Related Party Transactions

9 Months Ended

Sep. 30, 2011

Related Party Transactions [Abstract]

Related Party Transactions

15. Related Party Transactions

On August 19, 2011, GTSI sold its 37% equity interest in Eyak Technology, LLC (“EyakTek”) to EyakTek for $20 million and settled all of the pending arbitration proceedings, litigation and related disputes with EyakTek and its officers and other owners, pursuant to a settlement and redemption agreement. GTSI had acquired the EyakTek equity interest in 2002 when GTSI invested approximately $0.4 million in EyakTek. GTSI was not the primary beneficiary of this “variable interest entity” because GTSI did not control EyakTek, whether through voting rights or other means. GTSI’s previous investment balance in EyakTek was included in the long-term receivables and other assets in the accompanying unaudited condensed consolidated balance sheets. The investment in EyakTek was accounted for under the equity method and adjusted for earnings or losses as reported in the financial statements of EyakTek and dividends received from EyakTek. At September 30, 2011 and December 31, 2010, our investment balance for EyakTek was $0 million and $10.6 million, respectively, and for the nine months ended September 30, 2011 and 2010, our equity in earnings was $3.0 million and $6.0 million, respectively.

GTSI recognized sales to EyakTek and its subsidiary of $5.2 million and $25.7 million for the nine months ended September 30, 2011 and 2010, respectively. GTSI received a fee from EyakTek based on sales from products sold at cost by GTSI to EyakTek. Fees recorded by the Company, which are recognized when EyakTek sells to third party customers, are less than $0.1 million and $0.1 million for the nine months ended September 30, 2011 and 2010, respectively, which are included in sales in the accompanying unaudited condensed consolidated statements of operations.

The following table summarizes EyakTek’s unaudited financial information for the periods included in the accompanying unaudited condensed consolidated statements of operations.

	Three Months ended				Nine Months ended
	September 30,				September 30,
	2011		2010		2011		2010
Revenues	$	28,742	$	117,323	$	167,795	$	318,577
Gross margin	$	3,613	$	12,878	$	21,881	$	35,220
Net income	$	1,761	$	5,866	$	8,213	$	16,294

GTSI recorded a $7.3 million gain from the sale of its EyakTek equity interest; the details of the gain calculation are in the table below.

Cash	$	20,000
Less: Cost basis of equity investment, net		(12,082	)
Transaction Fees		(640	)
Gain on sale of equity investment	$	7,278