    
    
    
    
    3.8
    
    
    
    6.3Income (loss) from continuing
operations before income taxes
    
    
    3.8
    
    
    
    (2.4
    )
    
    
    
    
    
    
    4.4
    
    
    
    Provision for income taxes
    
    
    0.8
    
    
    
    1.3
    
    
    
    
    
    
    
    0.9
    
    
    
    1.3Income (loss) from continuing operations
    
    
    2.9
    
    
    
    (3.7
    )
    
    
    
    
    
    
    3.5
    
    
    
    (1.3
    )Loss from discontinued operations,
net of tax
    
    
    (6.7
    )
    
    
    (0.8
    )
    
    
    
    
    
    
    (4.1
    )
    
    
    (0.6
    )Net loss
    
    
    (3.8)
    %
    
    
    (4.5)
    %
    
    
    
    
    
    
    (0.6)
    %
    
    
    (1.9)
    %
  26




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##### Table of Contents



Three and Six Months Ended July 3, 2010 and June 27, 2009
 Overview
  Revenue
  Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    Increase (Decrease)
    
    
    July 3,
    
    
    June 27,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percent
    
    
    2010
    
    
    2009
    
    
    Amount
    
    
    PercentRevenue by
business segmentGovernment Group
    
    $
    198,677
    
    
    $
    115,581
    
    
    $
    83,096
    
    
    
    72
    %
    
    $
    375,914
    
    
    $
    233,347
    
    
    $
    142,567
    
    
    
    61
    %International Group
    
    
    11,148
    
    
    
    10,539
    
    
    
    609
    
    
    
    6
    %
    
    
    22,973
    
    
    
    20,258
    
    
    
    2,715
    
    
    
    13
    %Human Capital Group
    
    
    5,834
    
    
    
    10,364
    
    
    
    (4,530
    )
    
    
    (44)
    %
    
    
    11,969
    
    
    
    16,857
    
    
    
    (4,888
    )
    
    
    (29
    )%Elimination
    
    
    (813
    )
    
    
    (1,369
    )
    
    
    556
    
    
    
    (41)
    %
    
    
    (1,813
    )
    
    
    (2,474
    )
    
    
    661
    
    
    
    (27
    )%$
    214,846
    
    
    $
    135,115
    
    
    $
    79,731
    
    
    
    59
    %
    
    $
    409,043
    
    
    $
    267,988
    
    
    $
    141,055
    
    
    
    53
    %Business segment
revenue as a percent
of total revenueGovernment Group
    
    
    92.5
    %
    
    
    85.5
    %
    
    
    
    
    
    
    
    
    
    
    91.9
    %
    
    
    87.1
    %International Group
    
    
    5.2
    
    
    
    7.8
    
    
    
    
    
    
    
    
    
    
    
    5.6
    
    
    
    7.6Human Capital Group
    
    
    2.7
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    2.9
    
    
    
    6.3Elimination
    
    
    (0.4
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    (1.0
    )100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %
   
    
    Revenue from DoC contracts increased $85.9 million for the three months and
$134.7 million for the six months from the processing of census forms and data
capture under the 2010 U.S. Census contract that is scheduled to be substantially
completed in the third quarter of 2010.
 
    
    Revenue from HHS contracts, primarily Centers for Medicare and Medicaid Services
(CMS), declined $2.2 million for the three months but increased $3.4 million for
the six months.
 
    
    Revenue from Department of Defense (DoD)
contracts declined $2.3 million for
the three months but increased $1.1 million for the six months.
 
    
    Revenue from DoED increased $1.6 million for the three months and $4.8 million
for the six months primarily from contracts with the Office of Federal Student Aid.
 
    
    Revenue from a contract with the Department of State (DoS) for the National
Passport Information Center increased $1.5 million for the six months.
   27




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##### Table of Contents



Cost of Revenue
   General and Administrative Expenses
   Selling and Marketing Expenses
   28




---



##### Table of Contents



Operating Income
  Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    Increase (Decrease)
    
    
    July 3,
    
    
    June 27,
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    Percent
    
    
    2010
    
    
    2009
    
    
    Amount
    
    
    PercentOperating income
(loss) by business
segmentGovernment Group
    
    $
    15,966
    
    
    $
    6,057
    
    
    $
    9,909
    
    
    
    164
    %
    
    $
    34,835
    
    
    $
    18,351
    
    
    $
    16,484
    
    
    
    90
    %International Group
    
    
    8
    
    
    
    (111
    )
    
    
    119
    
    
    
    
    %
    
    
    70
    
    
    
    (110
    )
    
    
    180
    
    
    
    
    %Human Capital Group
    
    
    (522
    )
    
    
    (669
    )
    
    
    147
    
    
    
    22
    %
    
    
    (1,342
    )
    
    
    (1,285
    )
    
    
    (57
    )
    
    
    (4
    )%Corporate
    
    
    (6
    )
    
    
    (13
    )
    
    
    7
    
    
    
    
    %
    
    
    (11
    )
    
    
    (18
    )
    
    
    7
    
    
    
    
    %$
    15,446
    
    
    $
    5,264
    
    
    $
    10,182
    
    
    
    193
    %
    
    $
    33,552
    
    
    $
    16,938
    
    
    $
    16,614
    
    
    
    98
    %Operating margin
by business segmentGovernment Group
    
    
    8.0
    %
    
    
    5.2
    %
    
    
    
    
    
    
    
    
    
    
    9.3
    %
    
    
    7.9
    %International Group
    
    
    0.1
    %
    
    
    (1.1)
    %
    
    
    
    
    
    
    
    
    
    
    0.3
    %
    
    
    (0.5)
    %Human Capital Group
    
    
    (9.0)
    %
    
    
    (6.5)
    %
    
    
    
    
    
    
    
    
    
    
    (11.2)
    %
    
    
    (7.6)
    %
    Interest Expense, Net
  Provision for Income Taxes
  Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    Increase
    
    
    July 3,
    
    
    June 27,
    
    
    Increase2010
    
    
    2009
    
    
    (Decrease)
    
    
    2010
    
    
    2009
    
    
    (Decrease)Provision for income
taxes excluding
tax valuation
allowance
    
    $
    2,961
    
    
    $
    6
    
    
    $
    2,955
    
    
    $
    5,865
    
    
    $
    1,022
    
    
    $
    4,843Tax valuation allowance
    
    
    (1,110
    )
    
    
    1,688
    
    
    
    (2,798
    )
    
    
    (2,180
    )
    
    
    2,416
    
    
    
    (4,596
    )Total provision
for income taxes
    
    $
    1,851
    
    
    $
    1,694
    
    
    $
    157
    
    
    $
    3,685
    
    
    $
    3,438
    
    
    $
    247
  29




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##### Table of Contents



Discontinued Operations
  Three Months Ended
    
    
    Six Months EndedJuly 3,
    
    
    June 27,
    
    
    Increase
    
    
    July 3,
    
    
    June 27,
    
    
    Increase2010
    
    
    2009
    
    
    (Decrease)
    
    
    2010
    
    
    2009
    
    
    (Decrease)Revenue
    
    $
    7,075
    
    
    $
    5,895
    
    
    $
    1,180
    
    
    $
    14,210
    
    
    $
    10,494
    
    
    $
    3,716Costs and expenses
    
    
    7,346
    
    
    
    7,529
    
    
    
    (183
    )
    
    
    14,846
    
    
    
    12,842
    
    
    
    2,004Expected loss on
disposal
    
    
    15,277
    
    
    
    
    
    
    
    15,277
    
    
    
    17,895
    
    
    
    
    
    
    
    17,895Other (income)
expense, net
    
    
    7
    
    
    
    (38
    )
    
    
    45
    
    
    
    (746
    )
    
    
    (18
    )
    
    
    (728
    )Loss from
discontinued
operations
before income
taxes
    
    
    (15,555
    )
    
    
    (1,596
    )
    
    
    (13,959
    )
    
    
    (17,785
    )
    
    
    (2,330
    )
    
    
    (15,455
    )Provision (benefit)
for income taxes
    
    
    (1,207
    )
    
    
    (447
    )
    
    
    (760
    )
    
    
    (1,000
    )
    
    
    (566
    )
    
    
    (434
    )Loss from
discontinued
operations
net of tax
    
    $
    (14,348
    )
    
    $
    (1,149
    )
    
    $
    (13,199
    )
    
    $
    (16,785
    )
    
    $
    (1,764
    )
    
    $
    (15,021
    )
      30




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##### Table of Contents



Liquidity and Capital Resources
    Long-Term Debt
  Risk Factors
 Debt Covenants
   31




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##### Table of Contents



Interest Rate Swaps on Variable-Rate Term Loan under Senior Secured Credit Facility
   Working Capital
  Effect onJuly 3,
    
    
    December 31,
    
    
    Working2010
    
    
    2009
    
    
    CapitalCash and cash equivalents
    
    $
    37,533
    
    
    $
    44,638
    
    
    $
    (7,105
    )Trade receivables, net
    
    
    140,212
    
    
    
    109,846
    
    
    
    30,366Prepaid expenses and other
    
    
    11,850
    
    
    
    10,353
    
    
    
    1,497Current portion of long-term debt
    
    
    
    
    
    
    (13,534
    )
    
    
    13,534Accounts payable and accrued liabilities
    
    
    (75,422
    )
    
    
    (64,849
    )
    
    
    (10,573
    )Accrued interest payable
    
    
    (7,950
    )
    
    
    (8,186
    )
    
    
    236Other liabilities
    
    
    (8,700
    )
    
    
    (9,604
    )
    
    
    904Discontinued operations, net
    
    
    1,087
    
    
    
    7,515
    
    
    
    (6,428
    )Net working capital
    
    $
    98,610
    
    
    $
    76,179
    
    
    $
    22,431
 Cash Flows
  Six Months EndedJuly 3,
    
    
    June 27,
    
    
    Increase2010
    
    
    2009
    
    
    (Decrease)Net cash provided by (used in)Operating activities:Continuing operations
    
    $
    13,857
    
    
    $
    9,649
    
    
    $
    4,208Discontinued operations
    
    
    (2,870
    )
    
    
    (2,574
    )
    
    
    (296
    )Investing activities:Continuing operations
    
    
    (3,526
    )
    
    
    (4,779
    )
    
    
    1,253Discontinued operations
    
    
    (811
    )
    
    
    (1,760
    )
    
    
    949Financing activities:Continuing operations
    
    
    (13,665
    )
    
    
    (163
    )
    
    
    (13,502
    )
 Net Cash Provided by (Used in) Operating Activities
   32




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##### Table of Contents



Net Cash Used in Investing Activities
  Net Cash Used in Financing Activities
  Contractual Obligations
  Payments Due by Year2010 (remaining
    
    
    2011 and
    
    
    2013 andTotal
    
    
    six months)
    
    
    2012
    
    
    2014
    
    
    2015
    
    
    ThereafterLong-term debt:Term loan under senior secured
credit
facility due February 2013 (1)
    
    $
    216.8
    
    
    $
    
    
    
    $
    1.7
    
    
    $
    215.1
    
    
    $
    
    
    
    $
    Senior subordinated notes due 2015
    
    
    190.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190.0
    
    
    
    Interest relating to long-term debt (2)
    
    
    109.9
    
    
    
    14.1
    
    
    
    48.8
    
    
    
    37.8
    
    
    
    9.2
    
    
    
    Operating leases
    
    
    73.6
    
    
    
    11.0
    
    
    
    31.8
    
    
    
    13.7
    
    
    
    3.4
    
    
    
    13.7Purchase and other contractual
commitments (3)
    
    
    18.9
    
    
    
    8.9
    
    
    
    10.0
    
    
    
    
    
    
    
    
    
    
    
    $
    609.2
    
    
    $
    34.0
    
    
    $
    92.3
    
    
    $
    266.6
    
    
    $
    202.6
    
    
    $
    13.7
 
 (1)
    
    Scheduled payments for the term loan under the senior secured credit facility do not give
effect to possible future mandatory prepayments in March 2011 or March 2012 that could result
from excess cash flow from the prior calendar year.  33




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##### Table of Contents



(2)
    
    Future interest payments consist of interest on the variable-rate term loan under the senior
secured credit facility based on the prevailing rate of 2.50% at July 3, 2010, the estimated
future payments based on fair value
of the related interest rate swaps, and interest based on the fixed rate of 9 5/8 % for the
senior subordinated notes.(3)
    
    Purchase and other contractual commitments represent the minimum noncancelable obligations
under service and other agreements, primarily information technology and telecommunications
services. Variable Interest Entities
  Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Quantitative and Qualitative Disclosures about Market Risk
 
 ITEM 4T. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   34




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Risk
Factors
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 5. OTHER INFORMATION
 Entry into a Material Definitive Agreement
     35




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description31.1*
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief 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. 
 SIGNATURE
  Vangent, Inc.August 5, 2010
    /s/ James C. ReaganJames C. ReaganSenior Vice President and Chief Financial Officer
(Principal Financial and Principal Accounting Officer)  36




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
  37