2.2.0.7falseDescription of Business0201 - Disclosure - Description of Businesstruefalsefalsefalse1USDfalsefalseUSDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0$20id_DescriptionOfBusinessAbstractidfalsenadurationDescription of Business.falsefalsefalsefalsefalsetruefalsefalsefalsefalsefalsefalse1falsefalsefalsefalse00falsefalsefalsexbrli:stringItemTypestringDescription of Business.false31us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabelfalse1falsefalsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. DESCRIPTION OF BUSINESS</b>
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<div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     L-1 Identity Solutions, Inc. and its subsidiaries (“L-1” or the “Company”) provide solutions
and services that protect and secure personal identities and assets and allow international
governments, federal and state agencies, law enforcement and commercial businesses to guard the
public against terrorism, crime and identity theft.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     In January 2010, L-1 announced that one of its strategic goals and objectives for 2010 was to
explore strategic alternatives to enhance shareholder value. Subsequently, on September 19, 2010,
the Company entered into an agreement (the “Merger Agreement”) with Safran SA (“Safran”) and Laser
Acquisition Sub Inc. (“Merger Sub”), a wholly owned subsidiary of Safran, pursuant to which, subject
to the terms and conditions set forth in the Merger Agreement, the Company is to be acquired by
Safran in a merger transaction providing for shareholders to receive $12.00 per share in cash, for
an aggregate enterprise value of approximately $1.6 billion, inclusive of outstanding debt. See
Note 3 to our consolidated financial statements for additional information. Completion of the
merger remains subject to certain conditions, including, among others, (i) the disposition of our
SpecTal/McClendon and Advanced Concepts businesses as described below; (ii) approval of the merger
transaction by our shareholders; (iii) the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”);
(iv) termination or expiration of the Committee on Foreign Investment in the United States
(“CFIUS”) review period pursuant to the Exon-Florio Provision of the Defense Production Act of
1950; (v) completion of the novation, termination or expiration of certain contracts; (vi) no
Company Material Adverse Effect (as defined in the Merger Agreement) having occurred since the date
of the Merger Agreement; (vii) subject to certain materiality exceptions, the accuracy of the
representations and warranties made by the Company and Safran and compliance by the Company and
Safran with their respective obligations under the Merger Agreement; (viii) no law or government
order prohibiting the merger; and (ix) other customary conditions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Also on September 19, 2010, the Company entered in a definitive agreement
(the “BAE Purchase Agreement”) to sell SpecTal/McClendon and Advanced Concepts (the “Intel Business”) to BAE Systems
Information Solutions, Inc. (“BAE”) (a subsidiary of BAE Systems, Inc. the U.S. affiliate of BAE
Systems plc) for a purchase price of $295.8 million in cash (and approximately $7.2 million in
assumed obligations), the net proceeds of which (as defined in the credit agreement) will be used
to repay outstanding debt under the Company’s credit agreement. Completion of the sale remains
subject to certain conditions, including, among others, (i) the expiration or termination of the
applicable waiting periods under the HSR Act; (ii) termination or expiration of the CFIUS review
period; (iii) no Business Material Adverse Effect (as defined in the BAE Purchase Agreement) having
occurred since the date of the BAE Purchase Agreement; (iv) subject to certain materiality
exceptions, the accuracy of the representations and warranties made by the Company and BAE and
compliance by the Company and BAE with their respective obligations under the BAE Purchase
Agreement; (v) the completion of certain actions in respect of organizational conflict of interest
provisions under certain contracts of the Intel Business; (vi) no law or judgment prohibiting the
sale and (vii) other customary conditions. The purchase price is subject to adjustment based upon the working capital of the Intel Business at closing.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying financial statements reflect the impact of the sale of the Intel Business and
approximately $11.2 million of costs incurred related to exploration of strategic alternatives in
respect of the nine months ended September 30, 2010, of which $3.3 million is attributable to the
Intel Business.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The operating results related to the
Intel Business have been reflected as discontinued operations
for all periods presented. Unless otherwise noted, revenues and expenses in these Notes to
Condensed Consolidated Financial Statements exclude amounts attributable to discontinued
operations. The assets and liabilities have been included in assets held for sale and liabilities
related to assets held for sale at September 30, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company operates in two reportable segments: Solutions and Services. The Solutions
segment includes Secure Credentialing and Biometrics/Enterprise Access. Secure Credentialing
solutions span the entire secure credentialing lifecycle, from testing through issuance and
inspection. This includes driver’s licenses, national IDs, ePassports and other forms of
government-issued proof of identity credentials. Biometric solutions capture, manage and move
biometric data for positive, rapid ID and tracking of persons of interest. Biometrics solutions
also encompass access control readers that enable businesses and governments to secure facilities
and restricted areas by preventing unauthorized entry.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">     Prior to September 19, 2010, the Services segment included Enrollment Services,
SpecTal/McClendon and Advanced Concepts. Enrollment Services performs fingerprint-based background
checks necessary for federal and state licensed employment in the banking, finance, insurance,
healthcare, legal, real estate, education and other industries. SpecTal/McClendon and Advanced
Concepts provide services to the national security and intelligence community, including
information technology, engineering and analytics, and intelligence. As a result of accounting for
SpecTal/McClendon and Advanced Concepts as discontinued operations, subsequent to September 19,
2010, the Services segment consists of the Enrollment Services operating segment and all prior
period segment data have been revised accordingly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     Customers, depending on their needs, may order solutions that include hardware, equipment,
consumables, software products or services or combine hardware products, consumables, equipment,
software products and services to create multiple element arrangements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%"><i>Reorganization</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     On May 16, 2007, the Company adopted a new holding company organizational structure to
facilitate the issuance of its convertible senior notes (the “Convertible Notes” or “Notes”) and
the structuring of acquisitions. Pursuant to the reorganization, L-1 Identity Solutions, Inc.
became the sole shareholder of its predecessor, L-1 Identity Solutions Operating Company (“L-1
Operating”, previously also known as L-1 Identity Solutions, Inc.).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company has no operations other than those carried through its investment in L-1 Operating
and the financing operations related to the issuance of the Convertible Notes. A summary balance
sheet of the Company (Parent Company only) is set forth below (in thousands):
</div>
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<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%" nowrap="nowrap">           </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
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<td>
<div style="margin-left:15px; text-indent:-15px">Assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Deferred financing costs
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,693</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,506</td>
<td> </td>
</tr>
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<td>
<div style="margin-left:45px; text-indent:-15px">Investment in L-1 Operating
</div></td>
<td> </td>
<td> </td>
<td align="right">903,656</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">894,988</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:45px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">905,349</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">897,494</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 2px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 2px double #000000"> </td>
<td> </td>
</tr>
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<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
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<td>
<div style="margin-left:15px; text-indent:-15px">Liabilities and equity:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
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<td>
<div style="margin-left:45px; text-indent:-15px">Accrued interest
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,466</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">825</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Deferred tax liability
</div></td>
<td> </td>
<td> </td>
<td align="right">5,200</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,200</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Convertible debt
</div></td>
<td> </td>
<td> </td>
<td align="right">165,190</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">161,008</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">172,856</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">167,033</td>
<td> </td>
</tr>
<tr>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">732,493</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">730,461</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:45px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">905,349</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">897,494</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
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