##### 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 March 28, 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
    
    (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 Statements
    
    
    3Condensed Consolidated Balance Sheets as of December 31, 2008
and March 28, 2009 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the three
months ended March 29, 2008 and March 28, 2009 (unaudited)
    
    
    4Condensed Consolidated Statements of Stockholders Equity and
Comprehensive Income (Loss) for the three months ended March
29, 2008 and March 28, 2009 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the three
months ended March 29, 2008 and March 28, 2009 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4T. Controls and Procedures
    
    
    31PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31Signature
    
    
    32Exhibit 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
 
 December 31,
    
    
    March 28,2008
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    21,134
    
    
    $
    8,808Trade receivables, net
    
    
    129,859
    
    
    
    131,972Other receivables and prepaid items
    
    
    12,413
    
    
    
    14,312Total current assets
    
    
    163,406
    
    
    
    155,092Property and equipment, net
    
    
    27,152
    
    
    
    27,016Intangible assets, net
    
    
    177,999
    
    
    
    172,667Goodwill
    
    
    286,866
    
    
    
    286,866Deferred debt financing costs, net
    
    
    10,197
    
    
    
    9,648Other assets
    
    
    654
    
    
    
    778Total assets
    
    $
    666,274
    
    
    $
    652,067Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    73,172
    
    
    $
    61,958Accrued interest
    
    
    8,304
    
    
    
    3,347Deferred tax liability
    
    
    3,962
    
    
    
    3,467Advance payments on contracts
    
    
    2,695
    
    
    
    2,293Total current liabilities
    
    
    88,133
    
    
    
    71,065Long-term debt, net of current portion
    
    
    420,366
    
    
    
    420,366Other long-term liabilities
    
    
    7,879
    
    
    
    7,179Deferred tax liability
    
    
    5,259
    
    
    
    7,390Total liabilities
    
    
    521,637
    
    
    
    506,000Commitments 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
    
    
    206,328
    
    
    
    206,581Accumulated other comprehensive loss
    
    
    (13,135
    )
    
    
    (12,922
    )Accumulated deficit
    
    
    (48,556
    )
    
    
    (47,592
    )Total stockholders equity
    
    
    144,637
    
    
    
    146,067Total liabilities and stockholders equity
    
    $
    666,274
    
    
    $
    652,067
   3




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##### Table of Contents



Vangent, Inc.
 
 Condensed Consolidated Statements of Operations
 Three Months EndedMarch 29,
    
    
    March 28,2008
    
    
    2009Revenue
    
    $
    143,475
    
    
    $
    137,472Cost of revenue
    
    
    117,166
    
    
    
    111,904Gross profit
    
    
    26,309
    
    
    
    25,568General and administrative expenses
    
    
    13,784
    
    
    
    10,291Selling and marketing expenses
    
    
    4,131
    
    
    
    4,317Operating income
    
    
    8,394
    
    
    
    10,960Interest expense
    
    
    9,218
    
    
    
    8,400Interest income
    
    
    (268
    )
    
    
    (29
    )Income (loss) before income taxes
    
    
    (556
    )
    
    
    2,589Provision for income taxes
    
    
    1,868
    
    
    
    1,625Net income (loss)
    
    $
    (2,424
    )
    
    $
    964
   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, 2007
    
    
    100
    
    
    $
    
    
    
    $
    205,275
    
    
    $
    (2,937
    )
    
    $
    (22,049
    )
    
    $
    180,289Effect of hedging activities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,643
    )
    
    
    
    
    
    
    (2,643
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    81Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,424
    )
    
    
    (2,424
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,986
    )Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    247
    
    
    
    
    
    
    
    
    
    
    
    247Balance, March 29, 2008
    
    
    100
    
    
    $
    
    
    
    $
    205,522
    
    
    $
    (5,499
    )
    
    $
    (24,473
    )
    
    $
    175,550Balance, December 31, 2008
    
    
    100
    
    
    $
    
    
    
    $
    206,328
    
    
    $
    (13,135
    )
    
    $
    (48,556
    )
    
    $
    144,637Effect of hedging activities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    552
    
    
    
    
    
    
    
    552Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (339
    )
    
    
    
    
    
    
    (339
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    964
    
    
    
    964Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,177Equity-based compensation
    
    
    
    
    
    
    
    
    
    
    253
    
    
    
    
    
    
    
    
    
    
    
    253Balance, March 28, 2009
    
    
    100
    
    
    $
    
    
    
    $
    206,581
    
    
    $
    (12,922
    )
    
    $
    (47,592
    )
    
    $
    146,067
   5




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##### Table of Contents



Vangent, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 Three Months EndedMarch 29,
    
    
    March 28,2008
    
    
    2009Cash flows from operating activitiesNet income (loss)
    
    $
    (2,424
    )
    
    $
    964Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Amortization of intangibles
    
    
    5,235
    
    
    
    5,332Depreciation and amortization
    
    
    3,184
    
    
    
    3,014Equity-based compensation expense
    
    
    247
    
    
    
    253Deferred income taxes
    
    
    1,523
    
    
    
    1,572Changes in operating assets and liabilities:Trade receivables
    
    
    (10,171
    )
    
    
    (2,256
    )Other receivables and prepaid and other assets
    
    
    (3,789
    )
    
    
    (1,403
    )Accounts payable and accrued liabilities
    
    
    15,021
    
    
    
    (11,741
    )Accrued interest payable
    
    
    (5,048
    )
    
    
    (4,957
    )Advance payments on contracts
    
    
    (922
    )
    
    
    (402
    )Other
    
    
    700
    
    
    
    (202
    )Net cash provided by (used in) operating activities
    
    
    3,556
    
    
    
    (9,826
    )Cash flows from investing activitiesCapital expenditures
    
    
    (1,570
    )
    
    
    (2,309
    )Net cash used in investing activities
    
    
    (1,570
    )
    
    
    (2,309
    )Cash flows from financing activitiesRepayment of senior secured term loan
    
    
    (5,525
    )
    
    
    Capital lease payments
    
    
    (74
    )
    
    
    (82
    )Net cash used in financing activities
    
    
    (5,599
    )
    
    
    (82
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    20
    
    
    
    (109
    )Net decrease in cash and cash equivalents
    
    
    (3,593
    )
    
    
    (12,326
    )Cash and cash equivalents, beginning of period
    
    
    26,093
    
    
    
    21,134Cash and cash equivalents, end of period
    
    $
    22,500
    
    
    $
    8,808Supplemental cash flow informationInterest paid
    
    $
    13,630
    
    
    $
    12,891Income taxes paid
    
    
    204
    
    
    
    456
   6




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##### Table of Contents



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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##### Table of Contents



2. Recent Accounting Pronouncements
 The Hierarchy of Generally Accepted Accounting
Principles FASB Accounting
Standards Codification TM
 Interim Disclosures
about Fair Value of Financial Instruments
 3. Trade Accounts Receivable
  December 31,
    
    
    March 28,2008
    
    
    2009Trade accounts receivable
    
    $
    64,183
    
    
    $
    74,339Billable trade receivables
    
    
    48,657
    
    
    
    44,456Unbilled trade receivables pending contract authorization and retainage
    
    
    15,797
    
    
    
    12,909Other
    
    
    1,427
    
    
    
    550130,064
    
    
    
    132,254Allowance for doubtful accounts
    
    
    (205
    )
    
    
    (282
    )Trade accounts receivable, net
    
    $
    129,859
    
    
    $
    131,972Trade accounts receivable from major customersDepartment of Health and Human Services
    
    
    41
    %
    
    
    34
    %Department of Education
    
    
    10
    %
    
    
    18
    %
 4. Intangible Assets
  WeightedAverage Life
    
    December 31,
    
    
    March 28,(in years)
    
    2008
    
    
    2009Customer relationships
    
    10.8
    
    $
    205,724
    
    
    $
    205,724Intellectual property
    
    Indefinite
    
    
    11,178
    
    
    
    11,178Other
    
    4
    
    
    658
    
    
    
    658217,560
    
    
    
    217,560Accumulated amortization
    
    
    
    
    (39,561
    )
    
    
    (44,893
    )$
    177,999
    
    
    $
    172,667
  8




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##### Table of Contents



Years Ending December 312009 (nine months)
    
    $
    15,9942010
    
    
    21,3262011
    
    
    20,9542012
    
    
    20,7912013
    
    
    20,791Thereafter
    
    
    61,633$
    161,489
 5. Long-Term Debt
  December 31,
    
    
    March 28,2008
    
    
    2009Senior secured credit facilityTerm loan, due February 14, 2013, with interest at variable rates
    
    $
    230,366
    
    
    $
    230,3669 5/8% Senior subordinated fixed rate notes, due February 15, 2015
    
    
    190,000
    
    
    
    190,000$
    420,366
    
    
    $
    420,366Scheduled maturities of long-term debt2009
    
    
    
    
    
    $
    2010
    
    
    
    
    
    
    1,7812011
    
    
    
    
    
    
    2,3752012
    
    
    
    
    
    
    2,3752013
    
    
    
    
    
    
    223,8352014
    
    
    
    
    
    
    2015
    
    
    
    
    
    
    190,000$
    420,366
 Senior Secured Credit Facility
     9




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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
    
    $
    4,559
    
    
    Purchase U.S. Dollars and exchange Mexican Peso
  10




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##### Table of Contents



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
    
    $
    140,000
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2007 to February 2008120,000
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2008 to February 2009110,000
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2009 to February 2010April 2008
    
    $
    75,000
    
    
    
    3.280
    %
    
    3-month LIBOR
    
    April 2008 to February 2010150,000
    
    
    
    3.280
    %
    
    3-month LIBOR
    
    February 2010 to February 2011
  Foreign Currency Contracts
   Fair Value Measurements
 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. These include quoted prices for similar assets or liabilities in
active markets
and quoted prices for identical or similar assets or liabilities in markets that are
not active.
    
    Level 3
    
    Unobservable inputs that reflect the reporting entitys own assumptions.
  11




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December 31,
    
    
    March 28,2008
    
    
    2009Total assets
    
    $
    
    
    
    $
    Liabilities:Level 1  Quoted prices in active markets for identical items
    
    
    
    
    
    
    Level 2  Significant other observable inputs
    
    
    9,342
    
    
    
    8,805Level 3  Significant unobservable inputs
    
    
    
    
    
    
    Total liabilities
    
    $
    9,342
    
    
    $
    8,805
 Derivative Instruments and Hedging Activities
 Disclosures about Derivative Instruments and
Hedging Activities,
 Statements of Operations DataLocation of Gain(Loss)Location of
    
    
    
    
    
    
    Recognized in
    
    
    Amount of GainGain (Loss)
    
    
    
    
    
    
    Income on
    
    
    (Loss) RecognizedReclassified
    
    
    
    
    
    
    Derivative
    
    
    in Income onfrom
    
    
    
    
    
    
    (Ineffective
    
    
    DerivativeDerivatives in
    
    
    
    
    
    Accumulated
    
    
    Amount of Gain (Loss)
    
    
    Portion and
    
    
    (IneffectiveSFAS No. 133
    
    Amount of Gain (Loss)
    
    
    OCI into
    
    
    Reclassified from
    
    
    Amount
    
    
    Portion andCash Flow
    
    Recognized in OCI on
    
    
    Income
    
    
    Accumulated OCI into
    
    
    Excluded from
    
    
    Amount ExcludedHedging
    
    Derivative (Effective
    
    
    (Effective
    
    
    Income (Effective
    
    
    Effectiveness
    
    
    from EffectivenessRelationships
    
    Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    Testing)
    
    
    Testing)Three Months Ended
    
    
    
    
    
    
    Three Months Ended
    
    
    
    
    
    
    Three Months EndedMarch 28, 2009
    
    
    
    
    
    
    March 28, 2009
    
    
    
    
    
    
    March 28, 2009Interest rate swap
agreements
    
    $
    (374
    )
    
    Interest expense
    
    $
    (1,209
    )
    
    Interest expense
    
    $
    25Foreign currency contracts
    
    
    (283
    )
    
    Cost of revenue
    
    
    
    
    
    Cost of revenue
    
    
    $
    (657
    )
    
    
    
    
    
    $
    (1,209
    )
    
    
    
    
    
    $
    25
  12




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##### Table of Contents



Balance Sheet DataBalance
    
    
    Fair Value of Liability DerivativesDerivatives Designated as Hedging
    
    Sheet
    
    
    December 31,
    
    
    March 28,Instruments under SFAS No.133
    
    Location
    
    
    2008
    
    
    2009Interest rate swap agreementsCurrent portion
    
    Accrued expenses
    
    
    $
    6,063
    
    
    $
    6,238Non-current portion
    
    Other long-term liabilities
    
    
    
    3,279
    
    
    
    2,284$
    9,342
    
    
    $
    8,522Foreign currency forward
contracts
    
    Accrued expenses
    
    
    $
    
    
    
    $
    283
 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
    
    
    
    123,500$
    420,366
    
    
    $
    353,866Interest rate swap agreements to pay fixed and receive variableShort-term liabilities
    
    $
    6,238
    
    
    $
    6,238Long-term liabilities
    
    
    2,284
    
    
    
    2,284$
    8,522
    
    
    $
    8,522Foreign currency forward contractsShort-term liabilities
    
    $
    283
    
    
    $
    283
  7. Income Taxes
  Business
Combinations,
  13




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##### Table of Contents



Accounting for Uncertainty in Income Taxesan Interpretation of
FASB Statement No. 109
  8. Commitments and Contingencies
 Loss of Data
  Other
  9. Equity-Based Compensation
    14




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Class B
    
    
    
    
    
    
    Fair Value ofMembership
    
    
    Class B
    
    
    Class BInterests
    
    
    Membership
    
    
    MembershipAvailable for
    
    
    Interests
    
    
    Interests at DateGrant
    
    
    Outstanding
    
    
    of GrantBalance, December 31, 2007
    
    
    2.6
    %
    
    
    4.9
    %
    
    $
    5,492Granted
    
    
    (1.5
    )
    
    
    1.5
    
    
    
    1,127Forfeited
    
    
    0.8
    
    
    
    (0.8
    )
    
    
    (940
    )Balance, December 31, 2008
    
    
    1.9
    %
    
    
    5.6
    %
    
    $
    5,679Granted
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    0.4
    
    
    
    (0.4
    )
    
    
    (298
    )Balance, March 28, 2009
    
    
    2.3
    %
    
    
    5.2
    %
    
    $
    5,381
 , Share-Based Payments
 Years Ending December 312009 (remaining nine months)
    
    $
    7772010
    
    
    1,0362011
    
    
    1,0362012
    
    
    2672013
    
    
    50$
    3,166
 10. Related Party Transactions
    15




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11. Accumulated Other Comprehensive Income (Loss)
  December 31,
    
    
    March 28,2008
    
    
    2009Effect of hedging activities, net of tax:Interest rate swap agreements
    
    $
    (8,774
    )
    
    $
    (7,939
    )Foreign currency contracts
    
    
    
    
    
    
    (283
    )(8,774
    )
    
    
    (8,222
    )Foreign currency cumulative translation adjustment
    
    
    (4,361
    )
    
    
    (4,700
    )$
    (13,135
    )
    
    $
    (12,922
    )Summary of hedging activityBalance, December 31, 2008
    
    
    
    
    
    $
    (8,774
    )Change in fair value
    
    
    
    
    
    
    (657
    )Reclassification to interest expense
    
    
    
    
    
    
    1,209Reclassification to cost of revenue
    
    
    
    
    
    
    Balance, March 28, 2009
    
    
    
    
    
    $
    (8,222
    )
 12. Business Segments and Major Customers
     16




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Three Months EndedMarch 29,
    
    
    March 28,2008
    
    
    2009Revenue by business segmentGovernment Group
    
    $
    117,132
    
    
    $
    117,766International Group
    
    
    18,791
    
    
    
    14,318Human Capital Group
    
    
    7,552
    
    
    
    6,493Elimination
    
    
    
    
    
    
    (1,105
    )Total revenue
    
    $
    143,475
    
    
    $
    137,472Operating income (loss) by business segmentGovernment Group
    
    $
    8,417
    
    
    $
    12,500International Group
    
    
    235
    
    
    
    (696
    )Human Capital Group
    
    
    (11
    )
    
    
    (591
    )8,641
    
    
    
    11,213Corporate (1)
    
    
    (247
    )
    
    
    (253
    )Total operating income by business segment
    
    
    8,394
    
    
    
    10,960Interest expense, net
    
    
    8,950
    
    
    
    8,371Income (loss) before income taxes
    
    $
    (556
    )
    
    $
    2,589Depreciation and amortizationGovernment Group
    
    $
    6,777
    
    
    $
    7,014International Group
    
    
    1,198
    
    
    
    960Human Capital Group
    
    
    444
    
    
    
    372Total
depreciation and amortization
    
    $
    8,419
    
    
    $
    8,346Revenue
from major customers as a percent of total revenueDepartment of Health and Human Services
    
    
    48
    %
    
    
    45
    %Department of Education
    
    
    17
    %
    
    
    19
    %
 
 (1)
    
    Corporate represents equity-based compensation expense.  17




---



##### Table of Contents



13. Condensed Company and Non-Guarantor Financial Information
  Issuer and Non-Guarantor Financial Information  Condensed Combining Balance Sheets
 December 31, 2008
    
    
    March 28, 2009Non-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    15,519
    
    
    $
    5,615
    
    
    $
    
    
    
    $
    21,134
    
    
    $
    3,750
    
    
    $
    5,058
    
    
    $
    
    
    
    $
    8,808Trade receivables, net
    
    
    117,453
    
    
    
    12,406
    
    
    
    
    
    
    
    129,859
    
    
    
    120,168
    
    
    
    11,804
    
    
    
    
    
    
    
    131,972Other receivables and prepaid
items
    
    
    9,116
    
    
    
    3,297
    
    
    
    
    
    
    
    12,413
    
    
    
    8,910
    
    
    
    5,402
    
    
    
    
    
    
    
    14,312Total current assets
    
    
    142,088
    
    
    
    21,318
    
    
    
    
    
    
    
    163,406
    
    
    
    132,828
    
    
    
    22,264
    
    
    
    
    
    
    
    155,092Property and equipment, net
    
    
    21,238
    
    
    
    5,914
    
    
    
    
    
    
    
    27,152
    
    
    
    19,867
    
    
    
    7,149
    
    
    
    
    
    
    
    27,016Intangible assets, net
    
    
    166,216
    
    
    
    11,783
    
    
    
    
    
    
    
    177,999
    
    
    
    161,059
    
    
    
    11,608
    
    
    
    
    
    
    
    172,667Goodwill
    
    
    261,327
    
    
    
    25,539
    
    
    
    
    
    
    
    286,866
    
    
    
    261,327
    
    
    
    25,539
    
    
    
    
    
    
    
    286,866Deferred debt financing costs
    
    
    10,197
    
    
    
    
    
    
    
    
    
    
    
    10,197
    
    
    
    9,648
    
    
    
    
    
    
    
    
    
    
    
    9,648Other
    
    
    423
    
    
    
    231
    
    
    
    
    
    
    
    654
    
    
    
    526
    
    
    
    252
    
    
    
    
    
    
    
    778Investment
in and advances to Non-Guarantor subsidiaries
    
    
    56,162
    
    
    
    
    
    
    
    (56,162
    )
    
    
    
    
    
    
    56,081
    
    
    
    
    
    
    
    (56,081
    )
    
    
    Total assets
    
    $
    657,651
    
    
    $
    64,785
    
    
    $
    (56,162
    )
    
    $
    666,274
    
    
    $
    641,336
    
    
    $
    66,812
    
    
    $
    (56,081
    )
    
    $
    652,067Liabilities and Stockholders
EquityCurrent liabilities:Accounts payable and accrued
expenses
    
    $
    65,357
    
    
    $
    7,815
    
    
    $
    
    
    
    $
    73,172
    
    
    $
    52,679
    
    
    $
    9,279
    
    
    $
    
    
    
    $
    61,958Accrued interest
    
    
    8,304
    
    
    
    
    
    
    
    
    
    
    
    8,304
    
    
    
    3,347
    
    
    
    
    
    
    
    
    
    
    
    3,347Deferred tax liability
    
    
    3,962
    
    
    
    
    
    
    
    
    
    
    
    3,962
    
    
    
    3,467
    
    
    
    
    
    
    
    
    
    
    
    3,467Advance payments on contracts
    
    
    1,952
    
    
    
    743
    
    
    
    
    
    
    
    2,695
    
    
    
    1,524
    
    
    
    769
    
    
    
    
    
    
    
    2,293Total current liabilities
    
    
    79,575
    
    
    
    8,558
    
    
    
    
    
    
    
    88,133
    
    
    
    61,017
    
    
    
    10,048
    
    
    
    
    
    
    
    71,065Long-term debt, net of current
portion
    
    
    420,366
    
    
    
    
    
    
    
    
    
    
    
    420,366
    
    
    
    420,366
    
    
    
    
    
    
    
    
    
    
    
    420,366Other long-term liabilities
    
    
    7,814
    
    
    
    160
    
    
    
    (95
    )
    
    
    7,879
    
    
    
    6,496
    
    
    
    1,444
    
    
    
    (761
    )
    
    
    7,179Deferred tax liability
    
    
    5,259
    
    
    
    
    
    
    
    
    
    
    
    5,259
    
    
    
    7,390
    
    
    
    
    
    
    
    
    
    
    
    7,390Total liabilities
    
    
    513,014
    
    
    
    8,718
    
    
    
    (95
    )
    
    
    521,637
    
    
    
    495,269
    
    
    
    11,492
    
    
    
    (761
    )
    
    
    506,000Stockholders equity
    
    
    144,637
    
    
    
    56,067
    
    
    
    (56,067
    )
    
    
    144,637
    
    
    
    146,067
    
    
    
    55,320
    
    
    
    (55,320
    )
    
    
    146,067Total liabilities and stockholders
equity
    
    $
    657,651
    
    
    $
    64,785
    
    
    $
    (56,162
    )
    
    $
    666,274
    
    
    $
    641,336
    
    
    $
    66,812
    
    
    $
    (56,081
    )
    
    $
    652,067
  18




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##### Table of Contents



Issuer and Non-Guarantor Financial Information  Condensed Combining Statements of Operations
 Three Months Ended March 29, 2008
    
    
    Three Months Ended March 28, 2009Non-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    124,782
    
    
    $
    18,693
    
    
    $
    
    
    
    $
    143,475
    
    
    $
    123,237
    
    
    $
    14,235
    
    
    $
    
    
    
    $
    137,472Cost of revenue
    
    
    101,125
    
    
    
    16,041
    
    
    
    
    
    
    
    117,166
    
    
    
    98,967
    
    
    
    12,937
    
    
    
    
    
    
    
    111,904Gross profit
    
    
    23,657
    
    
    
    2,652
    
    
    
    
    
    
    
    26,309
    
    
    
    24,270
    
    
    
    1,298
    
    
    
    
    
    
    
    25,568General and administrative
expenses
    
    
    12,766
    
    
    
    1,018
    
    
    
    
    
    
    
    13,784
    
    
    
    9,539
    
    
    
    752
    
    
    
    
    
    
    
    10,291Selling and marketing expenses
    
    
    3,281
    
    
    
    850
    
    
    
    
    
    
    
    4,131
    
    
    
    3,652
    
    
    
    665
    
    
    
    
    
    
    
    4,317Operating income (loss)
    
    
    7,610
    
    
    
    784
    
    
    
    
    
    
    
    8,394
    
    
    
    11,079
    
    
    
    (119
    )
    
    
    
    
    
    
    10,960Interest (income) expense, net
    
    
    8,992
    
    
    
    (42
    )
    
    
    
    
    
    
    8,950
    
    
    
    8,349
    
    
    
    22
    
    
    
    
    
    
    
    8,371Income (loss) before income taxes
    
    
    (1,382
    )
    
    
    826
    
    
    
    
    
    
    
    (556
    )
    
    
    2,730
    
    
    
    (141
    )
    
    
    
    
    
    
    2,589Provision (benefit) for income
taxes
    
    
    1,512
    
    
    
    356
    
    
    
    
    
    
    
    1,868
    
    
    
    1,637
    
    
    
    (12
    )
    
    
    
    
    
    
    1,625Equity in net income (loss) of
Non-Guarantor subsidiaries
    
    
    470
    
    
    
    
    
    
    
    (470
    )
    
    
    
    
    
    
    (129
    )
    
    
    
    
    
    
    129
    
    
    
    Net income (loss)
    
    $
    (2,424
    )
    
    $
    470
    
    
    $
    (470
    )
    
    $
    (2,424
    )
    
    $
    964
    
    
    $
    (129
    )
    
    $
    129
    
    
    $
    964
 Issuer and Non-Guarantor Financial Information
Condensed Combining Statements of Cash Flows
 Three Months Ended March 29, 2008
    
    
    Three Months Ended March 28, 2009Non
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NonIssuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total
    
    
    Issuer
    
    
    Guarantors
    
    
    Eliminations
    
    
    TotalNet cash provided by (used
in)
operating activities
    
    $
    2,455
    
    
    $
    1,101
    
    
    $
    
    
    
    $
    3,556
    
    
    $
    (10,608
    )
    
    $
    782
    
    
    $
    
    
    
    $
    (9,826
    )Net cash used in investing
activities
    
    
    (1,368
    )
    
    
    (202
    )
    
    
    
    
    
    
    (1,570
    )
    
    
    (1,091
    )
    
    
    (1,218
    )
    
    
    
    
    
    
    (2,309
    )Net cash used in financing
activities
    
    
    (5,599
    )
    
    
    
    
    
    
    
    
    
    
    (5,599
    )
    
    
    (70
    )
    
    
    (12
    )
    
    
    
    
    
    
    (82
    )Effect of exchange rate
changes
on cash and cash
equivalents
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    (109
    )Net increase (decrease) in
cash and cash equivalents
    
    
    (4,512
    )
    
    
    919
    
    
    
    
    
    
    
    (3,593
    )
    
    
    (11,769
    )
    
    
    (557
    )
    
    
    
    
    
    
    (12,326
    )Cash and cash equivalents,
beginning of period
    
    
    19,022
    
    
    
    7,071
    
    
    
    
    
    
    
    26,093
    
    
    
    15,519
    
    
    
    5,615
    
    
    
    
    
    
    
    21,134Cash and cash equivalents,
end of period
    
    $
    14,510
    
    
    $
    7,990
    
    
    $
    
    
    
    $
    22,500
    
    
    $
    3,750
    
    
    $
    5,058
    
    
    $
    
    
    
    $
    8,808
  19




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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
    20




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##### Table of Contents



Three Months EndedMarch 29,
    
    
    March 28,2008
    
    
    2009Cost-plus
    
    
    49
    %
    
    
    50
    %Fixed-price
    
    
    47
    %
    
    
    45
    %Time and materials
    
    
    4
    %
    
    
    5
    %100
    %
    
    
    100
    %
 Contract Backlog
  December 31, 2008
    
    
    March 28, 2009Total
    
    
    Funded
    
    
    Total
    
    
    FundedGovernment Group
    
    $
    1,250.9
    (1)
    
    $
    173.2
    (1)
    
    $
    1,149.5
    
    
    $
    136.1International Group
    
    
    360.3
    
    
    
    262.8
    
    
    
    346.5
    
    
    
    258.0Human Capital Group
    
    
    16.7
    
    
    
    16.7
    
    
    
    17.2
    
    
    
    13.4$
    1,627.9
    (1)
    
    $
    452.7
    (1)
    
    $
    1,513.2
    
    
    $
    407.5
 
 (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.  21




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##### Table of Contents



Results of Operations
  Three Months EndedMarch 29,
    
    
    March 28,
    
    
    Increase2008
    
    
    2009
    
    
    (Decrease)Statements of Operations DataRevenue
    
    $
    143,475
    
    
    $
    137,472
    
    
    $
    (6,003
    )Cost of revenue
    
    
    117,166
    
    
    
    111,904
    
    
    
    (5,262
    )Gross profit
    
    
    26,309
    
    
    
    25,568
    
    
    
    (741
    )General and administrative expenses
    
    
    13,784
    
    
    
    10,291
    
    
    
    (3,493
    )Selling and marketing expenses
    
    
    4,131
    
    
    
    4,317
    
    
    
    186Operating income
    
    
    8,394
    
    
    
    10,960
    
    
    
    2,566Interest expense, net
    
    
    8,950
    
    
    
    8,371
    
    
    
    (579
    )Income (loss) before income taxes
    
    
    (556
    )
    
    
    2,589
    
    
    
    3,145Provision for income taxes
    
    
    1,868
    
    
    
    1,625
    
    
    
    (243
    )Net income (loss)
    
    $
    (2,424
    )
    
    $
    964
    
    
    $
    3,388Statements of Operations Data
as a Percent of RevenueRevenue
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    81.7
    
    
    
    81.4Gross profit margin
    
    
    18.3
    
    
    
    18.6General and administrative expenses
    
    
    9.5
    
    
    
    7.5Selling and marketing expenses
    
    
    2.9
    
    
    
    3.1Operating income
    
    
    5.9
    
    
    
    8.0Interest expense, net
    
    
    6.3
    
    
    
    6.1Income (loss) before income taxes
    
    
    (0.4
    )
    
    
    1.9Provision for income taxes
    
    
    1.3
    
    
    
    1.2Net income (loss)
    
    
    (1.7
    )%
    
    
    0.7
    %
 Three Months Ended March 28, 2009 and March 29, 2008
 Revenue
   Cost of Revenue
   22




---



##### Table of Contents



Gross Profit
  General and Administrative Expenses
  Selling and Marketing Expenses
  Operating Income
  Interest Expense, Net
   Provision for Income Taxes
  Three Months EndedMarch 29,
    
    
    March 28,2008
    
    
    2009Provision (benefit) for income taxes excluding
tax valuation allowance
    
    $
    (410
    )
    
    $
    897Tax valuation allowance
    
    
    2,278
    
    
    
    728Total provision for income taxes
    
    $
    1,868
    
    
    $
    1,625
   23




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##### Table of Contents



Net Income (Loss)
  Business Segments
  Three Months EndedMarch 29,
    
    
    March 28,
    
    
    Increase2008
    
    
    2009
    
    
    (Decrease)Revenue by business segmentGovernment Group
    
    $
    117,132
    
    
    $
    117,766
    
    
    $
    634International Group
    
    
    18,791
    
    
    
    14,318
    
    
    
    (4,473
    )Human Capital Group
    
    
    7,552
    
    
    
    6,493
    
    
    
    (1,059
    )Elimination
    
    
    
    
    
    
    (1,105
    )
    
    
    (1,105
    )$
    143,475
    
    
    $
    137,472
    
    
    $
    (6,003
    )Business segment revenue
as a percent of total
revenueGovernment Group
    
    
    81.6
    %
    
    
    85.7
    %International Group
    
    
    13.1
    
    
    
    10.4Human Capital Group
    
    
    5.3
    
    
    
    4.7Other
    
    
    
    
    
    
    (0.8
    )100.0
    %
    
    
    100.0
    %Operating income (loss) by
business segmentGovernment Group
    
    $
    8,417
    
    
    $
    12,500
    
    
    $
    4,083International Group
    
    
    235
    
    
    
    (696
    )
    
    
    (931
    )Human Capital Group
    
    
    (11
    )
    
    
    (591
    )
    
    
    (580
    )8,641
    
    
    
    11,213
    
    
    
    2,572Corporate
    
    
    (247
    )
    
    
    (253
    )
    
    
    (6
    )$
    8,394
    
    
    $
    10,960
    
    
    $
    2,566Operating income (loss) as
a percent of revenueGovernment Group
    
    
    7.2
    %
    
    
    10.6
    %International Group
    
    
    1.3
    %
    
    
    (4.9
    )%Human Capital Group
    
    
    (0.1
    )%
    
    
    (9.1
    )%
  24




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##### Table of Contents



Government Group
   International Group
   Human Capital Group
   Liquidity and Capital Resources
     25




---



##### Table of Contents



Working Capital
  December 31,
    
    
    March 28,2008
    
    
    2009Cash and cash equivalents
    
    $
    21,134
    
    
    $
    8,808Trade receivables, net
    
    
    129,859
    
    
    
    131,972Other receivables and prepaid items
    
    
    12,413
    
    
    
    14,312Accounts payable and accrued expenses
    
    
    (73,172
    )
    
    
    (61,958
    )Accrued interest payable
    
    
    (8,304
    )
    
    
    (3,347
    )Deferred tax liability
    
    
    (3,962
    )
    
    
    (3,467
    )Advance payments on contracts
    
    
    (2,695
    )
    
    
    (2,293
    )Working capital
    
    $
    75,273
    
    
    $
    84,027
 Cash Flows
  Three Months EndedMarch 29,
    
    
    March 28,2008
    
    
    2009Net cash flows provided by (used in)Operating activities
    
    $
    3,556
    
    
    $
    (9,826
    )Investing activities
    
    
    (1,570
    )
    
    
    (2,309
    )Financing activities
    
    
    (5,599
    )
    
    
    (82
    )
 Operating Activities
     26




---



##### Table of Contents



Investing Activities
  Financing Activities
  Long-Term Debt
      27




---



##### Table of Contents



Interest Rate Swaps on Variable-Rate Term Loan under Senior Secured Credit Facility
  Notional
    
    
    Interest Rate
    
    
    Interest RateDate Entered
    
    Amount
    
    
    to be Paid
    
    
    to be Received
    
    
    Period CoveredFebruary 2007
    
    $
    140.0
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2007 to February 2008120.0
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2008 to February 2009110.0
    
    
    
    5.215
    %
    
    3-month LIBOR
    
    February 2009 to February 2010April 2008
    
    $
    75.0
    
    
    
    3.280
    %
    
    3-month LIBOR
    
    April 2008 to February 2010150.0
    
    
    
    3.280
    %
    
    3-month LIBOR
    
    February 2010 to February 2011
   Credit Ratings
  Standard &Poors
    
    
    MoodysSenior secured credit facility
    
    BB
    
    Ba3Senior subordinated notes due 2015
    
    
    B-
    
    
    CaalCorporate credit
    
    
    B+
    
    
    
    B2Outlook
    
    Stable
    
    Negative
  28




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##### Table of Contents



Contractual Obligations
  Payments Due by Period2009(remaining
    
    
    2010 and
    
    
    2012 andTotal
    
    
    nine 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)
    
    
    151.3
    
    
    
    20.0
    
    
    
    57.5
    
    
    
    46.4
    
    
    
    27.4Operating and capital leases
    
    
    67.4
    
    
    
    13.5
    
    
    
    25.4
    
    
    
    14.6
    
    
    
    13.9Purchase commitments (3)
    
    
    22.6
    
    
    
    11.5
    
    
    
    11.1
    
    
    
    
    
    
    
    $
    661.7
    
    
    $
    45.0
    
    
    $
    98.2
    
    
    $
    287.2
    
    
    $
    231.3
 
 (1)
    
    There were no borrowings under the revolving credit facility at March 28, 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 commitments represent the minimum noncancelable obligations under service
agreements, consisting primarily of information technology and telecommunications services. Variable Interest Entities
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
   Recent Accounting Pronouncements
   29




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##### 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
    
    
    
    123.5$
    420.4
    
    
    $
    353.9Interest rate swap agreements to pay fixed and receive variableShort-term liabilities
    
    $
    6.2
    
    
    $
    6.2Long-term liabilities
    
    
    2.3
    
    
    
    2.3$
    8.5
    
    
    $
    8.5Foreign currency forward contractsShort-term liabilities
    
    $
    0.3
    
    
    $
    0.3
  Interest Rate Risk
  Foreign Currency Risk
  Inflation Risk
   30




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##### 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
  
 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
  
 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.  31




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##### Table of Contents



SIGNATURE
  Vangent, Inc.May  6, 2009
    /s/ James C. ReaganJames C. ReaganSenior Vice President and Chief Financial Officer
(Principal Financial and Principal Accounting Officer)  32




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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.
  33