Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill and Intangible Assets [Abstract]

NOTE 6. GOODWILL AND INTANGIBLE ASSETS

At September 30, 2011, the Company’s goodwill totaled $210.9 million. The Company’s annual goodwill impairment test is conducted at November 30 of each calendar year and interim evaluations are performed when the Company determines that a triggering event has occurred that would more likely than not reduce the fair value of its goodwill below its carrying value. During the third quarter of 2011, due to a decline in the market price of the Company’s stock, the market capitalization of the Company was below the carrying value, which we considered a triggering event and therefore performed an interim impairment test.

The test was performed following the same methodology and weightings of the Company’s annual impairment evaluation, which is more fully described in our 2010 Form 10-K. The Company’s quoted market price is the primary driver in the valuation testing since quoted market prices in active markets provide the best evidence of fair value. Given recent market conditions, mainly increased industry and overall stock market volatility, the Company used a trailing thirty day average market price and a control premium consistent with industry specific transactions. The control premium was based on the premium paid in transactions occurring in the past three years by acquirers of publicly traded companies who provide management and information technology services to the federal government, which are similar to the services provided by the Company. The control premium may vary based upon business, industry and other market conditions.

Based on the testing performed, management determined that the Company’s fair value exceeded the carrying value of its equity by approximately 25% as of September 30, 2011 resulting in the Company passing Step 1. Accordingly, the second step of the impairment testing was not required, and no impairment charges were recorded.

For the nine months ended September 30, 2011, the carrying amount of goodwill increased $113.3 million related to the merger of HPTi.

Components of the Company’s identifiable intangible assets are as follows:

At September 30, 2011:

	Cost		Accumulated Amortization			Net
Customer relationships	$	14,600	$	(904	)	$	13,696
Contractual backlog		6,700		(972	)		5,728
Customer contracts		3,500		(3,195	)		305
Non-competition agreements		1,400		(1,400	)		-
Trade name		600		(97	)		503
Total	$	26,800	$	(6,568	)	$	20,232

At December 31, 2010:

	Cost		Accumulated Amortization			Net
Customer relationships	$	1,900	$	(440	)	$	1,460
Customer contracts		3,500		(2,857	)		643
Non-competition agreements		1,400		(970	)		430
8(a) contract transition		130		(130	)		-
Total	$	6,930	$	(4,397	)	$	2,533

The Company added $20.0 million of intangible assets during the second quarter of 2011 from the HPTi merger. During the first quarter of 2011, the Company wrote-off $0.1 million of fully amortized intangible assets related to the 8(a) contract transition. The Company recorded amortization expense for its identifiable intangible assets of $1.6 million and $0.4 million for the three months ended September 30, 2011 and 2010, respectively, and $2.3 million and $1.2 million for the nine months then ended.

At September 30, 2011, estimated future amortization expense for the identifiable intangible assets to be recorded in subsequent fiscal years was as follows:

Remainder of 2011	$	1,491
2012	$	4,124
2013	$	3,722
2014	$	3,663
2015	$	2,887
2016 and thereafter	$	4,345

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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