Document And Entity Information(USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Mar. 7, 2012
Jun. 30, 2011
Entity Registrant Name
GeoEye, Inc.
Entity Central Index Key
0001040570
Current Fiscal Year End Date
--12-31
Entity Well-known Seasoned Issuer
Yes
Entity Voluntary Filers
No
Entity Current Reporting Status
Yes
Entity Filer Category
Accelerated Filer
Entity Public Float
$526.6
Entity Common Stock, Shares Outstanding
22,244,065
Document Fiscal Year Focus
2011
Document Fiscal Period Focus
FY
Document Type
10-K
Amendment Flag
false
Document Period End Date
Dec. 31, 2011
CONSOLIDATED BALANCE SHEETS(USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current assets:
Cash and cash equivalents
$188,738
$283,233
Short-term investments
9,220
50,124
Accounts receivable - trade and unbilled receivables (net of allowances: 2011 - $718; 2010 - $957)
39,917
42,868
Income tax receivable
19,645
34,385
Restricted cash
4,207
3,952
Current deferred tax assets
2,148
0
Prepaid expenses and other current assets
14,805
16,183
Total current assets
278,680
430,745
Property, plant and equipment, net
48,065
35,924
Satellites and related ground systems, net
913,454
697,126
Goodwill
68,130
71,568
Intangible assets, net
10,526
14,943
Non-current restricted cash
6,875
10,822
Other non-current assets
8,855
7,957
Total assets
1,334,585
1,269,085
Current liabilities:
Accounts payable and accrued expenses
58,510
70,936
Current portion of deferred revenue
53,433
50,533
Current deferred tax liabilities
0
6,656
Total current liabilities
111,943
128,125
Long-term debt
511,019
508,160
Long-term deferred revenue, net of current portion
131,968
161,673
Deferred tax liabilities
64,694
21,336
Other non-current liabilities
7,674
6,548
Total liabilities
827,298
825,842
Commitments and contingencies
  
  
Stockholders' equity:
Common stock, par value $.01; 50,000 shares authorized; 22,215 and 22,061 shares issued and outstanding at December 31, 2011 and 2010, respectively
222
221
Additional paid-in capital
379,154
367,723
Retained earnings
127,910
75,298
Total stockholders' equity
507,287
443,243
Total liabilities and stockholders' equity
1,334,585
1,269,085
Series A Convertible Preferred Stock [Member]
Stockholders' equity:
Total stockholders' equity
1
1
Series A convertible preferred stock [Member]
Stockholders' equity:
Preferred Stock
1
1
Series B junior participating preferred stock [Member]
Stockholders' equity:
Preferred Stock
$0
$0
CONSOLIDATED BALANCE SHEETS (Parenthetical)(USD $)
In Thousands, except Per Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Current assets
Accounts receivable, allowance for doubtful accounts
$718
$957
Stockholders' equity
Common stock, par value (in dollars per share)
$0.01
$0.01
Common stock, shares authorized (in shares)
50,000
50,000
Common stock, shares issued (in shares)
22,215
22,061
Common stock, outstanding (in shares)
22,215
22,061
Series A convertible preferred stock [Member]
Stockholders' equity
Preferred stock, par value (in dollars per share)
$0.01
$0.01
Preferred stock, shares authorized (in shares)
80
80
Preferred stock, shares issued (in shares)
80
80
Preferred stock, shares outstanding (in shares)
80
80
Series B junior participating preferred stock [Member]
Stockholders' equity
Preferred stock, par value (in dollars per share)
$0
$0
Preferred stock, shares authorized (in shares)
50
50
Preferred stock, shares issued (in shares)
0
0
Preferred stock, shares outstanding (in shares)
0
0
CONSOLIDATED STATEMENTS OF OPERATIONS(USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Revenues
$356,407
$330,345
$271,102
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)
122,972
104,010
94,693
Depreciation and amortization
71,840
65,262
57,166
Selling, general and administrative
60,921
57,451
46,608
Goodwill impairment
2,500
0
0
Total operating expenses
258,233
226,723
198,467
Income from operations
98,174
103,622
72,635
Interest expense, net
(8,249)
(27,918)
(31,020)
Other non-operating expense
0
(24,466)
0
Gain from investments
0
3,200
0
Loss from early extinguishment of debt
0
(37)
(27,127)
Write-off of prepaid financing costs
0
(6,412)
0
Income before (provision) benefit for income taxes
89,925
47,989
14,488
(Provision) benefit for income taxes
(33,313)
(23,352)
17,573
Net income
56,612
24,637
32,061
Preferred stock dividends
(4,000)
(1,107)
0
Net income less preferred stock dividends
52,612
23,530
32,061
Income allocated to participating securities
(5,701)
(783)
0
Net income available to common stockholders
$46,911
$22,747
$32,061
Earnings per share
Earnings per common share - basic (in dollars per share)
$2.12
$1.05
$1.71
Earnings per common share - diluted (in dollars per share)
$2.06
$1.02
$1.55
Shares used to compute basic earnings per share (in shares)
22,119
21,622
18,753
Shares used to compute diluted earnings per share (in shares)
22,788
22,250
20,685
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(USD $)
In Thousands, unless otherwise specified
Common Stock [Member]
Series A Convertible Preferred Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings (Accumulated Deficit) [Member]
Total
Balance at Dec. 31, 2008
$184
$0
$210,513
$19,707
$230,404
Balance (in shares) at Dec. 31, 2008
18,422
0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income
0
0
0
32,061
32,061
Warrants exercised
14
0
14,632
0
14,646
Warrants exercised (in shares)
1,407
0
Issuance of common stock
1
0
749
0
750
Issuance of common stock (in shares)
94
0
Surrender of common stock to cover employees' minimum tax liability
0
0
(277)
0
(277)
Surrender of common stock to cover employees' minimum tax liability (in shares)
(14)
0
Stock-based compensation
0
0
2,371
0
2,371
Stock-based compensation (in shares)
3
0
Balance at Dec. 31, 2009
199
0
227,988
51,768
279,955
Balance (in shares) at Dec. 31, 2009
19,912
0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income
0
0
0
24,637
24,637
Warrants exercised
18
0
18,305
0
18,323
Warrants exercised (in shares)
1,832
0
Issuance of common stock
4
0
10,426
0
10,430
Issuance of common stock (in shares)
319
0
Surrender of common stock to cover employees' minimum tax liability
0
0
(137)
0
(137)
Surrender of common stock to cover employees' minimum tax liability (in shares)
(3)
0
Foreign currency translation adjustment and other
0
0
(56)
0
(56)
Stock-based compensation
0
0
6,877
0
6,877
Stock-based compensation (in shares)
1
0
Issuance of preferred stock
0
1
104,320
0
104,321
Issuance of preferred stock (in shares)
0
80
Preferred stock dividends
0
0
0
(1,107)
(1,107)
Balance at Dec. 31, 2010
221
1
367,723
75,298
443,243
Balance (in shares) at Dec. 31, 2010
22,061
80
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income
0
0
0
56,612
56,612
Issuance of common stock
1
0
1,158
0
1,159
Issuance of common stock (in shares)
154
0
Surrender of common stock to cover employees' minimum tax liability
0
0
(1,352)
0
(1,352)
Foreign currency translation adjustment and other
0
0
34
0
34
Stock-based compensation
0
0
11,591
0
11,591
Preferred stock dividends
0
0
0
(4,000)
(4,000)
Balance at Dec. 31, 2011
$222
$1
$379,154
$127,910
$507,287
Balance (in shares) at Dec. 31, 2011
22,215
80
CONSOLIDATED STATEMENTS OF CASH FLOWS(USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities:
Net income
$56,612
$24,637
$32,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
71,840
65,262
57,166
Non-cash recognition of deferred revenue
(34,679)
(31,733)
(24,477)
Non-cash amortization of deferred costs
3,852
4,337
1,645
Amortization of debt discount and issuance costs
3,844
3,529
3,356
Loss from early extinguishment of debt
0
37
27,077
Change in fair value of financial instruments
0
24,466
11
Impairment and other write-offs
4,678
6,412
0
Gain from investments
0
(3,200)
0
Deferred income taxes
33,301
23,342
5,637
Stock-based compensation
10,520
6,877
2,371
Bad debt expense and other
214
379
194
Changes in assets and liabilities, net of effects of business combinations:
Accounts receivable and other current assets
2,153
(6,729)
(12,474)
Net transfer from (to) restricted cash
3,692
2,831
(17,605)
Other assets
106
(4)
329
Accounts payable, accrued expenses and current liabilities
3,749
2,098
(8,768)
Income taxes receivable / payable and reserves
15,413
5,477
4,619
Deferred revenue and other long-term liabilities
7,613
(1,325)
29,065
Net cash provided by operating activities
182,908
126,693
100,207
Cash flows from investing activities:
Capital expenditures
(314,524)
(233,736)
(79,090)
Net transfer from (to) restricted cash
0
47,757
(47,757)
Redemptions of short-term investments
40,780
0
3,813
Acquisition of GeoEye Analytics
319
(31,454)
0
Transactions from investments
(1,000)
1,700
0
Purchases of short-term investments
0
(50,188)
0
Net cash used in investing activities
(274,425)
(265,921)
(123,034)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issuance costs
0
120,962
377,094
Proceeds from issuance of convertible preferred stock, net of issuance costs
0
77,761
0
Preferred stock dividend payments
(4,000)
(100)
0
Repayment of long-term debt
0
0
(266,965)
Prepaid financing costs
(118)
(4,547)
0
Proceeds from exercise of stock options and warrants, and other
1,140
19,513
14,837
Net cash (used in) provided by financing activities
(2,978)
213,589
124,966
Net (decrease) increase in cash and cash equivalents
(94,495)
74,361
102,139
Cash and cash equivalents, beginning of period
283,233
208,872
106,733
Cash and cash equivalents, end of period
188,738
283,233
208,872
Supplemental disclosures of cash flow information:
Interest paid, net of capitalized interest of $44,600, $16,580 and $4,771, respectively
4,471
21,598
35,161
Income taxes paid
31
17,969
3,215
Transfer of derivative liability to preferred stock value
0
26,560
0
Non-cash surrender of common stock to cover employees' minimum tax liability
(1,352)
(137)
(277)
Non-cash issuance of common stock for services provided
0
250
0
Common stock issued for SPADAC acquisition
0
9,026
0
Non-cash dividend accrual
1,008
1,007
0
Non-cash consideration on customer transaction
$1,920
$0
$0
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)(USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Supplemental disclosures of cash flow information:
Interest paid, Capitalized
$44,600
$16,580
$4,771
Business
Business
(1)
Business

GeoEye is a leading provider of geospatial information and insight for decision makers and analysts who need a clear understanding of our changing world to protect lives, manage risk and optimize resources. Each day, organizations in defense and intelligence, public safety, critical infrastructure, energy and online media rely on GeoEye's Earth imagery, geospatial expertise and enabling technology to support important missions around the globe. Widely recognized as a pioneer in high-resolution satellite imagery, GeoEye has evolved into a complete provider of geospatial intelligence solutions.

We own and operate two Earth-imaging satellites, GeoEye-1 and IKONOS, and three airplanes with advanced high-resolution imagery collection capabilities. GeoEye-1 is the world's highest resolution and most accurate commercial Earth-imaging satellite.

In addition to our imagery collection capacities, we are a global leader in the creation of enhanced satellite imagery information products and services. We operate state-of-the-art high-resolution image processing and production facilities in St. Louis, Missouri and Thornton, Colorado. Our St. Louis, Missouri facility processes imagery from numerous commercial and government sensors, in addition to our own enhanced satellite imagery information products and services, to produce a variety of value-added products. We believe we are the only major commercial imagery satellite operator who can produce imagery from multiple Earth imagery sources in addition to our own enhanced satellite imagery information products and services.

GeoEye's information services allow its customers to collect, process and analyze vast amounts of geospatial data to quickly see precise changes on the ground and anticipate where events may occur in the future. Our Web-based information services platform, EyeQ, can provide imagery services and other layers of geospatial information on demand. EyeQ combines imagery products with on-demand tools for managing geospatial information and project-based collaboration. GeoEye Analytics, which provides geospatial predictive analytic solutions, has expertise in analyzing multiple layers of intelligence, including human geography, to discover patterns in order to gain insights that protect lives, optimize deployment of resources and mitigate risk.

We believe the combination of our highly accurate satellite and aerial imaging assets, our high-resolution image processing and production facilities-especially our multi-source production capability-our color digital imagery library and our information services differentiate us from our competitors. This combination enables us to provide “elevated insight” by delivering a comprehensive range of Earth imagery, geospatial expertise and enabling technology to our diverse customer base.

We serve both domestic and international customers with imagery, products and information services. Our principal customers are U.S. government agencies. Most of our government contracts are funded incrementally on a year-to-year basis. Our largest government contract, the EnhancedView Service Level Agreement, or SLA (see Note 3), has up to eight additional one-year renewal options. Changes in U.S. government policies, priorities or funding levels could materially and adversely affect our financial condition, liquidity and results of operations. For the year ended December 31, 2011, U.S. government agencies represented approximately 64 percent of our total revenues.
Significant Accounting Policies
Significant Accounting Policies
(2)
Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of GeoEye and all of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Certain amounts in the prior period have been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make judgments, estimates and assumptions that affect the amounts reported in the Company's consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Revenue Recognition

Our principal sources of revenue are from imaging services, the sale of satellite imagery directly to end users or value-added resellers, the provision of direct access to our satellites, associated ground processing technology upgrades and operations and maintenance services.  We also derive significant revenue from value-added production services where we combine our images with data and imagery from our own and other sources to create sophisticated information products. Additionally, new sources of revenue include the dissemination and hosting of imagery and the provision of consultation, integration, data analysis and other professional services related to geospatial information systems.
 
We record revenues from the sale of satellite imagery directly to end users or value-added resellers based on the delivery of the imagery. This revenue is recognized when the products are delivered to the customer, and, generally, these arrangements are contracted for separately on a stand-alone basis.

Sales of direct access to our satellites ordinarily require us to provide access over the term of multi-year sales contracts under subscription-based arrangements. Accordingly, we recognize revenues on such imagery contracts on a straight-line basis over the delivery term of the contract. However, certain multi-year sales contracts are based on minimum levels of access time with adjustments based on usage. In addition to the sale of direct satellite access, we may separately sell ground processing technology upgrades and operations and maintenance services to a customer in a bundled arrangement. Prior to 2011, to determine revenue recognition for multiple element arrangements, we considered whether individual customer arrangement elements had value to the customer on a standalone basis, whether there was objective and reliable evidence of fair value of undelivered item(s) and whether the arrangement included a general right of return relative to the delivered item(s), and delivery performance of the undelivered item(s) was considered probable and substantially in the Company's control. If the satellite access service is combined with the sale of ground processing technology upgrades and operations and maintenance services, and the requirements for separate revenue recognition are not met, we recognize revenues on a straight-line basis over the combined delivery term of the services. In other arrangements when the separation criteria are met, total arrangement consideration is allocated to each separate unit of accounting using relative fair value. Revenues are recognized over the appropriate service period: access and operations and maintenance are recognized over the contract term; and ground processing technology upgrades are recognized when delivery and acceptance is complete. We consider a deliverable to have standalone value if the product or service provides value to the customer independent from other elements in the arrangement or if the product or service is sold separately by us or if it could be resold by the customer. Our revenue arrangements generally do not include a general right of return relative to the delivered products.

Beginning on January 1, 2011, we adopted, on a prospective basis, the guidance on revenue from multiple deliverable arrangements from the Financial Accounting Standards Board, or FASB. With the adoption of this guidance, the inability to determine the fair value of undelivered item(s) will no longer preclude our ability to separate deliverables in multiple element arrangements. Instead, management's estimated selling price will be used to allocate the contract value among the deliverables, assuming all other separation criteria are met. We determine estimated selling price by considering several external and internal factors including, but not limited to: pricing practices, margin objectives, estimated costs to deliver the offering(s), competition and customer type. As these factors evolve, we may modify our estimated selling prices in the future for purposes of allocating arrangement consideration to agreements with multiple elements. Estimated selling prices are analyzed on an annual basis or more frequently if we experience significant changes in our estimated selling prices and the factors that affect or determine the estimated selling prices. The introduction of this accounting guidance has not materially impacted our consolidated financial statements.
 
Revenue is recognized on contracts to provide value-added production services using the percentage-of-completion method. Revenue is recognized under different acceptable alternatives of the percentage-of-completion method depending on the terms of the underlying contract, which include input measures based on costs and efforts expended or output measures based on units of delivery or completion of contractual milestones. Costs associated with products not yet delivered at year-end are recorded as work in progress. Costs of $0.1 million were recorded in work in progress at both December 31, 2011 and 2010. Revenues recognized in advance of becoming billable are recorded as unbilled receivables. Such amounts generally do not become billable until after the products have been completed and delivered. Total unbilled accounts receivable were $6.6 million and $3.4 million at December 31, 2011 and 2010, respectively. Generally these arrangements are sold on a standalone basis and are not bundled with other product offerings. To the extent that estimated costs of completion are adjusted, revenue and profit recognized from a particular contract will be affected in the period of the adjustment. Anticipated contract losses are recognized as they become known. Losses recognized during 2011 and 2010 were immaterial.
 
We record revenues generated from the information services base offerings, including dissemination and hosting of imagery, on a straight-line basis over the subscription period.

Revenues for consultation and professional services are recognized as the services are performed. Revenues from time and materials contracts are recognized based on man-hours utilized, plus other reimbursable contract costs incurred during the period. Revenues from firm-fixed price contracts are recognized on a percentage of completion basis, utilizing the relationship of contract costs incurred and management's estimate of total contract costs. Revenues from cost-reimbursable contracts are recognized based on costs incurred, with applied estimated or contractually specified indirect cost rates and our contractually specified fee or profit margin.

Deferred revenue represents receipts in advance of the delivery of imagery or services. Revenue for other services is recognized as services are performed. In addition, cost-share amounts received from the U.S. government are recorded as deferred revenue when received and recognized on a straight-line basis over the useful life of the satellite.
 
Accounts receivable are stated at amounts due from customers and primarily include international customers, U.S. government customers and commercial customers. Allowances for doubtful accounts receivable balances are recorded when circumstances indicate that collection is doubtful for particular accounts receivable or for all probable losses of accounts receivable not specifically identified. Management estimates such allowances based on historical evidence, such as amounts that are subject to risk. Accounts receivable are written off if reasonable collection efforts are not successful.

The changes in our allowance for doubtful accounts are as follows (in thousands):

Allowances for Doubtful Accounts
 
Balance at
Beginning
of Period
  
Charged to
Operations
  
Write-offs
  
Balance at
End of
Period
 
Year ended December 31, 2009
 $738   194   (9) $923 
                  
Year ended December 31, 2010
 $923   366   (332) $957 
                  
Year ended December 31, 2011
 $957   37   (276) $718 
 
Stock-Based Compensation

The Company accounts for stock-based compensation to employees and directors based on the estimated fair value of the award at the grant date. The associated expense, net of estimated forfeitures, is recognized ratably over the requisite service period, which is generally the maximum vesting period of the award. Further information regarding stock-based compensation can be found in Note 19, “Stock Incentive Plans.”

Cash and Cash Equivalents

We consider all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents. These investments generally consist of money market investments.

Restricted Cash

The Company is party to irrevocable standby letters of credit, in connection with contracts between GeoEye and third parties, in the ordinary course of business to serve as performance obligation guarantees. As of December 31, 2011, the Company had $11.1 million classified as restricted cash as a result of the irrevocable standby letters of credit. Approximately $4.2 million is available within one year and is classified as current, and the remaining $6.9 million is available through 2022.

Investments

We record our investments in debt securities at amortized cost or fair value, and classify these securities as short-term investments on the consolidated balance sheet when the original maturities at purchase are greater than ninety days but less than one year.

The Company's short-term investments consist of debt securities that include commercial paper, corporate bonds, agency notes, variable rate demand notes and certificates of deposit. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are recorded at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as available-for-sale. As of December 31, 2011, short-term investments consisted of variable rate demand notes.

We evaluate our investments for other-than-temporary impairment on a quarterly basis. Other-than-temporary impairment occurs when the fair value of an investment is below our carrying value, and we determine that difference is not recoverable in the near future. Factors we consider to make such determination include the duration and severity of the impairment, the reason for the decline in value and the potential recovery period, and our intent to sell, or whether it is more likely than not that we will be required to sell the investment before recovery of the amortized cost basis.

As of December 31, 2011 and 2010, we categorized our investments as either available-for-sale or held-to-maturity, and all of these outstanding short-term investments mature within one year. Although the variable-rate demand notes have long-term contractual maturity dates of 20 to 30 years, the interest rates reset weekly. Despite the long-term nature of the underlying securities, they are classified as short-term due to our ability to quickly liquidate or put back these securities.

Concentrations of Credit Risk

The Company's cash and cash equivalents are placed in or with various financial institutions. We have not experienced losses on such accounts and do not believe we have any significant risk in this area.
 
Much of the Company's revenues are generated through contracts with the U.S. government. U.S. government agencies may terminate or suspend their contracts at any time, with or without cause, or may change their policies, priorities or funding levels by reducing agency or program budgets or by imposing budgetary constraints. If a U.S. government agency terminates or suspends any of its contracts with the Company, or changes its policies, priorities or funding levels, these actions could have a material adverse effect on the business, financial condition and results of operations. Imagery contracts with international customers generally are not cancelable pursuant to the terms of such contracts.

Satellites and Related Ground Systems and Property, Plant and Equipment

Satellites and related ground systems and property, plant and equipment are recorded at cost. The cost of our satellites includes capitalized interest cost incurred during the construction and development period. In addition, capitalized costs of our satellites and related ground systems include internal direct labor and project management costs incurred in the construction and development of our satellite and related ground systems. We also capitalize certain internal and external software development costs incurred to develop software for internal use. Costs of major enhancements to internal use software are capitalized while routine maintenance of existing software is charged to expense as incurred.

While under construction, the costs of our satellites are capitalized during the construction phase, assuming the eventual successful launch and in-orbit operation of the satellite. Ground systems are placed into service when they are ready for their intended use. If a satellite were to fail during launch or while in-orbit, the resulting loss would be charged to expense in the period in which the loss occurs. The amount of any such loss would be reduced to the extent of insurance proceeds received as a result of the launch or in-orbit failure.

Depreciation and amortization are provided using the straight-line method as follows:

Asset
 
Estimated Useful Life
Buildings
 
15 to 40 years
Furniture, computers, equipment and software
 
3 to 7 years
Leasehold improvements
 
Shorter of estimated useful life or lease term, generally 3 to 12 years
Vehicles
 
5 years
Airplanes
 
15 years
Ground systems
 
9 years
Satellites
 
9 years
 
Satellite Insurance

We maintain in-orbit insurance policies covering our GeoEye-1 and IKONOS satellites. We capitalize the portion of the premiums associated with the insurance coverage of the launch and in-orbit commissioning period of our commercial satellites. Accordingly, prior to the start of GeoEye-1's commercial operations, we capitalized a portion of insurance premiums in the cost of the satellite that will be amortized over the estimated life of GeoEye-1, which is nine years. Following launch and in-orbit commissioning, insurance premium amounts related to in-orbit operations are charged to expense ratably over the related policy periods.

The Company maintains insurance policies for GeoEye-1 with both full coverage and total-loss-only coverage in compliance with our indenture. As of December 31, 2011, we carried $260.3 million in-orbit insurance for GeoEye-1, comprised in part by $195.8 million of full coverage to be paid if GeoEye-1's capabilities become impaired as measured against a set of specifications, which expires on December 1, 2012. We also carry $64.5 million of insurance in the event of a total loss of the satellite, which expires December 1, 2012.

Our IKONOS satellite was fully depreciated in June 2008. The IKONOS satellite is insured for $4.3 million of in-orbit coverage, which expires on December 1, 2012.

Goodwill and Intangible Assets

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill is tested for impairment annually or whenever an event occurs or circumstances change that could reduce the fair value of a reporting unit below its carrying amount. As a result of the acquisition of SPADAC in December 2010, we determined that a new reporting unit was created. As of December 31, 2011, GeoEye's reporting units include GeoEye, Inc. and GeoEye Analytics.

In assessing the recoverability of goodwill, we calculate the fair market value at the reporting unit level, based upon discounted cash flows that utilize estimates in annual revenues, gross margins and other relevant factors for determining the fair value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company compares the implied value of goodwill with its carrying amount. If the carrying amount of the goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized for the difference between the carrying amount and the implied fair value of goodwill.
 
Effective October 1, 2011, the Company elected to change the annual impairment test date for goodwill from December 31 to October 1. The Company's management believes this change in testing date is preferable under the circumstances because it provides the Company with additional time for the completion of its annual impairment testing in conjunction with its December 31 year-end closing activities and is better aligned with the timing of its annual budget process. The Company does not believe that this change in annual impairment testing dates will accelerate or delay an impairment charge or otherwise avoid an impairment charge. The Company applied the new annual impairment testing effective October 1, 2011.

Intangible assets arising from business combinations are initially recorded at fair value. We amortize intangible assets with definitive lives on a straight-line basis over their estimated useful lives, which are generally two to ten years. We review for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Impairment of Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Impairment losses are recognized in operating results when the sum of expected discounted net future cash flows is less than the carrying value of the assets. The amount of the impairment is measured as the difference between the asset's estimated fair value and its carrying value. Fair market value is determined primarily using the projected future cash flows.

Research and Development Costs

We record as research and development expense all internal and external services and supplies costs incurred in the development of the information services business. The Company incurred $2.7 million, $1.6 million and $1.4 million in research and development costs for the years ended December 31, 2011, 2010 and 2009, respectively. Any research and development expenses incurred are included in selling, general and administrative expenses in our consolidated statement of operations.

Preferred Stock

In September 2010, the Company issued Series A Convertible Preferred Stock, or the Series A Preferred Stock, par value of $.01 per share. Cumulative dividends on the Series A Preferred Stock are payable at a rate of 5 percent per annum of the $1,000 liquidation preference per share. At the Company's option, dividends may be declared and paid in cash out of funds legally available therefore, when, as and if declared by the Board of Directors of the Company. If not paid in cash, an amount equal to the cash dividends due is added to the liquidation preference. Dividends payable in cash are recorded in current liabilities. All dividends payable, whether in cash or as an addition to the liquidation preference, are recorded as a reduction to our retained earnings.

Earnings per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Net income available to common stockholders is equal to net income less preferred stock dividends and income allocated to participating securities. The Company's preferred shares are participating securities and require the two-class method of computing earnings per share. Diluted earnings per share is calculated by dividing net income available to common stockholders as adjusted for the effect of dilutive common equivalent shares by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the common shares issuable upon the conversion of the convertible preferred shares and those issuable related to stock options, deferred stock units, employee stock purchase plan shares and nonvested stock (using the treasury stock method). For purposes of computing diluted earnings per share, the if-converted method will be used to the extent that the result is more dilutive than the application of the two-class method.

Income Taxes

The provision for income taxes is computed using the asset and liability method under which deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary.

Interest and penalty expenses related to uncertain tax positions are recorded as part of the provision for income taxes.
 
Recent and Pending Accounting Pronouncements
 
In December 2011, the Financial Accounting Standards Board, or the FASB, issued an update to the guidance related to disclosures about offsetting assets and liabilities on the balance sheet.  The updated guidance requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements prepared under U.S. GAAP with financial statements prepared under International Financial Reporting Standards, or IFRS.  The guidance is effective for interim and annual reporting periods beginning January 1, 2013, and retrospective application is required.  We are currently evaluating the impact of this accounting guidance and do not expect any significant impact on our consolidated financial statements.

In September 2011, the FASB issued an update to the guidance related to goodwill impairment testing. The updated guidance gives companies the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If a company concludes that this is the case, it must perform the two-step test. Otherwise, the two-step goodwill impairment test is not required. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company elected to early adopt this accounting guidance at the beginning of its fourth quarter of 2011 on a prospective basis for goodwill impairment tests.

In May 2011, the FASB issued new guidance for fair value measurements intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The guidance modifies the existing standard to include disclosure of all transfers between Level 1 and Level 2 asset and liability fair value categories. In addition, it provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. The guidance requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The guidance is effective for interim and annual reporting periods beginning after December 15, 2011, with early adoption prohibited. We are currently evaluating the impact of this accounting guidance and do not expect any significant impact on our consolidated financial statements.
EnhancedView Program
EnhancedView Program
(3)
EnhancedView Program

On August 6, 2010, the National Geospatial-Intelligence Agency, or NGA, awarded us contracts under its EnhancedView program. This competitively awarded contract supports the EnhancedView program by providing products and services that will help meet the increasing geospatial intelligence needs of the intelligence community and the Department of Defense. During 2011, the Company successfully completed all critical design review milestones related to the GeoEye-2 satellite development under the EnhancedView contract.

The EnhancedView program award provides for a new satellite imagery delivery SLA with the NGA valued at up to $2.8 billion. The EnhancedView SLA initially provides for continued monthly payments by the NGA of up to $12.5 million ($150.0 million per year), subject to a maximum reduction of 10 percent in the base year and 15 percent in the option years based on performance metrics. Under the EnhancedView SLA, to the extent that less than $12.5 million is paid by the NGA for any month, the shortfall can be applied to future products and services or used to fund an extension of the contract.  When GeoEye-2 becomes operational and meets NGA certification requirements, which we currently expect will occur in 2013, EnhancedView SLA payments are expected to increase by an additional $15.3 million per month ($183.6 million per year), also subject to a maximum reduction of 15 percent based on performance metrics. The initial term of the EnhancedView SLA was one year, with nine one-year renewal options exercisable by the NGA. Imagery deliveries under the EnhancedView SLA began on September 1, 2010, and the imagery is collected by the Company's existing satellite constellation, with GeoEye-2 to collect additional imagery when it becomes operational.

As part of the EnhancedView contract, the NGA has agreed to contribute 42.1 percent of the cost, up to a maximum of $337.0 million of the overall construction and launch costs of the GeoEye-2 satellite and associated ground station equipment. The contribution will be made in two cost-share payments: the first payment of approximately $111.0 million when the GeoEye-2 satellite is ready for integration and testing; and the second payment, and balance of the cost-share, when the GeoEye-2 satellite becomes operational and meets NGA certification requirements. This award component will be initially recorded as deferred revenue and recognized as revenue over the expected operational life of the satellite. At the time the final cost-share payment is made, it is expected that any credits due to the government will be determined and will be factored into the final payment amount.
 
The EnhancedView program award also provides for up to an estimated $702.0 million for value-added products and services and our EyeQ Web Mapping Services to be delivered over the life of the EnhancedView SLA. This award component includes funding for the design and procurement of additional infrastructure to support government operations, which will be initially recorded as deferred revenue and recognized as revenue over the contractual term of the EnhancedView contract.

Assuming the NGA exercises all of its options and we perform as specified, the EnhancedView contracts are worth up to $3.8 billion over ten years.

On October 4, 2011, the Company entered into an amendment to the EnhancedView SLA with the NGA exercising the first renewal option under the contract to extend the EnhancedView SLA for the period of October 5, 2011, through August 31, 2012. Previously, on August 30, 2011, the Company signed an amendment to its SLA with the NGA to extend the performance period of the base year to October 4, 2011. The amendment also changed the date by which the NGA may exercise its first of nine one-year renewal options under the EnhancedView SLA from August 31, 2011, to October 31, 2011. The first of the one-year renewal options was shortened by the amount that the base year was extended by this amendment, so that the date by which NGA may exercise the second option year is August 31, 2012.
 
This program replaced the NextView program, except that GeoEye will continue to fulfill existing NextView value-added product and services orders until such orders are complete. New value-added product and services orders are expected to be placed under the EnhancedView contract. The NextView SLA portion of the NextView program was replaced by the EnhancedView SLA as of September 1, 2010. We recognized $147.0 million and $49.0 million of imagery and other revenue under the EnhancedView SLA during the years ended December 31, 2011 and 2010, respectively.

NextView Program
NextView Program
 (4)
NextView Program

The U.S. government's NGA announced in March 2003 that it intended to support, through the NextView program, the continued development of the commercial satellite imagery industry. The NGA also announced that it intended to award two imagery providers with contracts to support the engineering, construction and launch of the next generation of imagery satellites. On September 30, 2004, the NGA awarded us a contract as the second provider under the NextView program and, as a result, we contracted for the construction of a new satellite, GeoEye-1. Under the NextView program, we began delivering imagery to the NGA from our IKONOS satellite in February 2007 and from our GeoEye-1 satellite in the first quarter of 2009. GeoEye-1 was launched in September 2008 and started commercial operations and obtained certification from the NGA in February 2009, at which point GeoEye-1commenced full operations. Total capitalized costs (including financing and launch insurance costs) of the GeoEye-1 satellite and related ground systems incurred were $478.3 million.

Under the NextView contract, the NGA agreed to support the GeoEye-1 project with a final cost-share of approximately $217.4 million spread over the course of the project development and subject to various milestones. On March 19, 2009, the NGA had paid the Company its cost-share obligation in full. GeoEye had deferred recognition of the cost-share amounts from the NGA as revenue until GeoEye-1's in-service date in February 2009. We recognize this revenue on a straight-line basis over the expected nine-year depreciable operational life of the satellite. During the years ended December 31, 2011, 2010 and 2009, we recognized $24.2 million, $24.2 million and $21.1 million, respectively, of deferred revenue under the NextView contract.
 
The NextView SLA provided for monthly payments of $12.5 million, subject to a maximum reduction of 10 percent based on performance metrics. Under the NextView SLA, to the extent that less than $12.5 million was paid by the NGA in any month, the shortfall was used to fund an extension of the contract. The EnhancedView SLA replaced the NextView SLA portion of the NextView program as of September 1, 2010. We recognized no imagery revenue during the year ended December 31, 2011 under the NextView SLA, and $99.2 million and $124.9 million of imagery revenue under the NextView SLA during the years ended December 31, 2010 and 2009, respectively.
Acquisition
Acquisition
(5)
Acquisition

On December 15, 2010, the Company completed the purchase of 100 percent of the stock of SPADAC, Inc., a geospatial predictive analytics company, for a net purchase price of $43.4 million, which includes adjustments for changes to the tangible net worth of SPADAC, as defined in the merger agreement. The purchase price consisted of $32.0 million in cash, $8.9 million in restricted stock and $2.5 million of equity in SPADAC owned by the Company prior to the acquisition. With the completion of the acquisition, SPADAC became a wholly owned subsidiary named GeoEye Analytics. GeoEye Analytics currently provides geospatial predictive analytic solutions to over 40 customers in key markets of defense, intelligence and homeland security, enabling their customers to gain the insight they need to support mission-critical operations around the world.

In connection with the acquisition of SPADAC, the Company assumed net assets of $1.1 million, recognized $5.9 million of intangibles assets, including $3.7 million related to customer relationships, $2.0 million related to developed technology and $0.2 million related to tradenames, with estimated useful lives ranging from two to five years, and recognized $36.4 million of goodwill. None of the goodwill is expected to be deductible for income tax purposes. See Note 11 for further discussion of goodwill.

Prior to the acquisition, the Company had a 4.4 percent ownership interest in SPADAC, and accounted for it as a cost-method investment. On the acquisition date, we recognized a gain of $2.5 million resulting from the increase in the fair value of our non-controlling interest in SPADAC prior to the acquisition. This gain was reported within gain from investments in the consolidated statement of operations.
 
The Company's consolidated financial statements include the operating results of GeoEye Analytics from the date of the acquisition. Pro forma results of operations for this acquisition have not been presented because the financial impact to the Company's consolidated results of operations is not material.
 
The Company recognized $1.2 million of acquisition-related costs in 2010 as a result of this acquisition. These costs were expensed in the period incurred and reported in the Company's consolidated statement of operations in selling, general and administrative expenses.
Comprehensive Income
Comprehensive Income
(6)
Comprehensive Income

For the years ended December 31, 2011, 2010 and 2009, there were no material differences between net income as reported and comprehensive income.

Earnings per Share
Earnings per Share
(7)
Earnings per Share

Basic earnings per share, or EPS, is computed based on the weighted-average number of shares of the Company's Common Stock outstanding. Diluted EPS is computed based on the weighted-average number of shares of the Company's Common Stock outstanding and other dilutive securities. Securities that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are required to be included in the computation of basic EPS and diluted EPS pursuant to the two-class method. The Company's Series A preferred shares are participating securities.

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations (in thousands):

   
For The Years Ended December 31,
 
 
 
2011
  
2010
  
2009
 
Numerator for basic and diluted earnings per share:
         
Net income
 $56,612  $24,637  $32,061 
Preferred stock dividends
  (4,000)  (1,107)  - 
    52,612   23,530   32,061 
Income allocated to participating securities
  (5,701)  (783)  - 
Net income available to common stockholders
 $46,911  $22,747  $32,061 
              
Denominator:
            
Weighted average shares outstanding used to compute basic earnings per share
  22,119   21,622   18,753 
Dilutive effect of:
            
Warrants
  -   118   1,710 
Stock options, deferred stock units, restricted stock units, employee stock purchase plan shares and nonvested stock
  669   510   222 
Weighted average shares outstanding and dilutive securities used to compute diluted earnings per share
   22,788    22,250    20,685 
 
For each of the years ended December 31, 2011 and 2010, 2.7 million potential common shares from the conversion of preferred stock and 0.3 million stock options and nonvested stock awards were excluded from the computation of dilutive EPS, as their inclusion would have been anti-dilutive. For the year ended December 31, 2009, outstanding stock options to purchase 0.2 million shares of our common stock were excluded from the computation of dilutive EPS, as the effect would have been anti-dilutive. See Note 19, “Stock Incentive Plans,” for information on option exercise prices and expiration dates and restricted stock units.
Investments
Investments
(8)
Investments

Short-term investments consisted of the following at December 31, 2011 and 2010 (in thousands):
 
      
Gross unrecognized
    
December 31, 2011
 
Amortized
cost
  
Gains
  
Losses
  
Estimated
fair value
 
Available-for-sale securities:
            
Variable-rate demand notes
 $9,220  $-  $-  $9,220 
                  
Total short-term investments
 $9,220  $-  $-  $9,220 

      
Gross unrecognized
    
December 31, 2010
 
Amortized
cost
  
Gains
  
Losses
  
Estimated
fair value
 
Available-for-sale securities:
            
Variable-rate demand notes
 $10,000  $-  $-  $10,000 
                  
Held-to-maturity securities:
                
Commercial paper
  19,969   4   -   19,973 
Corporate bonds
  5,155   5   -   5,160 
Agency notes
  5,000   -   -   5,000 
Certificates of deposit
  10,000   -   -   10,000 
                  
Total short-term investments
 $50,124  $9  $-  $50,133 
 
As of December 31, 2011, there were no other-than-temporary impairments of the Company's investments.
Property, Plant and Equipment
Property, Plant and Equipment
(9)
Property, Plant and Equipment

Property, plant and equipment (excluding satellites and related ground systems) consisted of the following at December 31, 2011 and 2010 (in thousands):

   
2011
  
2010
 
Land and buildings
 $7,419  $7,297 
Furniture, computers, equipment and software
  53,113   42,724 
Leasehold improvements
  19,405   3,460 
Vehicles and airplanes
  2,181   2,228 
Accumulated depreciation
  (36,713)  (29,467)
Subtotal
  45,405   26,242 
Property, plant and equipment in process
  2,660   9,682 
Property, plant and equipment, net
 $48,065  $35,924 
 
Depreciation expense related to property, plant and equipment was $12.6 million, $9.2 million and $7.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. In addition, an impairment of $0.7 million was recorded in depreciation expense in the year ended December 31, 2011 related to property, plant and equipment.
Goodwill and Intangible Assets
Goodwill and Intangible Assets
(11)
Goodwill and Intangible Assets

The following table contains details related to the recorded goodwill of our reporting units for the years ended December 31, 2011 and 2010 (inthousands):

   
GeoEye, Inc.
  
GeoEye Analytics
  
Total
 
Net goodwill at December 31, 2009
 $34,264  $-  $34,264 
Goodwill acquired
  -   37,304   37,304 
Net goodwill at December 31, 2010
  34,264   37,304   71,568 
Goodwill adjustment
  -   (938)  (938)
Goodwill impairment
  -   (2,500)  (2,500)
Net goodwill at December 31, 2011
 $34,264  $33,866  $68,130 
 
In 2011, the Company made purchase price adjustments to reduce the goodwill balance related to GeoEye Analytics by $0.9 million.  Additionally, during the Company's annual impairment testing of goodwill, we determined that the carrying value of our GeoEye Analytics reporting unit exceeded the fair value and resulted in a $2.5 million impairment charge recorded within continuing operations. The impairment charge is primarily due to lower than expected performance in 2011 and a corresponding reduction to our originally projected near-term growth rate. As of December 31, 2011, the accumulated goodwill impairment losses were $2.5 million.

Intangible assets consisted of the following at December 31, 2011 and 2010 (inthousands):
 
   
2011
  
2010
 
 
 
Weighted
Average
Life
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Value
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Value
 
Contracts/customer relationships
  8.3  $21,291  $(12,444) $8,847  $22,671  $(10,241) $12,430 
Developed technology
  5.0   2,000   (417)  1,583   2,000   -   2,000 
Trade names
  2.0   1,473   (1,377)  96   2,293   (1,785)  508 
Patents and other
  5.0   3,396   (3,396)  -   3,396   (3,391)  5 
Intangible assets, net
     $28,160  $(17,634) $10,526  $30,360  $(15,417) $14,943 
 
Total amortization expense related to intangible assets was $3.5 million, $2.6 million and $2.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. In addition, an impairment of $0.9 million was recorded in amortization expense in the year ended December 31, 2011 related to intangible assets. Estimated future amortization expense related to intangible assets at December 31, 2011, is as follows (in thousands):

For the Year Ending December 31,
   
2012
 $3,189 
2013
  3,095 
2014
  3,095 
2015
  1,147 
2016 and thereafter
  - 
Total expected future amortization
 $10,526 
 
Income Taxes
Income Taxes
(12)
Income Taxes

We file a consolidated U.S. federal income tax return with our wholly owned subsidiaries. The components of our income tax (provision) benefit are as follows (in thousands):
 
   
2011
  
2010
  
2009
 
Current (provision) benefit:
         
Federal
 $(12) $(10) $19,893 
State
  -   -   3,317 
Total current (provision) benefit
  (12)  (10)  23,210 
Deferred (provision) benefit:
            
Federal
  (31,361)  (20,266)  (3,296)
State
  (1,940)  (3,076)  (2,341)
Total deferred (provision) benefit
  (33,301)  (23,342)  (5,637)
Total (provision) benefit for income taxes
 $(33,313) $(23,352) $17,573 
 
The differences between the tax provision calculated at the statutory U.S. income tax rate and the actual tax provision are as follows (in thousands):

   
2011
  
2010
  
2009
 
Federal tax at statutory rate
 $(31,474) $(16,796) $(5,071)
State income taxes, net
  (3,104)  (2,316)  (295)
Permanent items
  (1,105)  (9,321)  - 
Change in valuation allowance
  (1,298)  (230)  (121)
Change in state effective rate, and other
  (445)  (363)  37 
Restored net operating losses
  -   -   21,419 
Research credits
  6,195   7,995   515 
Unrecognized tax benefits adjustment
  (2,082)  (2,321)  1,089 
Total (provision) benefit for income taxes
 $(33,313) $(23,352) $17,573 
 
The components of net deferred tax assets and liabilities were as follows at December 31, 2011 and 2010 (in thousands):
 
   
2011
  
2010
 
Deferred tax assets:
      
Deferred revenue
 $7,023  $75,874 
Accruals and reserves
  6,171   5,741 
Goodwill and intangibles
  21   - 
Net operating losses
  105,456   56,412 
Credit carryforwards, net
  10,101   7,430 
Deferred equity compensation
  6,786   4,032 
Other
  100   454 
Total gross deferred tax assets
  135,658   149,943 
Less: valuation allowance
  (1,834)  (536)
Deferred tax assets
  133,824   149,407 
Deferred tax liabilities:
        
IRC 481(a) adjustment
  (600)  (18,555)
Goodwill and intangibles
  -   (1,131)
Property, plant and equipment
  (195,356)  (157,455)
Other
  (414)  (258)
Total deferred tax liabilities
  (196,370)  (177,399)
Net deferred tax liabilities
 $(62,546) $(27,992)
 
The total federal and state net operating loss carryforwards are approximately $276.2 million and $150.0 million for 2011 and 2010. The net operating loss carryforwards will expire between tax years 2024 and 2031.  Certain net operating loss carryforwards that were generated at various dates prior to November 2004 (prior to December 2010 for GeoEye Analytics, Inc. acquired net operating loss carryforwards) are subject to limitations on their use pursuant to Internal Revenue Code Section 382, or Section 382, as a result of ownership changes as defined by Section 382. However, we do not expect these assets to expire unused.
 
As of December 31, 2011, we had tax credit carryforwards of approximately $10.1 million, of which $8.8 million expire on various dates through 2026.  Certain business tax credit carryforwards that were generated at various dates prior to December 2008 are subject to limitations on their use pursuant to the Internal Revenue Code, or IRC. However, we do not expect these business tax credits to expire unused.

The statutes of limitation for income tax returns in the U.S. federal jurisdiction and various state jurisdictions for tax years 2006 through 2010 have not expired, and, thus, these years remain subject to examination by the Internal Revenue Service, or IRS, and state jurisdictions. Significant state jurisdictions that remain subject to examination include Colorado and Missouri, for tax years 2006 through 2010, and Virginia, for tax years 2007 through 2010.  For tax years for which we are no longer subject to federal, state and local tax examinations by tax authorities, the tax attribute carryforwards generated from these years may still be adjusted upon examination by tax authorities.

 In May 2011, the Company finalized its method of tax accounting for the NextView cost-share payments with the IRS to allow the NextView cost-share payments to be treated for tax purposes the same as for book purposes. Amounts received from the U.S. government are now recorded as deferred revenue when received and recognized as revenue on a straight-line basis over the useful life of the satellite, rather than when the Company was entitled to receive these payments from the U.S. government. The change in tax accounting method resulted in a reclassification of deferred tax items related to deferred revenues and IRC 481(a) adjustments into net operating losses and will have no material impact on cash flow or earnings.

 Deferred tax assets are reduced by a valuation allowance when, in the opinion of our management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating our ability to realize deferred tax assets, we consider all available evidence, both positive and negative. Accordingly, we consider past operating results, forecasts of earnings and taxable income, the reversal of temporary differences and any prudent and feasible tax planning strategies. Management believes the results of future operations will generate sufficient taxable income to realize the deferred tax asset. The change in the valuation allowance during the year is attributable to an additional valuation allowance recorded against separate company state net operating losses and state research and development credit carryforward amounts.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

   
2011
  
2010
 
Balance at beginning of year
 $1,942  $24 
Additions for tax positions in prior years
  397   101 
Additions for tax positions in current years
  2,266   1,817 
Balance at end of year
 $4,605  $1,942 
 
We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense as well as any potential tax liability arising from these positions. Interest expense recorded through the income tax (provision) benefit related to uncertain tax positions was negligible for the year ended December 31, 2011 and $0.5 million for the year ended December 31, 2010. Penalties expense recorded through the income tax (provision) benefit related to uncertain tax positions were negligible for each of the years ended December 31, 2011 and 2010.

The amount of accrued interest in the consolidated balance sheet associated with uncertain tax positions was negligible at December 31, 2011 and $0.6 million at December 31, 2010. The amount of accrued penalties in the consolidated balance sheet associated with uncertain tax positions was negligible for both periods.

The total amount of unrecognized tax benefits that, if recognized, would benefit the effective tax rate as of December 31, 2011 and 2010 is $4.6 million and $1.9 million, respectively. The total amount of unrecognized tax benefits anticipated to result in a net decrease to unrecognized tax benefits within 12 months of December 31, 2011 is estimated to be negligible.
Accounts Payable and Accrued Expenses
Accounts Payable and Accrued Expenses
(13)
Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following at December 31, 2011 and 2010 (in thousands):
 
   
2011
  
2010
 
Accounts payable and accrued expenses
 $18,054  $17,246 
Accrued payroll
  16,410   14,660 
Accrued expenses - subcontractors
  10,718   25,912 
Accrued interest payable
  12,320   12,111 
Dividends payable
  1,008   1,007 
Total accounts payable and accrued expenses
 $58,510  $70,936 
 
Long-Term Debt
Long-Term Debt
(14)
Long-Term Debt

On October 8, 2010, the Company issued $125.0 million aggregate principal of 8.625 percent Senior Secured Notes due 2016, or the 2016 Notes, in a publicly registered offering. Interest payments on the 2016 Notes are due semi-annually in arrears on April 1 and October 1 of each year. At any time on or after October 1, 2013, the Company may, on one or more occasions, redeem all or part of the 2016 Notes at 104.313 percent of principal for the subsequent 12-month period; at 102.156 percent of principal on October 1, 2014, for the subsequent 12-month period; and at 100 percent of principal on October 1, 2015, and thereafter.

The 2016 Notes are unconditionally guaranteed, jointly and severally, on a secured second-priority basis, by all existing and future domestic restricted subsidiaries of the Company. The 2016 Notes and the guarantees are secured by a lien on substantially all of the assets of the Company and the guarantors. Except for a minor investment in a foreign subsidiary, the Company does not have any independent assets or operations other than its ownership in all of the capital stock of its subsidiaries. Since inception, all of the Company's operations have been conducted through its wholly owned subsidiaries.

 On October 9, 2009, the Company issued $400.0 million aggregate principal, net of original issue discount of $20.0 million, of 9.625 percent Senior Secured Notes due 2015, or the 2015 Notes. Interest is payable on the 2015 Notes semi-annually in arrears on April 1 and October 1 of each year. At any time on or after October 1, 2013, the Company may on one or more occasions redeem all or part of the 2015 Notes at 104.813 percent of principal for the subsequent 12-month period and at 100 percent of principal on October 1, 2014, and thereafter. Proceeds from the sale of the 2015 Notes were used in part to redeem all of our Senior Secured Floating Rate Notes due 2012, or the 2012 Notes.

The 2015 Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis, by all existing and future domestic restricted subsidiaries of the Company. The 2015 Notes and the guarantees are secured by a lien on substantially all of the assets of the Company and the guarantors.

The composition of interest expense, net, is as follows (in thousands):

   
For The Year Ended December 31,
 
   
2011
  
2010
  
2009
 
Interest expense
 $53,138  $44,902  $36,183 
Capitalized interest
  (44,600)  (16,580)  (4,771)
Interest income
  (289)  (404)  (392)
Total interest expense, net
 $8,249  $27,918  $31,020 
 
Stockholder Rights Plan
Stockholder Rights Plan
(15)
Stockholder Rights Plan

On June 8, 2011, the Board of Directors adopted a Stockholder Rights Agreement, or Rights Agreement between the Company and Mellon Investor Services LLC, as rights agent. The rights are designed to ensure that all stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers, open market accumulations and other abusive or coercive tactics to gain control of the Company without paying all stockholders a control premium. In connection with the adoption of the amended Rights Agreement, the Board of Directors of the Company declared a dividend of one preferred stock purchase right, or Right, for each outstanding share of Common Stock to stockholders of record as of the close of business on June 22, 2011. Subject to certain exceptions, the Rights will be exercisable if a person or group of affiliated or associated persons acquires 20 percent or more of the Company's Common Stock or announces a tender offer for 20 percent or more of the Common Stock.  In the case of a tender offer, the Board of Directors may determine a later date for the exercise of the Rights unless the person or group that announced the tender offer acquires 25 percent or more of the Company's Common Stock. Under certain circumstances, each Right will entitle stockholders to buy one one-thousandth of a share of newly created Series B Junior Participating Preferred Stock of the Company at an exercise price of $175. The Company's Board of Directors will be entitled to redeem the Rights at $0.001 per right at any time before a person or group has acquired 25 percent or more of the outstanding Common Stock. The Rights currently are not exercisable and are attached to and trade with the outstanding shares of Common Stock. The Rights will expire on June 7, 2012, subject to the Company's right to extend such date, unless earlier redeemed or exchanged by the Company or terminated. The Rights will at no time have any voting rights. Subject to limited exceptions, if a person or group acquired 20 percent or more of the outstanding Common Stock of the Company or announces a tender offer for 20 percent or more of the Common Stock (we refer to such a person or group as an “acquiring person”), each Right will entitle the Right holder to purchase, at the Right's then-current exercise price, a number of shares of Common Stock having a market value at that time of twice the Right's exercise price. Rights held by the acquiring person will become void and will not be exercisable. If the Company is acquired in a merger or other business combination transaction that has not been approved by the Board of Directors after the Rights become exercisable, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of shares of the acquiring company's common stock having a market value at that time of twice the Right's exercise price.
 
On December 9, 2011, the Company entered into an amendment of its Rights Agreement, which increased the percentage of the Company's outstanding stock such that a person or group of affiliated or associated persons may beneficially own before becoming an acquiring person, as defined in the amended Rights Agreements from 20 percent to 25 percent.

On February 9, 2012, the Company entered into a second amendment of its Rights Agreement, which increased the percentage of the Company's outstanding stock such that a person or group of affiliated or associated persons may beneficially own before becoming an acquiring person, as defined in the amended Rights Agreements from 25 percent to 30 percent.

Convertible Preferred Stock
Convertible Preferred Stock
(16)
Convertible Preferred Stock

In March 2010, the Company entered into a Stock Purchase Agreement and a Note Purchase Agreement with Cerberus Satellite LLC, or Cerberus for the sale of its Series A Convertible Preferred Stock, or Series A Preferred Stock. In September 2010, pursuant to the terms of the Stock Purchase Agreement and as a result of the EnhancedView award by the NGA being made without the letter-of-credit requirement, Cerberus purchased 80,000 shares of Series A Preferred Stock having a liquidation preference of $1,000 per share. This resulted in net proceeds to the Company of $78.0 million, after discounts and before issuance costs. The Series A Preferred Stock is convertible on issuance, at the option of the holders, at a conversion rate of $29.76 per common share, which is equivalent to a conversion rate of 2.7 million shares of common stock of the Company.

The March 2010 Stock Purchase Agreement represented a financial instrument, not in the form of a share, which contained a conditional obligation on the part of the Company to redeem its equity shares by transferring assets in the future and was, therefore, presented as a liability. It was initially and subsequently measured at fair value until Cerberus purchased the Series A Preferred Stock on September 22, 2010. During the year ended December 31, 2010, the change in the value of the financial instrument resulted in other non-operating expense of $24.5 million.

The Series A Preferred Stock represents an ownership interest assuming conversion of such Series A Preferred Stock to the Company's common stock, of approximately 11 percent as of December 31, 2011. Dividends on the Series A Preferred Stock are payable quarterly in arrears at a rate of 5 percent per annum of the liquidation preference of $1,000 per share, subject to declaration by the Board of Directors. The Company declared dividends on the Series A Preferred Stock of $4.0 million and $1.1 million during the years ended December 31, 2011 and 2010, respectively. The dividend payable of $1.0 million was included in accounts payable and accrued expenses as of December 31, 2011 and 2010.

In connection with the February 9, 2012 second amendment to the Stockholder Rights Agreement, the Company entered into a standstill letter agreement with Cerberus Capital Management, L.P.  Under the standstill agreement, Cerberus and its affiliates have agreed, subject to certain exceptions, not to take certain actions with respect to the Company during the standstill period of February 9, 2012 through the earliest of certain specified events or June 30, 2013, including, among other things, not to effect or seek to effect any acquisition by the Cerberus parties of beneficial ownership of any securities, assets or businesses of the Company, or any of its subsidiaries if, upon acquisition, the aggregate beneficial ownership of Cerberus parties of beneficial ownership would exceed 29.99 percent of the number of common shares of the Company that are then outstanding, including the shares of the Company's Series A Convertible Preferred Stock, on an as converted basis.
 
Commitments and Contingencies
Commitments and Contingencies
(17)
Commitments and Contingencies

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2011:
 
   
Payments due by year
 
Contractual Obligations
 
2012
  
2013
  
2014
  
2015
  
2016
  
2017 and thereafter
  
Total
 
   
(in thousands)
 
Long-term debt obligations
 $-  $-  $-  $400,000  $125,000  $-  $525,000 
Interest payments on long-term debt (1)
  49,281   49,281   49,281   49,281   10,781   -   207,905 
Operating lease obligations
  11,489   15,993   18,283   17,374   17,752   15,324   96,215 
Purchase obligations (2)
  144,638   26,926   840   560   -   -   172,964 
Total contractual obligations
 $205,408  $92,200  $68,404  $467,215  $153,533  $15,324  $1,002,084 

(1) 
Represents contractual interest payment obligations on the $400.0 million outstanding principal balance of our 2015 Notes, which bear interest at a rate per annum of 9.625% and contractual interest payment obligations on the $125.0 million outstanding principal balance of our 2016 Notes, which bear interest at a rate per annum of 8.625%.

(2) 
Purchase obligations include all commitments to purchase goods or services of either a fixed or minimum quantity that are enforceable and legally binding. As of December 31, 2011, purchase obligations include EnhancedView-related commitments, ground systems and communication services.
 
Operating Leases

We have commitments for operating leases primarily relating to office and operating facilities and equipment. We lease various real properties under operating leases that generally require us to pay taxes, insurance, maintenance and minimum lease payments. These leases contain escalation provisions for increases as a result of increases in real estate taxes and operating expenses. We recognize rent expense under such leases on a straight-line basis over the term of the lease. Substantially all of these leases have lease terms ranging from three to twelve years. Some of our leases have options to renew.
 
Total rental expense under operating leases for the years ended December 31, 2011, 2010 and 2009 was approximately $4.4 million, $3.3 million and $2.2 million, respectively.

Contingencies

GeoEye, from time to time, may be party to various lawsuits, legal proceedings and claims arising in the normal course of business. The Company cannot predict the outcome of these lawsuits, legal proceedings and claims with certainty. Nevertheless, the Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse impact on the Company's financial results, liquidity or operations.

Employee Benefit Plan
Employee Benefit Plan
(18)
Employee Benefit Plan

The GeoEye Retirement Savings Plan, or the Plan, is a combination employee savings plan and discretionary profit-sharing plan that covers most GeoEye employees. The Plan qualifies under section 401(k) of the IRC. Under the Plan, participating employees may elect to voluntarily contribute on a pre-tax basis between 1 percent and 100 percent of their salary up to the annual maximum established by the IRC. Participating employees may also elect to contribute on an after-tax basis between 1 percent and 10 percent of their salary up to the annual maximum established by the IRC. Participants are always 100 percent vested in their accounts. Our matching contributions to the Plan are based on certain Plan provisions and at the discretion of the Board of Directors. Other than our matching obligations, profit sharing contributions are discretionary. The matching annual contribution expense was $1.6 million, $1.4 million and $1.1 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Stock Incentive Plans
Stock Incentive Plans
(19)
Stock Incentive Plans

Employee Stock Plans

We adopted an Employee Stock Purchase Plan, or ESPP, on July 1, 2008. The ESPP allows eligible employees to purchase common stock at not less than 85 percent of the closing fair market value of a share of the common stock on the purchase date. The ESPP is considered to be compensatory as defined under current FASB accounting guidance. Unless modified by the ESPP administrator, each offering period under the ESPP will last six months and begin on January 1 and July 1. The purchase price is established on each new purchase date. Purchases are limited to 10 percent of each employee's eligible compensation and subject to certain IRS restrictions. In general, all of our regular full-time employees are eligible to participate in the ESPP. The ESPP provides for a maximum of 500,000 shares in the aggregate to be issued.  Of the 100,000 shares of common stock reserved for issuance under the ESPP, 64,815 shares have been issued as of December 31, 2011.

Stock Incentive Plans
 
In September 2006, the stockholders approved the 2006 Omnibus Stock and Performance Incentive Plan, or the 2006 Plan, which provides for the granting of a maximum of 1.7 million shares of the Company's Common Stock in the form of equity and cash awards, including stock options, stock appreciation rights, nonvested stock, unrestricted stock, stock units and restricted stock units.  The 2006 Plan was adopted to replace the Company's 2003 Employee Stock Incentive Plan.

In June 2010, the stockholders approved the 2010 Omnibus Incentive Plan, or the 2010 Plan, which provides for the granting of a maximum of 1.45 million additional shares of the Company's Common Stock, subject to adjustment as provided in the 2010 Plan, to participants under the 2010 Plan in the form of equity and cash awards, including stock options, stock appreciation rights, nonvested stock, restricted stock units, deferred stock units, performance-based and other share-based awards.

During 2011, we granted awards only under the 2010 Plan.  Although future awards will be granted under the 2010 Plan, we currently have outstanding awards subject to vesting and or available for exercise under all three of our stock incentive plans.

We accounted for our stock incentive plan using the modified prospective method as of January 1, 2006. We recognize stock-based compensation expense based on the estimated grant date fair value over the requisite service period of the award. During 2011, 2010 and 2009, we recognized $10.5 million, $6.9 million and $2.4 million of stock-based compensation expense, respectively. Stock-based compensation expense of $3.4 million is included in direct costs of revenue, and $7.1 million is included in selling, general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2011. In addition, $1.1 million of stock-based compensation has been included in satellites and related ground systems.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company's stock on the date of grant.
 
Valuation Assumptions

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The estimated forfeiture rate is based on the Company's historical experience of actual forfeitures. Information pertaining to stock options granted during the years ended December 31, 2011, 2010 and 2009 and related assumptions are noted in the following table:

   
For The Year Ended December 31,
 
 
 
2011
  
2010
  
2009
 
Volatility
 41.54% - 58.30%  41.84% - 52.75%  75.93% - 83.59% 
Dividend yield
 0.00%  0.00%  0.00% 
Risk-free interest rate
 1.08% - 2.74%  1.77% - 3.69%  1.90% - 3.39% 
Expected average life
 
5.90 - 6.80 years
  
5.90 - 6.90 years
  
5.22 - 6.25 years
 
Exercise price per option
 $19.01 - $42.04  $23.91 - $44.68  $19.52 - $32.69 
Weighted average fair value of options granted during the year
 $19.13  $14.67  $15.84 
 
Expected Dividend Yield. We have not issued dividends on our common stock in the past nor do we expect to issue dividends in the future; as such, the dividend yield used was zero.

Expected Volatility. The expected volatility was determined using a combination of implied volatility, based on exchange-traded options for our shares, and actual historical volatility calculated over a period that we believe is representative of the expected future volatility over the expected term. We determined that blended volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. The options generally have graded vesting over four years (25 percent of the options in each grant vest annually), and the contractual term is either eight or ten years.

Risk-free Interest Rate. The yield on actively traded non-inflation indexed U.S. Treasury notes was used to extrapolate an average risk-free interest rate based on the expected term of the underlying grants.

Expected Term. The expected term of options granted was determined based on historical experience of similar awards, giving consideration to contractual terms of the awards, vesting schedules and expectations of future employee behavior. The options had graded vesting over four years (25 percent of the options in each grant vest annually), and the contractual term was eight or ten years.

The following table summarizes stock option activity for the year ended December 31, 2011 (in thousands, except exercise price and contractual termdata):
 
   
Number
of
Shares
  
Weighted-
Average
Exercise Price
  
Aggregate
Intrinsic
Value
  
Weighted Average-
Remaining
Contractual Term
(in Years)
 
Outstanding at January 1, 2011
  908  $21.67       
Granted
  155   40.11       
Exercised
  (56)  19.54       
Forfeited/Canceled
  (26)  28.05       
Outstanding December 31, 2011
  981  $24.54  $2,679   5.80 
Exercisable at December 31, 2011
  510  $18.63  $2,569   4.75 
Vested and expected to vest at December 31, 2011
  966  $24.44  $2,676   5.78 
 
The intrinsic value of options exercised during 2011, 2010 and 2009 was $1.1 million, $2.2 million and $1.1 million, respectively. As of December 31, 2011, there was $5.6 million of total unrecognized compensation costs related to nonvested stock option awards. That cost, net of forfeitures, is expected to be recognized over a weighted-average period of 2.53 years. The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009, was $2.4 million, $1.5 million, and $1.0 million, respectively.

Nonvested Stock

In 2011, we granted a total of 157,454 shares of nonvested stock. This included grants of (i) 116,321 shares of nonvested stock at a grant price of $41.30 to employees for exceptional performance, and (ii) a total of 41,133 shares, granted at prices from $19.01 to $44.55 per share, to employees, executives and consultants for a range of purposes, including promotions, new hire incentives and consulting services.

A summary of the status of our nonvested shares as of December 31, 2011, and changes during the year are presented below (in thousands, except fair value pricedata):

Nonvested Stock
 
Number of
Shares
  
Weighted-Average
Grant-Date Fair Value
 
Nonvested at January 1, 2011
  518  $32.72 
Granted
  157   39.51 
Vested
  (114)  30.75 
Forfeited/Canceled
  (45)  37.53 
Nonvested at December 31, 2011
  516  $34.79 
 
As of December 31, 2011, there was $10.6 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the stock incentive plans. That cost is expected to be recognized over a weighted-average period of 2.44 years. The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009 was $3.5 million, $0.3 million, and $1.5 million, respectively.

Restricted Stock Units

In 2011, we granted 93,858 restricted stock units to executive officers as part of a Long Term Incentive Plan, or LTIP. Restricted stock unit awards under the LTIP have both performance and service requirements with vesting periods of two to three years, with the exception that 15,177 units granted in 2011 may vest earlier than two years from the grant date, provided certain performance metrics are met. All units granted vest, if at all, between 2012 and 2014 depending on performance measured at the end of the agreement term, at which time the vested units are converted into shares of common stock.

A summary of the status of our nonvested shares as of December 31, 2011, and changes during the year is presented below (in thousands, except fair value price data):
 
Nonvested Restricted Stock Units
 
Number of
Shares
  
Weighted-Average
Grant-Date Fair Value
 
Nonvested at January 1, 2011
  191  $24.91 
Granted
  94   37.77 
Vested
  (22)  16.98 
Forfeited/Canceled
  (7)  26.01 
Nonvested at December 31, 2011
  256  $30.27 
 
The fair value of each restricted stock unit award is calculated using the share price at the date of grant. We recognize compensation cost ratably over the requisite service period based on the achievement of the performance conditions and the estimated expected payout each reporting period. As of December 31, 2011, there was $3.2 million of total unrecognized compensation cost related to the nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.31 years. The total fair value of units vested during the year ended December 31, 2011 was $0.4 million.

Deferred Stock Units

Under the current non-employee director compensation plan, each January 1, non-employee directors receive annual grants of deferred stock units valued at $60,000. Deferred stock units vest in two installments: at six months after grant and at twelve months after grant. Deferred stock units are settled in shares of the Company's common stock six months after the non-employee director's separation from Board service.

A summary of the status of our nonvested shares as of December 31, 2011, and changes during the year is presented below (in thousands, except fair value price data):

Deferred Stock Units
 
Number of
Shares
  
Weighted-Average
Grant-Date Fair Value
 
Balance at January 1, 2011
  87  $21.86 
Granted
  13   42.20 
Forfeited/Canceled
  (1)  42.20 
Balance at December 31, 2011
  99  $24.35 
 
Fair Value Measurements
Fair Value Measurements
(20)
Fair Value Measurements

The Company applies authoritative accounting guidance for fair value measurements of financial and nonfinancial assets and liabilities. The guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance requires disclosure of the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Three levels of inputs may be used to measure fair value:

Level 1:  quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2:  observable prices that are based on inputs not quoted on active markets, but corroborated by market data

Level 3:  unobservable inputs are used when little or no market data is available

GeoEye's financial instruments include cash and cash equivalents, available-for-sale short-term investments, restricted cash, accounts receivable, accounts payable, accrued expenses and debt. The carrying amounts of cash and cash equivalents, available-for-sale short-term investments, restricted cash, accounts receivable, accounts payable and accrued expenses approximate their respective fair values due to the short-term nature of these instruments.
 
The following table provides information about the financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2011, and December 31, 2010 (in thousands):
   
December 31, 2011
  
December 31, 2010
 
   
Carrying
amount
  
Estimated
fair value
  
Carrying
amount
  
Estimated
fair value
 
Available-for-sale securites
 $9,220  $9,220  $10,000  $10,000 
Senior Secured Notes (due 2016)
  125,000   127,970   125,000   131,250 
Senior Secured Notes (due 2015)
  386,019   446,560   383,160   452,000 
 
We classified the above instruments as Level 2 instruments due to the usage of market prices not quoted on active markets and other observable market data.

During our annual goodwill impairment testing, we used Level 3 inputs to determine an implied fair value of $33.9 million for the goodwill of the GeoEye Analytics reporting unit at December 31, 2011.

Significant Customer and Geographic Information
Significant Customer and Geographic Information
(21)
Significant Customer and Geographic Information

The Company operates in a single industry segment, in which it provides Earth imagery, imagery information products and image-processing services to customers around the world.

GeoEye recognized revenue related to contracts with the U.S. government, the Company's largest customer, of $227.8 million, $218.6 million and $181.9 million for the years ended December 31, 2011, 2010 and 2009, representing 64 percent, 66 percent and 67 percent of total revenues, respectively. We had no other customers for whom revenues exceeded 10 percent of total revenues in 2011, 2010 and 2009.

The Company has two product and service lines: (a) Imagery, including the NextView cost-share, and (b) Production and Other Services.

Total revenues by these lines were as follows (in thousands):

   
For The Year Ended December 31,
 
   
2011
  
2010
  
2009
 
Imagery
 $256,280  $249,698  $206,417 
NextView cost-share
  24,153   24,153   21,062 
Production and other services
  75,974   56,494   43,623 
Total revenues
 $356,407  $330,345  $271,102 
 
Total domestic and international revenues were as follows (in thousands):

   
For The Year Ended December 31,
 
   
2011
  
2010
  
2009
 
Domestic
 $263,828  $244,826  $196,722 
International
  92,579   85,519   74,380 
Total revenues
 $356,407  $330,345  $271,102 
 
Our property, plant and equipment and related ground systems are held domestically.

Summary of Quarterly Information (Unaudited)
Summary of Quarterly Information (Unaudited)
 (22)
Summary of Quarterly Information (Unaudited)

Quarterly financial information for the years ended December 31, 2011 and 2010 is summarized below (in thousands, except per share amounts):
 
 
 
2011 Quarters
 
 
 
First
  
Second
  
Third
  
Fourth
 
   
(Unaudited)
 
Revenues
 $86,626  $87,206  $85,769  $96,806 
Income from operations (1)
  24,194   23,592   23,759   26,629 
Net income (1)
  12,247   13,409   14,088   16,868 
Net income available to common stockholders* (1)
  10,037   11,067   11,664   14,144 
Earnings per share - basic* (1)
  0.46   0.50   0.53   0.64 
Earnings per share - diluted* (1)
  0.44   0.49   0.51   0.62 

 
 
2010 Quarters
 
 
 
First
  
Second
  
Third
  
Fourth
 
   
(Unaudited)
 
Revenues
 $80,389  $80,961  $86,452  $82,543 
Income from operations
  26,504   24,276   29,148   23,694 
Net income (loss)
  774   12,149   (6,376)  18,090 
Net income (loss) available to common stockholders*
  774   12,149   (6,475)  15,211 
Earnings (loss) per share - basic*
  0.04   0.56   (0.30)  0.70 
Earnings (loss) per share - diluted*
  0.04   0.55   (0.30)  0.68 
 
*
Net income (loss) available to common stockholders and earnings (loss) per share are computed individually for each of the quarters presented; therefore, the sum of the quarterly net income (loss) available to common stockholders and earnings (loss) per share may not necessarily equal the total for the year.
 
(1)
 In the fourth quarter of 2011, as a result of the Company's annual impairment testing of goodwill, a $2.5 million impairment charge was recorded within continuing operations for the excess of the carrying value of goodwill over the implied fair value of goodwill for GeoEye Analytics.