Contingent Consideration

9 Months Ended

Sep. 30, 2011

Contingent Consideration

Contingent Consideration

Note 16—Contingent Consideration

In connection with an acquisition made during 2010, the Company made a contingent consideration payment to the sellers in April 2011 of $40,000 based on certain 2010 profitability levels of the acquired company. The Company could also be required to make a contingent consideration payment to the sellers in 2012, based on certain 2011 profitability levels of the acquired company, up to a maximum aggregate undiscounted amount for both payments of $59,000.

The Company determined the fair value of the liability for these contingent consideration payments based on a probability-weighted approach, which through the first quarter of 2011 would have resulted in the maximum contingent consideration being paid. During the second quarter of 2011, the acquired company’s performance expectations were reduced as a result of a softening in demand in the defense market and the related deferral of certain defense related programs to periods beyond 2011 and therefore outside the contractual earn-out period.  Therefore, it was determined that the payment related to 2011 profitability levels was and still is no longer probable and the Company adjusted the remaining contingent consideration liability of $17,813 as a gain in operating income in accordance with applicable accounting rules.  This adjustment had an impact on net income of approximately $11,200 for the second quarter and nine months ended September 30, 2011.