##### 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 September 26, 2009
 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 
incorporation or organization)
    
    (IRS Employer
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(Do not check if a smaller reporting company)
 o þ




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##### 



VANGENT, INC.
Table of Contents
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 26, 2009
and December 31, 2008 (unaudited)
    
    3Condensed Consolidated Statements of Operations for the three
and nine months ended September 26, 2009 and September 27, 2008
(unaudited)
    
    4Condensed Consolidated Statements of Stockholders Equity and
Comprehensive Income (Loss) for the nine months ended
September 26, 2009 and September 27, 2008 (unaudited)
    
    5Condensed Consolidated Statements of Cash Flows for the nine
months ended September 26, 2009 and September 27, 2008
(unaudited)
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    21Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    31Item 4T. Controls and Procedures
    
    32PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    32Item 1A. Risk Factors
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    32Item 3. Defaults Upon Senior Securities
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    32Item 5. Other Information
    
    32Item 6. Exhibits
    
    33Signature
    
    33Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  Forward-Looking Statements
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
  Vangent, Inc.Condensed Consolidated Balance Sheets
 September 26,
    
    
    December 31,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    32,078
    
    
    $
    21,134Trade receivables, net
    
    
    122,267
    
    
    
    129,859Prepaid expenses
    
    
    7,370
    
    
    
    6,134Deferred contract costs
    
    
    5,872
    
    
    
    Other current assets
    
    
    6,606
    
    
    
    6,279Total current assets
    
    
    174,193
    
    
    
    163,406Property and equipment, net
    
    
    29,959
    
    
    
    27,152Intangible assets, net
    
    
    162,004
    
    
    
    177,999Goodwill
    
    
    286,866
    
    
    
    286,866Deferred debt financing costs, net
    
    
    8,568
    
    
    
    10,197Other assets
    
    
    429
    
    
    
    654Total assets
    
    $
    662,019
    
    
    $
    666,274Liabilities and Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    594
    
    
    $
    Accounts payable and accrued liabilities
    
    
    71,156
    
    
    
    67,109Fair value of liability derivatives, current portion
    
    
    4,837
    
    
    
    6,063Accrued interest payable
    
    
    2,510
    
    
    
    8,304Deferred tax liability
    
    
    5,009
    
    
    
    3,962Advance payments on contracts
    
    
    2,702
    
    
    
    2,695Total current liabilities
    
    
    86,808
    
    
    
    88,133Long-term debt, net of current portion
    
    
    419,772
    
    
    
    420,366Other long-term liabilities
    
    
    8,003
    
    
    
    7,879Deferred tax liability
    
    
    9,226
    
    
    
    5,259Total liabilities
    
    
    523,809
    
    
    
    521,637Commitments and contingencies (Note 8)Stockholders equity:Common stock, $0.01 par value, 1,000 shares authorized,
and 100 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    207,104
    
    
    
    206,328Accumulated other comprehensive loss
    
    
    (9,923
    )
    
    
    (13,135
    )Accumulated deficit
    
    
    (58,971
    )
    
    
    (48,556
    )Total stockholders equity
    
    
    138,210
    
    
    
    144,637Total liabilities and stockholders equity
    
    $
    662,019
    
    
    $
    666,274
  3




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##### Table of Contents



Vangent, Inc.Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    149,393
    
    
    $
    133,391
    
    
    $
    427,875
    
    
    $
    400,800Cost of revenue
    
    
    128,567
    
    
    
    106,470
    
    
    
    362,742
    
    
    
    329,570Gross profit
    
    
    20,826
    
    
    
    26,921
    
    
    
    65,133
    
    
    
    71,230General and administrative expenses
    
    
    10,803
    
    
    
    12,445
    
    
    
    31,638
    
    
    
    38,702Selling and marketing expenses
    
    
    4,967
    
    
    
    3,757
    
    
    
    13,849
    
    
    
    11,963Operating income
    
    
    5,056
    
    
    
    10,719
    
    
    
    19,646
    
    
    
    20,565Interest expense
    
    
    8,669
    
    
    
    8,719
    
    
    
    25,628
    
    
    
    26,895Interest and other (income)
expense, net
    
    
    7
    
    
    
    (185
    )
    
    
    (86
    )
    
    
    (634
    )Income (loss) before income taxes
    
    
    (3,620
    )
    
    
    2,185
    
    
    
    (5,896
    )
    
    
    (5,696
    )Provision for income taxes
    
    
    1,647
    
    
    
    2,632
    
    
    
    4,519
    
    
    
    5,728Net loss
    
    $
    (5,267
    )
    
    $
    (447
    )
    
    $
    (10,415
    )
    
    $
    (11,424
    )
  4




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##### Table of Contents



Vangent, Inc.Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Stockholder'sShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    EquityBalance, December 31,
2008
    
    
    100
    
    
    $
    
    
    
    $
    206,328
    
    
    $
    (13,135
    )
    
    $
    (48,556
    )
    
    $
    144,637Effect of hedging
activities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,162
    
    
    
    
    
    
    
    2,162Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,050
    
    
    
    
    
    
    
    1,050Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,415
    )
    
    
    (10,415
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,203
    )Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    776
    
    
    
    
    
    
    
    
    
    
    
    776Balance, September 26,
2009
    
    
    100
    
    
    $
    
    
    
    $
    207,104
    
    
    $
    (9,923
    )
    
    $
    (58,971
    )
    
    $
    138,210Balance, December 31,
2007
    
    
    100
    
    
    $
    
    
    
    $
    205,275
    
    
    $
    (2,937
    )
    
    $
    (22,049
    )
    
    $
    180,289Effect of hedging
activities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    821
    
    
    
    
    
    
    
    821Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (710
    )
    
    
    
    
    
    
    (710
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,424
    )
    
    
    (11,424
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,313
    )Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    
    
    
    
    839Balance, September 27,
2008
    
    
    100
    
    
    $
    
    
    
    $
    206,114
    
    
    $
    (2,826
    )
    
    $
    (33,473
    )
    
    $
    169,815
  5




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##### Table of Contents



Vangent, Inc.Condensed Consolidated Statements of Cash Flows
 Nine Months EndedSeptember 26,
    
    
    September 27,2009
    
    
    2008Cash flows from operating activitiesNet loss
    
    $
    (10,415
    )
    
    $
    (11,424
    )Adjustments to reconcile net loss to net cash provided
by operating activities:Amortization of intangible assets
    
    
    15,995
    
    
    
    15,851Depreciation and amortization
    
    
    8,960
    
    
    
    10,475Equity-based compensation expense
    
    
    776
    
    
    
    839Deferred income taxes
    
    
    5,054
    
    
    
    4,889Changes in operating assets and liabilities, net of
effect of acquisition:Trade receivables
    
    
    8,238
    
    
    
    574Prepaid expenses and other assets
    
    
    (4,053
    )
    
    
    2,886Accounts payable and accrued liabilities
    
    
    4,161
    
    
    
    (6,214
    )Accrued interest payable
    
    
    (5,794
    )
    
    
    (5,152
    )Advance payments on contracts
    
    
    7
    
    
    
    (1,907
    )Other
    
    
    107
    
    
    
    125Net cash provided by operating activities
    
    
    23,036
    
    
    
    10,942Cash flows from investing activitiesAcquisition, net of cash acquired
    
    
    
    
    
    
    (3,892
    )Capital expenditures
    
    
    (12,193
    )
    
    
    (6,796
    )Net cash used in investing activities
    
    
    (12,193
    )
    
    
    (10,688
    )Cash flows from financing activitiesRepayment of senior secured term loan
    
    
    
    
    
    
    (7,834
    )Capital lease payments
    
    
    (264
    )
    
    
    (205
    )Net cash used in financing activities
    
    
    (264
    )
    
    
    (8,039
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    365
    
    
    
    (217
    )Net increase (decrease) in cash and cash equivalents
    
    
    10,944
    
    
    
    (8,002
    )Cash and cash equivalents, beginning of period
    
    
    21,134
    
    
    
    26,093Cash and cash equivalents, end of period
    
    $
    32,078
    
    
    $
    18,091Supplemental noncash investing and financing activitiesLeasehold improvements provided by lessor under operating
leases
    
    $
    813
    
    
    $
    2,503Supplemental cash flow informationInterest paid
    
    $
    29,116
    
    
    $
    30,361Income taxes paid
    
    $
    781
    
    
    $
    405
  6




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




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Subsequent Events
  2. Recent Accounting Pronouncements
 FASB Accounting
Standards Codification TM
 Consolidations,
 Accounting for Redeemable Equity Instruments, Presentation in Financial Statements of
Redeemable Preferred Stocks
 Fair Value Measurements and Disclosures 
Measuring Liabilities at Fair Value
 Multiple-Deliverable Revenue Arrangementsa
consensus of the FASB Emerging Issues Task Force,
 8




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##### Table of Contents



3. Trade Accounts Receivable
  September 26,
    
    
    December 31,2009
    
    
    2008Trade accounts receivable
    
    $
    62,424
    
    
    $
    64,183Billable trade receivables
    
    
    41,161
    
    
    
    48,657Unbilled trade receivables pending completion of milestones,
contract authorizations, and retainage
    
    
    18,348
    
    
    
    15,797Other
    
    
    561
    
    
    
    1,427122,494
    
    
    
    130,064Allowance for doubtful accounts
    
    
    (227
    )
    
    
    (205
    )Trade accounts receivable, net
    
    $
    122,267
    
    
    $
    129,859Trade accounts receivable from major customersDepartment of Health and Human Services
    
    
    36
    %
    
    
    41
    %Department of Education
    
    
    10
    %
    
    
    10
    %Department of Defense
    
    
    11
    %
    
    
    
    *
 
 *
    
    Less than 10%. 4. Intangible Assets
  WeightedAverage Life
    
    September 26,
    
    
    December 31,(in years)
    
    2009
    
    
    2008Customer relationships
    
    10.7
    
    $
    205,724
    
    
    $
    205,724Intellectual property
    
    Indefinite
    
    
    11,178
    
    
    
    11,178Other
    
    4
    
    
    658
    
    
    
    658217,560
    
    
    
    217,560Accumulated amortization
    
    
    
    
    (55,556
    )
    
    
    (39,561
    )$
    162,004
    
    
    $
    177,999
  Years Ending December 312009 (remaining three months)
    
    $
    5,3312010
    
    
    21,3262011
    
    
    20,9542012
    
    
    20,7912013
    
    
    20,791Thereafter
    
    
    61,633$
    150,826
 9




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##### Table of Contents



5. Long-Term Debt
  September 26,
    
    
    December 31,2009
    
    
    2008Term loan under senior secured credit facility, due February
14, 2013,
with interest at variable rates (2.92% at September 27, 2009)
    
    $
    230,366
    
    
    $
    230,3669 5/8% Senior subordinated fixed rate notes, due February 15, 2015
    
    
    190,000
    
    
    
    190,000420,366
    
    
    
    420,366Less: current portion of long-term debt
    
    
    (594
    )
    
    
    $
    419,772
    
    
    $
    420,366Scheduled maturities of long-term debt2009 (remaining three months)
    
    
    
    
    
    $
    2010
    
    
    
    
    
    
    1,7812011
    
    
    
    
    
    
    2,3752012
    
    
    
    
    
    
    2,3752013
    
    
    
    
    
    
    223,8352014
    
    
    
    
    
    
    2015
    
    
    
    
    
    
    190,000$
    420,366
 Senior Secured Credit Facility
     10




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##### Table of Contents



9 5/8% Senior Subordinated Notes
    6. Derivative Instruments, Hedging Activities and Financial Instruments
   NotionalDerivative Financial Instruments
    
    Amount
    
    DescriptionInterest rate swap agreements
    
    $
    185,000
    
    
    Pay fixed and receive variableForeign currency forward contracts
    
    $
    7,126
    
    
    Sell Mexican Pesos
 Interest Rate Swap Agreements on Variable-Rate Term Loan
  Fixed
    
    VariableNotional
    
    Interest Rate
    
    Interest RateDate Entered
    
    Amount
    
    to be Paid
    
    to be Received
    
    Period CoveredFebruary 2007
    
    $
    110,000
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2009 to February 2010April 2008
    
    $
    75,000
    
    
    
    3.280
    %
    
    3-month LIBOR
    
    April 2008 to February 2010April 2008
    
    $
    150,000
    
    
    
    3.280
    %
    
    3-month LIBOR
    
    February 2010 to February 2011
  11




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##### Table of Contents



Foreign Currency Contracts
   Fair Value Measurements
  
    Level 1
    Observable inputs such as quoted prices (unadjusted) in active markets
for identical assets
or liabilities.
    Level 2
    Inputs, other than quoted prices that are observable for the asset or
liability, either directly or indirectly, including quoted prices for similar assets
or liabilities in active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; inputs other than quoted prices that are
observable for the asset or liability; and inputs that are derived principally from
or corroborated by observable market data by correlation or other means.
    Level 3
    Unobservable inputs that reflect the reporting entitys own assumptions.
  September 26,
    
    
    December 31,2009
    
    
    2008LiabilitiesLevel 1 - Quoted prices in active markets for identical items
    
    $
    
    
    
    $
    Level 2 - Significant other observable inputs:Interest rate swap agreements
    
    
    6,873
    
    
    
    9,342Foreign currency forward contracts
    
    
    350
    
    
    
    Total Level 2
    
    
    7,223
    
    
    
    9,342Level 3 - Significant unobservable inputs
    
    
    
    
    
    
    Total liabilities
    
    $
    7,223
    
    
    $
    9,342
 Derivative Instruments and Hedging Activities
  12




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Statements of Operations DataLocation of Gain(Loss)Location of
    
    
    
    
    
    Recognized in
    
    Amount of GainGain (Loss)
    
    
    
    
    
    Income on
    
    (Loss) RecognizedReclassified
    
    
    
    
    
    Derivative
    
    in Income onfrom
    
    
    
    
    
    (Ineffective
    
    DerivativeAccumulated
    
    Amount of Gain (Loss)
    
    
    Portion and
    
    (IneffectiveAmount of Gain (Loss)
    
    
    OCI into
    
    Reclassified from
    
    
    Amount
    
    Portion andDerivatives in Cash
    
    Recognized in OCI on
    
    
    Income
    
    Accumulated OCI into
    
    
    Excluded from
    
    Amount ExcludedFlow Hedging
    
    Derivative (Effective
    
    
    (Effective
    
    Income (Effective
    
    
    Effectiveness
    
    from EffectivenessRelationships
    

Portion)
    
    
    Portion)
    
    Portion)
    
    
    Testing)
    
    Testing)Three Months Ended
    
    
    
    
    Three Months Ended
    
    
    
    
    Three Months EndedSeptember 26, 2009
    
    
    
    
    September 26, 2009
    
    
    
    
    September 26, 2009Interest rate swap agreements
    
    $
    1,006
    
    
    Interest expense
    
    $
    (1,807
    )
    
    Interest expense
    
    $
    23Foreign currency forward
contracts
    
    
    34
    
    
    Cost of revenue
    
    
    (192
    )
    
    Cost of revenue
    
    
    $
    1,040
    
    
    
    
    $
    (1,999
    )
    
    
    
    $
    23Nine Months Ended
    
    
    
    Nine Months Ended
    
    
    
    Nine Months EndedSeptember 26, 2009
    
    
    
    September 26, 2009
    
    
    
    September 26, 2009Interest rate swap agreements
    
    $
    (1,927
    )
    
    Interest expense
    
    $
    (4,600
    )
    
    Interest expense
    
    $
    (70
    )Foreign currency forward
contracts
    
    
    (730
    )
    
    Cost of revenue
    
    
    (219
    )
    
    Cost of revenue
    
    
    $
    (2,657
    )
    
    
    
    $
    (4,819
    )
    
    
    
    $
    (70
    )
 Balance Sheet DataBalance
    
    Fair Value of Liability DerivativesDerivatives Designated as Hedging
    
    Sheet
    
    September 26,
    
    
    December 31,Instruments
    
    Location
    
    2009
    
    
    2008Interest rate swap agreements:Current portion
    
    Fair value of liability derivatives
    
    $
    4,487
    
    
    $
    6,063Non-current portion
    
    Other long-term liabilities
    
    
    2,386
    
    
    
    3,2796,873
    
    
    
    9,342Foreign currency forward contracts
    
    Fair value of liability derivatives
    
    
    350
    
    
    
    Total liabilitiy derivatives
    
    
    
    $
    7,223
    
    
    $
    9,342
 13




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##### Table of Contents



Financial Instruments
  CarryingAmount
    
    
    Fair ValueLong-term debtVariable-rate term loan under the senior secured credit facility
    
    $
    230,366
    
    
    $
    230,3669 5/8% senior subordinated notes, due February 15, 2015
    
    
    190,000
    
    
    
    176,700$
    420,366
    
    
    $
    407,066Interest rate swap agreements to pay fixed and receive variableShort-term liabilities
    
    $
    4,487
    
    
    $
    4,487Long-term liabilities
    
    
    2,386
    
    
    
    2,386$
    6,873
    
    
    $
    6,873Foreign currency forward contractsShort-term liabilities
    
    $
    350
    
    
    $
    350
  7. Income Taxes
      14




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##### Table of Contents



8. Commitments and Contingencies
   9. Equity-Based Compensation
    Class B
    
    
    
    
    
    
    Fair Value ofMembership
    
    
    Class B
    
    
    Class BInterests
    
    
    Membership
    
    
    MembershipAvailable for
    
    
    Interests
    
    
    Interests at DateGrant
    
    
    Outstanding
    
    
    of GrantBalance, December 31, 2008
    
    
    1.9
    %
    
    
    5.6
    %
    
    $
    5,679Granted
    
    
    (0.4
    )
    
    
    0.4
    
    
    
    329Forfeited
    
    
    0.5
    
    
    
    (0.5
    )
    
    
    (406
    )Balance, September 26, 2009
    
    
    2.0
    %
    
    
    5.5
    %
    
    $
    5,602At September 26, 2009:Vested
    
    
    
    
    
    
    2.0
    %Not yet vested
    
    
    
    
    
    
    3.55.5
    %
  15




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##### Table of Contents



Years Ending December 312009 (remaining three months)
    
    $
    2662010
    
    
    1,0662011
    
    
    1,0662012
    
    
    3282013
    
    
    1162014
    
    
    17$
    2,859
 10. Related Party Transactions
   11. Accumulated Other Comprehensive Income (Loss)
  September 26,
    
    
    December 31,2009
    
    
    2008Accumulated other comprehensive lossEffect of hedging activities, net of tax:Interest rate swap agreements
    
    $
    (6,101
    )
    
    $
    (8,774
    )Foreign
currency forward contracts
    
    
    (511
    )
    
    
    (6,612
    )
    
    
    (8,774
    )Foreign currency cumulative translation adjustment
    
    
    (3,311
    )
    
    
    (4,361
    )Total accumulated other comprehensive loss
    
    $
    (9,923
    )
    
    $
    (13,135
    )
 ForeignInterest
    
    
    CurrencyRate
    
    
    ForwardSummary of hedging activity
    
    Swaps
    
    
    Contracts
    
    
    TotalBalance, December 31, 2008
    
    $
    (8,774
    )
    
    $
    
    
    
    $
    (8,774
    )Change in fair value
    
    
    (1,927
    )
    
    
    (730
    )
    
    
    (2,657
    )Reclassification to interest expense
    
    
    4,600
    
    
    
    
    
    
    
    4,600Reclassification to cost of revenue
    
    
    
    
    
    
    219
    
    
    
    219Balance, September 26, 2009
    
    $
    (6,101
    )
    
    $
    (511
    )
    
    $
    (6,612
    )
 12. Business Segments and Major Customers
   16




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue by business segmentGovernment Group
    
    $
    125,714
    
    
    $
    107,949
    
    
    $
    359,061
    
    
    $
    320,845International Group
    
    
    17,011
    
    
    
    18,281
    
    
    
    47,763
    
    
    
    58,063Human Capital Group
    
    
    7,712
    
    
    
    7,161
    
    
    
    24,569
    
    
    
    21,892Elimination
    
    
    (1,044
    )
    
    
    
    
    
    
    (3,518
    )
    
    
    Total revenue
    
    $
    149,393
    
    
    $
    133,391
    
    
    $
    427,875
    
    
    $
    400,800Operating income (loss) by business segmentGovernment Group
    
    $
    7,989
    
    
    $
    10,081
    
    
    $
    26,349
    
    
    $
    19,608International Group
    
    
    (2,181
    )
    
    
    433
    
    
    
    (4,639
    )
    
    
    1,142Human Capital Group
    
    
    (738
    )
    
    
    219
    
    
    
    (2,023
    )
    
    
    (141
    )Corporate
    
    
    (14
    )
    
    
    (14
    )
    
    
    (41
    )
    
    
    (44
    )Total operating income
    
    
    5,056
    
    
    
    10,719
    
    
    
    19,646
    
    
    
    20,565Interest expense and other, net
    
    
    8,676
    
    
    
    8,534
    
    
    
    25,542
    
    
    
    26,261Income (loss) before income taxes
    
    $
    (3,620
    )
    
    $
    2,185
    
    
    $
    (5,896
    )
    
    $
    (5,696
    )Depreciation and amortizationGovernment Group
    
    $
    6,530
    
    
    $
    7,375
    
    
    $
    20,434
    
    
    $
    21,447International Group
    
    
    1,274
    
    
    
    1,188
    
    
    
    3,409
    
    
    
    3,598Human Capital Group
    
    
    372
    
    
    
    397
    
    
    
    1,112
    
    
    
    1,281Total depreciation and amortization
    
    $
    8,176
    
    
    $
    8,960
    
    
    $
    24,955
    
    
    $
    26,326Revenue from major customers as a percent of total revenueDepartment of Health and Human Services
    
    
    39
    %
    
    
    46
    %
    
    
    41
    %
    
    
    46
    %Department of Education
    
    
    15
    %
    
    
    16
    %
    
    
    16
    %
    
    
    17
    %Department of Defense
    
    
    
    *
    
    
    
    *
    
    
    10
    %
    
    
    
    *
 
 *
    
    Less than 10%. 13.
Condensed Issuer and Non-Guarantor Financial Information
  17




---



##### Table of Contents



Issuer and Non-Guarantor Financial Information
Condensed Combining Balance Sheets
(unaudited)
 September 26, 2009
    
    
    December 31, 2008Non-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Guar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    25,176
    
    
    $
    6,902
    
    
    $
    
    
    
    $
    32,078
    
    
    $
    15,519
    
    
    $
    5,615
    
    
    $
    
    
    
    $
    21,134Trade receivables, net
    
    
    107,822
    
    
    
    14,445
    
    
    
    
    
    
    
    122,267
    
    
    
    117,453
    
    
    
    12,406
    
    
    
    
    
    
    
    129,859Loan receivable from Vangent Mexico
    
    
    4,448
    
    
    
    
    
    
    
    (4,448
    )
    
    
    Prepaid expenses
    
    
    4,699
    
    
    
    2,671
    
    
    
    
    
    
    
    7,370
    
    
    
    4,316
    
    
    
    1,818
    
    
    
    
    
    
    
    6,134Deferred contract costs
    
    
    5,872
    
    
    
    
    
    
    
    
    
    
    
    5,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other current assets
    
    
    675
    
    
    
    5,931
    
    
    
    
    
    
    
    6,606
    
    
    
    4,800
    
    
    
    1,479
    
    
    
    
    
    
    
    6,279Total current assets
    
    
    148,692
    
    
    
    29,949
    
    
    
    (4,448
    )
    
    
    174,193
    
    
    
    142,088
    
    
    
    21,318
    
    
    
    
    
    
    
    163,406Property and equipment, net
    
    
    22,143
    
    
    
    7,816
    
    
    
    
    
    
    
    29,959
    
    
    
    21,238
    
    
    
    5,914
    
    
    
    
    
    
    
    27,152Intangible assets, net
    
    
    150,746
    
    
    
    11,258
    
    
    
    
    
    
    
    162,004
    
    
    
    166,216
    
    
    
    11,783
    
    
    
    
    
    
    
    177,999Goodwill
    
    
    261,327
    
    
    
    25,539
    
    
    
    
    
    
    
    286,866
    
    
    
    261,327
    
    
    
    25,539
    
    
    
    
    
    
    
    286,866Deferred
debt financing costs, net
    
    
    8,568
    
    
    
    
    
    
    
    
    
    
    
    8,568
    
    
    
    10,197
    
    
    
    
    
    
    
    
    
    
    
    10,197Other
    
    
    343
    
    
    
    86
    
    
    
    
    
    
    
    429
    
    
    
    423
    
    
    
    231
    
    
    
    
    
    
    
    654Investment
in and advances to Non-Guarantor subsidiaries
    
    
    54,329
    
    
    
    
    
    
    
    (54,329
    )
    
    
    
    
    
    
    56,162
    
    
    
    
    
    
    
    (56,162
    )
    
    
    Total assets
    
    $
    646,148
    
    
    $
    74,648
    
    
    $
    (58,777
    )
    
    $
    662,019
    
    
    $
    657,651
    
    
    $
    64,785
    
    
    $
    (56,162
    )
    
    $
    666,274Liabilities and Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    594
    
    
    $
    
    
    
    $
    
    
    
    $
    594
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loan payable to Vangent, Inc. by
Vangent Mexico
    
    
    
    
    
    
    4,448
    
    
    
    (4,448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts payable and accrued
liabilities
    
    
    57,401
    
    
    
    13,755
    
    
    
    
    
    
    
    71,156
    
    
    
    59,294
    
    
    
    7,815
    
    
    
    
    
    
    
    67,109Fair value of liability
derivatives, current
portion
    
    
    4,487
    
    
    
    350
    
    
    
    
    
    
    
    4,837
    
    
    
    6,063
    
    
    
    
    
    
    
    
    
    
    
    6,063Accrued interest payable
    
    
    2,510
    
    
    
    
    
    
    
    
    
    
    
    2,510
    
    
    
    8,304
    
    
    
    
    
    
    
    
    
    
    
    8,304Deferred tax liability
    
    
    4,974
    
    
    
    35
    
    
    
    
    
    
    
    5,009
    
    
    
    3,962
    
    
    
    
    
    
    
    
    
    
    
    3,962Advance payments on contracts
    
    
    1,775
    
    
    
    927
    
    
    
    
    
    
    
    2,702
    
    
    
    1,952
    
    
    
    743
    
    
    
    
    
    
    
    2,695Total current liabilities
    
    
    71,741
    
    
    
    19,515
    
    
    
    (4,448
    )
    
    
    86,808
    
    
    
    79,575
    
    
    
    8,558
    
    
    
    0
    
    
    
    88,133Long-term debt, net of current portion
    
    
    419,772
    
    
    
    
    
    
    
    
    
    
    
    419,772
    
    
    
    420,366
    
    
    
    
    
    
    
    
    
    
    
    420,366Other long-term liabilities
    
    
    7,315
    
    
    
    1,386
    
    
    
    (698
    )
    
    
    8,003
    
    
    
    7,814
    
    
    
    160
    
    
    
    (95
    )
    
    
    7,879Deferred tax liability
    
    
    9,110
    
    
    
    116
    
    
    
    
    
    
    
    9,226
    
    
    
    5,259
    
    
    
    
    
    
    
    
    
    
    
    5,259Total liabilities
    
    
    507,938
    
    
    
    21,017
    
    
    
    (5,146
    )
    
    
    523,809
    
    
    
    513,014
    
    
    
    8,718
    
    
    
    (95
    )
    
    
    521,637Stockholders equity
    
    
    138,210
    
    
    
    53,631
    
    
    
    (53,631
    )
    
    
    138,210
    
    
    
    144,637
    
    
    
    56,067
    
    
    
    (56,067
    )
    
    
    144,637Total liabilities and stockholders
equity
    
    $
    646,148
    
    
    $
    74,648
    
    
    $
    (58,777
    )
    
    $
    662,019
    
    
    $
    657,651
    
    
    $
    64,785
    
    
    $
    (56,162
    )
    
    $
    666,274
 18




---



##### Table of Contents



Issuer and Non-Guarantor Financial Information
Condensed Combining Statements of Operations
(unaudited)
 Three Months Ended September 26, 2009
    
    
    Three Months Ended September 27, 2008Non-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Guar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalRevenue
    
    $
    132,519
    
    
    $
    16,874
    
    
    $
    
    
    
    $
    149,393
    
    
    $
    115,192
    
    
    $
    18,199
    
    
    $
    
    
    
    $
    133,391Cost of revenue
    
    
    111,225
    
    
    
    17,342
    
    
    
    
    
    
    
    128,567
    
    
    
    91,014
    
    
    
    15,456
    
    
    
    
    
    
    
    106,470Gross profit
    
    
    21,294
    
    
    
    (468
    )
    
    
    
    
    
    
    20,826
    
    
    
    24,178
    
    
    
    2,743
    
    
    
    
    
    
    
    26,921General and administrative
expenses
    
    
    10,122
    
    
    
    681
    
    
    
    
    
    
    
    10,803
    
    
    
    11,377
    
    
    
    1,068
    
    
    
    
    
    
    
    12,445Selling and marketing expenses
    
    
    4,229
    
    
    
    738
    
    
    
    
    
    
    
    4,967
    
    
    
    3,111
    
    
    
    646
    
    
    
    
    
    
    
    3,757Operating income (loss)
    
    
    6,943
    
    
    
    (1,887
    )
    
    
    
    
    
    
    5,056
    
    
    
    9,690
    
    
    
    1,029
    
    
    
    
    
    
    
    10,719Interest expense and other, net
    
    
    8,535
    
    
    
    141
    
    
    
    
    
    
    
    8,676
    
    
    
    8,463
    
    
    
    71
    
    
    
    
    
    
    
    8,534Income (loss) before income
taxes
    
    
    (1,592
    )
    
    
    (2,028
    )
    
    
    
    
    
    
    (3,620
    )
    
    
    1,227
    
    
    
    958
    
    
    
    
    
    
    
    2,185Provision for income taxes
    
    
    1,582
    
    
    
    65
    
    
    
    
    
    
    
    1,647
    
    
    
    1,676
    
    
    
    956
    
    
    
    
    
    
    
    2,632Equity in net income (loss) of
Non-Guarantor subsidiaries
    
    
    (2,093
    )
    
    
    
    
    
    
    2,093
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )
    
    
    Net income (loss)
    
    $
    (5,267
    )
    
    $
    (2,093
    )
    
    $
    2,093
    
    
    $
    (5,267
    )
    
    $
    (447
    )
    
    $
    2
    
    
    $
    (2
    )
    
    $
    (447
    )
 Nine Months Ended September 26, 2009
    
    
    Nine Months Ended September 27, 2008Non-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Guar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalRevenue
    
    $
    380,493
    
    
    $
    47,382
    
    
    $
    
    
    
    $
    427,875
    
    
    $
    342,991
    
    
    $
    57,809
    
    
    $
    
    
    
    $
    400,800Cost of revenue
    
    
    316,811
    
    
    
    45,931
    
    
    
    
    
    
    
    362,742
    
    
    
    280,042
    
    
    
    49,528
    
    
    
    
    
    
    
    329,570Gross profit
    
    
    63,682
    
    
    
    1,451
    
    
    
    
    
    
    
    65,133
    
    
    
    62,949
    
    
    
    8,281
    
    
    
    
    
    
    
    71,230General and administrative
expenses
    
    
    28,989
    
    
    
    2,649
    
    
    
    
    
    
    
    31,638
    
    
    
    35,581
    
    
    
    3,121
    
    
    
    
    
    
    
    38,702Selling and marketing expenses
    
    
    11,826
    
    
    
    2,023
    
    
    
    
    
    
    
    13,849
    
    
    
    9,714
    
    
    
    2,249
    
    
    
    
    
    
    
    11,963Operating income (loss)
    
    
    22,867
    
    
    
    (3,221
    )
    
    
    
    
    
    
    19,646
    
    
    
    17,654
    
    
    
    2,911
    
    
    
    
    
    
    
    20,565Interest expense and other, net
    
    
    25,438
    
    
    
    104
    
    
    
    
    
    
    
    25,542
    
    
    
    26,277
    
    
    
    (16
    )
    
    
    
    
    
    
    26,261Income (loss) before income
taxes
    
    
    (2,571
    )
    
    
    (3,325
    )
    
    
    
    
    
    
    (5,896
    )
    
    
    (8,623
    )
    
    
    2,927
    
    
    
    
    
    
    
    (5,696
    )Provision (benefit) for income
taxes
    
    
    4,864
    
    
    
    (345
    )
    
    
    
    
    
    
    4,519
    
    
    
    4,730
    
    
    
    998
    
    
    
    
    
    
    
    5,728Equity in net income (loss) of
Non-Guarantor subsidiaries
    
    
    (2,980
    )
    
    
    
    
    
    
    2,980
    
    
    
    
    
    
    
    1,929
    
    
    
    
    
    
    
    (1,929
    )
    
    
    Net income (loss)
    
    $
    (10,415
    )
    
    $
    (2,980
    )
    
    $
    2,980
    
    
    $
    (10,415
    )
    
    $
    (11,424
    )
    
    $
    1,929
    
    
    $
    (1,929
    )
    
    $
    (11,424
    )
 19




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##### Table of Contents



Issuer and Non-Guarantor Financial Information
Condensed Combining Statements of Cash Flows
Unaudited
 Nine Months Ended September 26, 2009
    
    
    Nine Months Ended September 27, 2008Non
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NonGuar-
    
    
    Elimin-
    
    
    
    
    
    
    
    
    
    
    Guar-
    
    
    Elimin-Issuer
    
    
    antors
    
    
    ations
    
    
    Total
    
    
    Issuer
    
    
    antors
    
    
    ations
    
    
    TotalNet cash
provided by operating activities
    
    $
    22,558
    
    
    $
    478
    
    
    $
    
    
    
    $
    23,036
    
    
    $
    10,044
    
    
    $
    898
    
    
    $
    
    
    
    $
    10,942Cash flows from investing activities:Loans to Vangent Mexico
    
    
    (4,448
    )
    
    
    
    
    
    
    4,448Loan repayment from Vangent
Mexico
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    (600
    )
    
    
    Loan repayment from Vangent, Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,806
    
    
    
    
    
    
    
    (1,806
    )
    
    
    Acquisition, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,892
    )
    
    
    
    
    
    
    
    
    
    
    (3,892
    )Capital expenditures
    
    
    (8,262
    )
    
    
    (3,931
    )
    
    
    
    
    
    
    (12,193
    )
    
    
    (6,234
    )
    
    
    (562
    )
    
    
    
    
    
    
    (6,796
    )Net cash used in investing activities
    
    
    (12,710
    )
    
    
    (3,931
    )
    
    
    4,448
    
    
    
    (12,193
    )
    
    
    (7,720
    )
    
    
    (562
    )
    
    
    (2,406
    )
    
    
    (10,688
    )Cash flows from financing activities:Loans from Vangent, Inc.
    
    
    
    
    
    
    4,448
    
    
    
    (4,448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayment of loans to Vangent, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,406
    )
    
    
    2,406
    
    
    
    Repayment of senior secured loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,834
    )
    
    
    
    
    
    
    
    
    
    
    (7,834
    )Capital lease payments
    
    
    (191
    )
    
    
    (73
    )
    
    
    
    
    
    
    (264
    )
    
    
    (205
    )
    
    
    
    
    
    
    
    
    
    
    (205
    )Net cash
provided by (used in) financing activities
    
    
    (191
    )
    
    
    4,375
    
    
    
    (4,448
    )
    
    
    (264
    )
    
    
    (8,039
    )
    
    
    (2,406
    )
    
    
    2,406
    
    
    
    (8,039
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    365
    
    
    
    
    
    
    
    365
    
    
    
    
    
    
    
    (217
    )
    
    
    
    
    
    
    (217
    )Net increase (decrease) in cash and
cash equivalents
    
    
    9,657
    
    
    
    1,287
    
    
    
    
    
    
    
    10,944
    
    
    
    (5,715
    )
    
    
    (2,287
    )
    
    
    
    
    
    
    (8,002
    )Cash and cash equivalents,
beginning of period
    
    
    15,519
    
    
    
    5,615
    
    
    
    
    
    
    
    21,134
    
    
    
    19,022
    
    
    
    7,071
    
    
    
    
    
    
    
    26,093Cash and cash equivalents, end
of period
    
    $
    25,176
    
    
    $
    6,902
    
    
    $
    
    
    
    $
    32,078
    
    
    $
    13,307
    
    
    $
    4,784
    
    
    $
    
    
    
    $
    18,091
 20




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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, 2008.
 Overview
      Nature of Our Contracts
   21




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 26,
    
    September 27,
    
    September 26,
    
    September 27,2009
    
    2008
    
    2009
    
    2008Cost-plus
    
    
    54
    %
    
    
    49
    %
    
    
    51
    %
    
    
    48
    %Fixed-price
    
    
    42
    %
    
    
    45
    %
    
    
    45
    %
    
    
    46
    %Time and materials
    
    
    4
    %
    
    
    6
    %
    
    
    4
    %
    
    
    6
    %100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Contract Backlog
  September 26, 2009
    
    
    December 31, 2008Total
    
    
    Funded
    
    
    Total
    
    
    FundedGovernment Group
    
    $
    1,871.8
    
    
    $
    233.1
    
    
    $
    1,321.0
    (1)
    
    $
    243.3
    (1)International Group
    
    
    354.4
    
    
    
    251.2
    
    
    
    360.3
    
    
    
    262.8Human Capital Group
    
    
    10.1
    
    
    
    10.1
    
    
    
    16.7
    
    
    
    16.7$
    2,236.3
    
    
    $
    494.4
    
    
    $
    1,698.0
    (1)
    
    $
    522.8
    (1)
 
 (1)
    
    Reflects a revision to reduce total contract backlog and funded backlog by $70.1 million, compared
with amounts previously reported in our annual report on Form 10-K for the year ended December 31,
2008. Goodwill and Intangible Assets
  Critical Accounting Policies
   Recent Accounting Pronouncements
  22




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##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    Increase
    
    
    September 26,
    
    
    September 27,
    
    
    Increase2009
    
    
    2008
    
    
    (Decrease)
    
    
    2009
    
    
    2008
    
    
    (Decrease)Statements of Operations DataRevenue
    
    $
    149,393
    
    
    $
    133,391
    
    
    $
    16,002
    
    
    $
    427,875
    
    
    $
    400,800
    
    
    $
    27,075Cost of revenue
    
    
    128,567
    
    
    
    106,470
    
    
    
    22,097
    
    
    
    362,742
    
    
    
    329,570
    
    
    
    33,172Gross profit
    
    
    20,826
    
    
    
    26,921
    
    
    
    (6,095
    )
    
    
    65,133
    
    
    
    71,230
    
    
    
    (6,097
    )General and administrative expenses
    
    
    10,803
    
    
    
    12,445
    
    
    
    (1,642
    )
    
    
    31,638
    
    
    
    38,702
    
    
    
    (7,064
    )Selling and marketing expenses
    
    
    4,967
    
    
    
    3,757
    
    
    
    1,210
    
    
    
    13,849
    
    
    
    11,963
    
    
    
    1,886Operating income
    
    
    5,056
    
    
    
    10,719
    
    
    
    (5,663
    )
    
    
    19,646
    
    
    
    20,565
    
    
    
    (919
    )Interest expense and other, net
    
    
    8,676
    
    
    
    8,534
    
    
    
    142
    
    
    
    25,542
    
    
    
    26,261
    
    
    
    (719
    )Income (loss) before income taxes
    
    
    (3,620
    )
    
    
    2,185
    
    
    
    (5,805
    )
    
    
    (5,896
    )
    
    
    (5,696
    )
    
    
    (200
    )Provision for income taxes
    
    
    1,647
    
    
    
    2,632
    
    
    
    (985
    )
    
    
    4,519
    
    
    
    5,728
    
    
    
    (1,209
    )Net loss
    
    $
    (5,267
    )
    
    $
    (447
    )
    
    $
    (4,820
    )
    
    $
    (10,415
    )
    
    $
    (11,424
    )
    
    $
    1,009Statements of Operations Data as a Percent of RevenueRevenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    86.1
    
    
    
    79.8
    
    
    
    
    
    
    
    84.8
    
    
    
    82.2Gross profit margin
    
    
    13.9
    
    
    
    20.2
    
    
    
    
    
    
    
    15.2
    
    
    
    17.8General and administrative expenses
    
    
    7.2
    
    
    
    9.4
    
    
    
    
    
    
    
    7.4
    
    
    
    9.7Selling and marketing expenses
    
    
    3.3
    
    
    
    2.8
    
    
    
    
    
    
    
    3.2
    
    
    
    3.0Operating income margin
    
    
    3.4
    
    
    
    8.0
    
    
    
    
    
    
    
    4.6
    
    
    
    5.1Interest expense and other, net
    
    
    5.8
    
    
    
    6.4
    
    
    
    
    
    
    
    6.0
    
    
    
    6.5Income (loss) before income taxes
    
    
    (2.4
    )
    
    
    1.6
    
    
    
    
    
    
    
    (1.4
    )
    
    
    (1.4
    )Provision for income taxes
    
    
    1.1
    
    
    
    1.9
    
    
    
    
    
    
    
    1.0
    
    
    
    1.5Net loss
    
    
    (3.5
    )%
    
    
    (0.3
    )%
    
    
    
    
    
    
    (2.4
    )%
    
    
    (2.9
    )%
 Three and Nine Months Ended September 26, 2009 and September 27, 2008
 Revenue
    23




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##### Table of Contents



Cost of Revenue
   General and Administrative Expenses
   Selling and Marketing Expenses
  Operating Income
    24




---



##### Table of Contents



Interest Expense and Other, Net
  Provision for Income Taxes
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Provision (benefit) for income
taxes excluding
tax valuation allowance
    
    $
    555
    
    
    $
    231
    
    
    $
    1,011
    
    
    $
    (1,391
    )Tax valuation allowance
    
    
    1,092
    
    
    
    2,401
    
    
    
    3,508
    
    
    
    7,119Total provision for income taxes
    
    $
    1,647
    
    
    $
    2,632
    
    
    $
    4,519
    
    
    $
    5,728
   25




---



##### Table of Contents



Business Segments
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    Increase
    
    
    September 26,
    
    
    September 27,
    
    
    Increase2009
    
    
    2008
    
    
    (Decrease)
    
    
    2009
    
    
    2008
    
    
    (Decrease)Revenue by business segmentGovernment Group
    
    $
    125,714
    
    
    $
    107,949
    
    
    $
    17,765
    
    
    $
    359,061
    
    
    $
    320,845
    
    
    $
    38,216International Group
    
    
    17,011
    
    
    
    18,281
    
    
    
    (1,270
    )
    
    
    47,763
    
    
    
    58,063
    
    
    
    (10,300
    )Human Capital Group
    
    
    7,712
    
    
    
    7,161
    
    
    
    551
    
    
    
    24,569
    
    
    
    21,892
    
    
    
    2,677Elimination
    
    
    (1,044
    )
    
    
    
    
    
    
    (1,044
    )
    
    
    (3,518
    )
    
    
    
    
    
    
    (3,518
    )$
    149,393
    
    
    $
    133,391
    
    
    $
    16,002
    
    
    $
    427,875
    
    
    $
    400,800
    
    
    $
    27,075Business segment revenue as a percent of total revenueGovernment Group
    
    
    84.1
    %
    
    
    80.9
    %
    
    
    
    
    
    
    83.9
    %
    
    
    80.0
    %International Group
    
    
    11.4
    
    
    
    13.7
    
    
    
    
    
    
    
    11.2
    
    
    
    14.5Human Capital Group
    
    
    5.2
    
    
    
    5.4
    
    
    
    
    
    
    
    5.7
    
    
    
    5.5Other
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    (0.8
    )
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    100.0
    %Operating income (loss) by business segmentGovernment Group
    
    $
    7,989
    
    
    $
    10,081
    
    
    $
    (2,092
    )
    
    $
    26,349
    
    
    $
    19,608
    
    
    $
    6,741International Group
    
    
    (2,181
    )
    
    
    433
    
    
    
    (2,614
    )
    
    
    (4,639
    )
    
    
    1,142
    
    
    
    (5,781
    )Human Capital Group
    
    
    (738
    )
    
    
    219
    
    
    
    (957
    )
    
    
    (2,023
    )
    
    
    (141
    )
    
    
    (1,882
    )Corporate
    
    
    (14
    )
    
    
    (14
    )
    
    
    
    
    
    
    (41
    )
    
    
    (44
    )
    
    
    3$
    5,056
    
    
    $
    10,719
    
    
    $
    (5,663
    )
    
    $
    19,646
    
    
    $
    20,565
    
    
    $
    (919
    )Operating income (loss) marginGovernment Group
    
    
    6.4
    %
    
    
    9.3
    %
    
    
    
    
    
    
    7.3
    %
    
    
    6.1
    %International Group
    
    
    (12.8
    )%
    
    
    2.4
    %
    
    
    
    
    
    
    (9.7
    )%
    
    
    2.0
    %Human Capital Group
    
    
    (9.6
    )%
    
    
    3.1
    %
    
    
    
    
    
    
    (8.2
    )%
    
    
    (0.6
    )%
 Government Group
   26




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##### Table of Contents



International Group
    Human Capital Group
   27




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##### Table of Contents



Liquidity and Capital Resources
     Working Capital
  September 26,
    
    
    December 31,2009
    
    
    2008Cash and cash equivalents
    
    $
    32,078
    
    
    $
    21,134Trade receivables, net
    
    
    122,267
    
    
    
    129,859Prepaid expenses and other assets
    
    
    19,848
    
    
    
    12,413Current portion of long-term debt
    
    
    (594
    )
    
    
    Accounts payable and accrued liabilities
    
    
    (71,156
    )
    
    
    (67,109
    )Fair value of liability derivatives, current portion
    
    
    (4,837
    )
    
    
    (6,063
    )Accrued interest payable
    
    
    (2,510
    )
    
    
    (8,304
    )Deferred tax liability
    
    
    (5,009
    )
    
    
    (3,962
    )Advance payments on contracts
    
    
    (2,702
    )
    
    
    (2,695
    )Working capital
    
    $
    87,385
    
    
    $
    75,273
 Cash Flows
  Nine Months EndedSeptember 26,
    
    September 27,2009
    
    2008Net cash flows provided by (used in)Operating activities
    
    $
    23,036
    
    
    $
    10,942Investing activities
    
    
    (12,193
    )
    
    
    (10,688
    )Financing activities
    
    
    (264
    )
    
    
    (8,039
    )
 28




---



##### Table of Contents



Operating Activities
     Investing Activities
  Financing Activities
  Credit Ratings
  29




---



##### Table of Contents



Standard& Poor's
    
    Moody'sSenior secured credit facility
    
    BB
    
    Ba3Senior subordinated notes due 2015
    
    B-
    
    CaalCorporate credit
    
    B+
    
    B2Outlook
    
    Stable
    
    Negative
 Contractual Obligations
  Payments Due by Period2009(remainingthree
    
    
    2010 and
    
    
    2012 andTotal
    
    
    months)
    
    
    2011
    
    
    2013
    
    
    ThereafterLong-term debt:Term loan under senior secured
credit
facility (1)
    
    $
    230.4
    
    
    $
    
    
    
    $
    4.2
    
    
    $
    226.2
    
    
    $
    Senior subordinated notes due 2015
    
    
    190.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190.0Interest relating to long-term debt (2)
    
    
    129.6
    
    
    
    3.6
    
    
    
    54.6
    
    
    
    44.0
    
    
    
    27.4Operating and capital leases
    
    
    80.5
    
    
    
    6.0
    
    
    
    36.2
    
    
    
    19.9
    
    
    
    18.4Purchase and other contractual
commitments (3)
    
    
    21.2
    
    
    
    6.2
    
    
    
    15.0
    
    
    
    
    
    
    
    $
    651.7
    
    
    $
    15.8
    
    
    $
    110.0
    
    
    $
    290.1
    
    
    $
    235.8
 
 (1)
    
    There were no borrowings under the revolving credit facility at September 26, 2009.
Scheduled payments for the term loan under the senior secured credit facility do not give
effect to possible future additional mandatory prepayments resulting from excess cash flow.(2)
    
    Future interest payments consist of interest on the variable-rate term loan under the senior
secured credit facility, the related interest rate swaps, and the fixed rate of 9 5/8% for
the senior subordinated notes.(3)
    
    Purchase and other contractual commitments represent minimum noncancelable obligations under
service and other agreements, primarily information technology and telecommunications
services. Variable Interest Entities
  Off-Balance Sheet Arrangements
  30




---



##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Financial Instruments
  CarryingAmount
    
    
    Fair ValueLong-term debtVariable-rate term loan under senior secured credit facility
    
    $
    230.4
    
    
    $
    230.49 5/8% senior subordinated notes, due February 15, 2015
    
    
    190.0
    
    
    
    176.7$
    420.4
    
    
    $
    407.1Interest rate swap agreements to pay fixed and receive
variableShort-term liabilities
    
    $
    4.5
    
    
    $
    4.5Long-term liabilities
    
    
    2.4
    
    
    
    2.4$
    6.9
    
    
    $
    6.9Foreign currency forward contractsShort-term liabilities
    
    $
    0.4
    
    
    $
    0.4
  Interest Rate Risk
   Foreign Currency Risk
    Inflation Risk
  31




---



##### Table of Contents



ITEM 4T.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  Our operations may suffer significant disruption as a result of a serious pandemic.
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5.
    
    OTHER INFORMATION
  32




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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.November 9, 2009
    /s/ James C. ReaganJames C. ReaganSenior Vice President and Chief Financial Officer

(Principal Financial and Principal Accounting Officer) 33




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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.
 34