FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

NOTE 8. FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities that are measured at fair value on a recurring basis:

		Fair Value Measurements
		At June 30, 2012 Using
Balance Sheet Classification		Level 1		Level 2		Level 3		Total
Assets:
Investments held in Rabbi Trusts	Other noncurrent assets	$	1,374	$	-	$	-	$	1,374
Liabilities:
Interest rate swap	Other long-term liabilities	$	-	$	57	$	-	$	57

		Fair Value Measurements
		At December 31, 2011 Using
Balance Sheet Classification		Level 1		Level 2		Level 3		Total
Assets:
Investments held in Rabbi Trusts	Other noncurrent assets	$	1,395	$	-	$	-	$	1,395
Interest rate swap	Other noncurrent assets	$	-	$	6	$	-	$	6

The following is a description of the valuation methodologies used for these items, as well as the general classification of such items:

Investments Held in Rabbi Trusts - The investments include exchange-traded equity securities and mutual funds. Fair values for these investments were based on quoted prices in active markets and were therefore classified within Level 1 of the fair value hierarchy.

Interest Rate Swap - The derivative is a receive-variable, pay-fixed interest rate swap based on the LIBOR rate and is designated as a cash flow hedge. Fair value was based on a model-driven valuation using the LIBOR rate, which was observable at commonly quoted intervals for the full term of the swap. Therefore, our interest rate swap was classified within Level 2 of the fair value hierarchy.

Changes to a financial asset's or liability's level within the fair value hierarchy are determined as of the end of a reporting period.  There were no changes to these levels during the quarter ended June 30, 2012.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

All other nonfinancial assets and liabilities measured at fair value in the financial statements on a nonrecurring basis are subject to fair value measurements and disclosures. Nonfinancial assets and liabilities included in our condensed consolidated balance sheets and measured on a nonrecurring basis consist of goodwill and long-lived assets, including other acquired intangibles. Goodwill and long-lived assets are measured at fair value to test for and measure impairment, if any, at least annually for goodwill or when necessary for both goodwill and long-lived assets.

We estimate fair value for our goodwill impairment test by employing three different methodologies to calculate a fair value and then weighting the outputs to arrive at an estimated fair value. The valuation methods utilized include an income approach, a comparison to comparable industry companies and a market approach.  Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. The fair value measurement was calculated using unobservable inputs in both the income approach and the comparable industry approach. In the income approach, the value of a business depends on its prospective economic income.  This approach looks at what a business will do in the future and not what it has done in the past. The key inputs used in this approach include risk adjusted discount rates and estimated future cash flows, which include estimates of future revenues, operating costs and operating capital related cash flows. The estimate of future cash flows takes into consideration factors such as growth rates and economic and market information. The key inputs in the comparable industry approach include our historical financial results and multiples that were selected based on data observed from publicly traded comparable companies. The market value approach is primarily driven by the underlying value of our common stock, which can vary significantly depending upon a number of factors, such as overall market conditions and our estimated future profitability. The control premium, applied to the market and comparable industry company approaches, is based on the premium paid in transactions occurring in the past 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 following tables present our assets and liabilities that are measured at fair value on a non-recurring basis:

		Fair Value Measurements
		At June 30, 2012 Using
Balance Sheet Location		Level 1		Level 2		Level 3		Total
Assets:
Goodwill	Goodwill	$	-	$	-	$	199,805	$	199,805

A goodwill impairment charge was recorded in the amount of $12.0 million in the second quarter of 2012.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, contract receivables and accounts payable at June 30, 2012 approximate fair value because of the short-term nature of these instruments.  The carrying value of the senior term loan at June 30, 2012 approximates fair value because the interest rate is variable and therefore deemed to reflect a market rate of interest.  At June 30, 2012, based on a review of similar financing arrangements, the Company determined the fair value of the subordinated debt did not change significantly during the quarter and therefore continues to approximate its carrying value.