ManTech Reports Results for the Second Quarter 2004; Strength of Core Business Offset by Losses From MSM Subsidiary.FAIRFAX, Va. -- ManTech International Corporation (Nasdaq:MANT) --Second quarter revenues increased to $198.6 million, a 12 percent increase over second quarter 2003 --Net loss of $5.2 million and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. loss of $0.16, due to losses at ManTech's MSM MSM - Micronetics Standard MUMPS Security Services Security services are state institutions for the provision of intelligence, primarily of a strategic nature, but also including protective security intelligence. Examples include the Security Service (MI5) and the Secret Intelligence Service (MI6) in the United Kingdom, and the , Inc. (MSM) subsidiary --Non-MSM business revenues increased to $205.1 million, a 21 percent increase over the second quarter of 2003 --Non-MSM business net income of $9.3 million ManTech International Corporation (Nasdaq:MANT), a leading provider of innovative technologies and solutions focused on mission-critical national security programs for the Intelligence Community, the Department of Defense, the Department of State, the Department of Justice, the Department of Homeland Security Noun 1. Department of Homeland Security - the federal department that administers all matters relating to homeland security Homeland Security executive department - a federal department in the executive branch of the government of the United States and other federal government customers, today announced results for the second quarter of 2004. Revenues for the quarter increased 12 percent to $198.6 million, compared to $177.1 million for the second quarter in 2003. The increase is attributable to a rise in national and homeland security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States spending, and an increase in defense system support for activities in Southwest Asia Southwest Asia or Southwestern Asia (largely overlapping with the Middle East) is the southwestern portion of Asia. The term Western Asia is sometimes used in writings about the archeology and the late prehistory of the region, and in the United States subregion , Europe and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . ManTech reported a net loss of $5.2 million in the second quarter of 2004, down from net income of $8.9 million in the second quarter of 2003. The decrease is due to a loss incurred in the MSM business unit which provides personnel security investigation (PSI) services to the federal government. The PSI business losses were concentrated in MSM's contract with the Defense Security Service (DSS (1) (Digital Signature Standard) A National Security Administration standard for authenticating an electronic message. See RSA and digital signature. (2) (Digital Satellite S ). Additional background information on the MSM situation: On May 26, 2004, ManTech lowered guidance for the second quarter due to an $11.3 million downward adjustment to revenue caused by a change in estimate of revenue earned and the level of work remaining to be completed under a fixed price contract at MSM. The cases MSM had been tasked to complete by the government were more complex and were requiring more time to complete than anticipated, based on previous case history. On July 19, 2004, ManTech announced that it expected to report an additional loss at its MSM subsidiary, which would result in a loss for ManTech in the second quarter 2004. This additional loss was caused by the confluence confluence /con·flu·ence/ (kon´floo-ins) 1. a running together; a meeting of streams.con´fluent 2. in embryology, the flowing of cells, a component process of gastrulation. of shifting customer priorities and policies - primarily at DSS - which required MSM to redirect re·di·rect tr.v. re·di·rect·ed, re·di·rect·ing, re·di·rects To change the direction or course of. n. A redirect examination. re resources and which resulted in inefficiencies and disruptions to ManTech's background investigations operations. These shifts and policy changes included the delayed merger of DSS and OPM See Oracle Process Manufacturing. , and the delayed awarding and implementation of the OPM background investigations contract - both of which slowed down the number of background cases MSM had expected to process. Changes in ManTech's estimates to complete work and a contract loss accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of $4.7 million on the DSS contract also contributed to the additional loss. ManTech's other national security operations: "While this has clearly been a difficult quarter for the company and our shareholders because of the problems with our MSM business unit, our other national security related business units are healthy, growing and operating effectively," said George J. Pedersen, ManTech International Chairman of the Board, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and President. "Our non-MSM business generated substantial gross profit, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and net income for this quarter. Additionally, if you consider just these operations, our revenue grew 21 percent this quarter over the second quarter in 2003 and these operations had organic growth of 17 percent." The following table provides details of ManTech's consolidated operating performance as well as separate information for MSM and the other operations' business activity.
For the second quarter 2004:
-------------------------------
(In millions)
Consolidated ManTech's Other
ManTech MSM Operations
------------ --------- ---------------
Revenue $198.6 ($6.5) $205.1
Gross profit (loss) $13.8 ($22.4) $36.2
Income (loss) from operations ($8.2) ($24.3) $16.1
Net (loss) income ($5.2) ($14.5) $9.3
Key Performance Metrics Performance metrics are measures of an organizations activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees [1]. Reported total backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. as of June 30, 2004 was $1.5 billion and funded backlog increased to $401 million from $342 million last year. ManTech derived approximately 87 percent of its revenue during the second quarter of 2004 from prime contracts and over 43 percent of its revenue from work under GSA (1) (Global mobile Suppliers Association, Sawbridgeworth, U.K., www.gsacom.com) A membership organization of suppliers of GSM products and services. Its goal is to promote GSM as the worldwide mobile communications standard. See GSM Association and GSM. schedule contracts. Revenue from the Department of Defense and the Intelligence Community accounted for over 92 percent of revenue for the second quarter of 2004. ManTech's time and materials labor and materials (time and materials) n. what some builders or repair people contract to provide and be paid for, rather than a fixed price or a percentage of the costs. contracts accounted for 65 percent of revenue, fixed-price contracts accounted for 6 percent of revenue and cost-plus contracts Cost-plus contract A contract in which the selling price is based on the total cost of production plus a fixed percentage or fixed amount. accounted for 29 percent of revenue. Through the first half of the year, ManTech has been awarded approximately $750 million of new contracts. Some of the announced recent significant business highlights included the award of a five-year, $49.8 million contract from the Naval Air Warfare Center The Naval Air Warfare Center was a former U.S. Navy military installation located in Warminster, Pennsylvania and Ivyland, Pennsylvania. The U.S. Navy purchased the grounds to establish this facility from the Brewster Aeronautical Corporation following its bankruptcy in the Aircraft Division; the award of the Naval Sea Systems Command The Naval Sea Systems Command (NAVSEA) is the largest of the U.S. Navy's five "systems commands," or materiel organizations. NAVSEA consists of four shipyards, eight "warfare centers" (two undersea and six surface), four major shipbuilding locations and the NAVSEA headquarters, Seaport IDIQ IDIQ Indefinite Delivery, Indefinite Quantity (contracting/procurement) contract; the OPM blanket purchase agreement contract for background investigations; and the successful demonstration to the Joint Warrior Warrior, river, Ala.: see Black Warrior. Interoperability The capability of two or more hardware devices or two or more software routines to work harmoniously together. For example, in an Ethernet network, display adapters, hubs, switches and routers from different vendors must conform to the Ethernet standard and interoperate with each other. Demonstration of ManTech's Baseline Tool Kit - a software solution that validates that DOD (1) (Dial On Demand) A feature that allows a device to automatically dial a telephone number. For example, an ISDN router with dial on demand will automatically dial up the ISP when it senses IP traffic destined for the Internet. information systems comply with security guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . Company Guidance ManTech's guidance for the third quarter and full year 2004 reflects the continuation of strong underlying trends in its national security business. However, the guidance also includes consideration of the difficulties and expected future losses in its MSM business, but it does not include any future acquisitions or divestitures.
Third Quarter 2004 Full Year 2004
------------------- -------------------
Revenue $208 million - $835 million -
$218 million $850 million
Diluted Earnings Per Share $0.24 - $0.29 $0.75 - $0.81
Weighted Average Common Shares
Outstanding 32.4 million 32.5 million
Conference Call: ManTech executive management will hold a conference call today at 5 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. , to discuss second quarter 2004 and full year 2004 results and answer questions. Interested parties may access the call by dialing (800) 759-3578 (domestic) or (706) 679-7301 (international). The conference call will be Webcast (listen only) simultaneously via the Internet at www.mantech.com. Interested parties should dial in or log on approximately ten minutes prior to the start of the call. A replay of the call will be available beginning at 9 p.m. today and will remain available through midnight, August 31. To access the replay, call (800) 642-1687 (domestic) or (706) 645-9291 (international). The confirmation code for the replay is 8498430. A replay will also be available on ManTech's Website approximately two hours after the conclusion of the call. About ManTech International Corporation: Headquartered in Fairfax, Virginia Fairfax is an independent city forming an enclave within the confines of Fairfax County, in the Commonwealth of Virginia. Although politically independent of the surrounding county, the City of Fairfax is nevertheless its county seatGR6. , ManTech International Corporation is a leading provider of innovative technologies and solutions for mission-critical national security programs for the Department of Defense, the Intelligence Community, the Department of State, the Department of Justice, the Department of Homeland Security and other U.S. federal government customers. The company's expertise includes software development, enterprise security architecture, information assurance, intelligence operations The variety of intelligence and counterintelligence tasks that are carried out by various intelligence organizations and activities within the intelligence process. Intelligence operations include planning and direction, collection, processing and exploitation, analysis and production, support, network and critical infrastructure protection Department of Defense (DOD) program to identify and protect assets critical to the Defense Transportation System. Loss of a critical asset would result in failure to support the mission of a combatant commander. , information technology, communications integration and engineering support. The company supports the advanced telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. systems that are used in Operation Iraqi Freedom and in other parts of the world; provides the physical and cyber (1) From "cybernetics," it is a prefix attached to everyday words to add a computer, electronic or online connotation. The term is similar to "virtual," but the latter is used more frequently. See virtual. security to protect U.S. embassies all over the world; has developed a secure, collaborative communications system In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. for the U.S. Department of Homeland Security; and is helping the Department of Justice's U.S. Marshall Service deploy a common, office automation system. With annual revenues in excess of $700 million and more than 5,300 highly qualified employees and several thousand consultants, the company operates in the United States and more than 30 countries worldwide. ManTech was selected by Business Week magazine as one of the Top 100 Hot Growth Companies for 2004. Also this year, VARBusiness magazine ranked ManTech as one of its Top 50 Fastest-Growing Solution Providers. Additional information on ManTech can be found at www.mantech.com. Forward-Looking Information: Statements and assumptions made in this press release, which do not address historical facts, could be interpreted to be "forward-looking" statements that ManTech believes to be within the definition in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those indicated by such forward-looking statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. include, but are not limited to: adverse changes in U.S. government spending Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product. priorities; failure to retain existing U.S. government contracts or win new contracts; incorrect estimations of the value of our indefinite-delivery, indefinite-quantity contracts, blanket purchase agreements or other indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those value contracts; the failure of the U.S. government to award task orders to ManTech, allot al·lot tr.v. al·lot·ted, al·lot·ting, al·lots 1. To parcel out; distribute or apportion: allotting land to homesteaders; allot blame. 2. funds to complete performance of task orders awarded to ManTech, or exercise schedule options; risks of contract performance or termination; risks of adverse consequences resulting from contract negotiations on existing U.S. government contracts; government contract procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. (such as bid protest) and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain employees; adverse results of U.S. government audits of our government contracts; failure to successfully integrate recent acquired companies or business into our operations or to realize any accretive or synergistic effects Synergistic effect A violation of value-additivity in that the value of a combination is greater than the sum of the individual values. ; failure to identify, execute of effectively integrate future acquisitions; additional costs associated with complying with new laws New Laws: see Las Casas, Bartolomé de. and regulations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc corporate government issues or new rules promulgated prom·ul·gate tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates 1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce. 2. by the SEC; and material changes in laws or regulations applicable to the company's businesses. For a discussion of these and other risks and uncertainties, please refer to the section titled "Risks Related to The Company's Business" in ManTech's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission on March 15, 2004, and, from time to time, in ManTech's other filings with the Securities and Exchange Commission, including, among others, its reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and Form 10-Q Form 10-Q See 10-Q. . The forward-looking statements included in this news release are only made as of the date of this news release and ManTech undertakes no obligation to publicly update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , changes in expectations or otherwise.
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(unaudited) (unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------ -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
REVENUES $ 198,582 $ 177,076 $ 401,351 $ 325,199
COST OF SERVICES 184,820 144,350 348,394 264,132
----------- ----------- ----------- -----------
GROSS PROFIT 13,762 32,726 52,957 61,067
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
General and
administrative 20,569 16,195 39,105 30,934
Depreciation and
amortization 1,427 1,242 2,725 2,177
----------- ----------- ----------- -----------
Total costs and
expenses 21,996 17,437 41,830 33,111
----------- ----------- ----------- -----------
INCOME (LOSS) FROM
OPERATIONS (8,234) 15,289 11,127 27,956
Interest income
(expense), net (596) (687) (1,138) (1,021)
Other income
(expense) 143 352 445 (270)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES
AND MINORITY
INTEREST (8,687) 14,954 10,434 26,665
Income taxes 3,499 (6,075) (4,280) (10,823)
Minority interest (2) (2) (4) (3)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (5,190) $ 8,877 $ 6,150 $ 15,839
=========== =========== =========== ===========
BASIC EARNINGS
(LOSS) PER SHARE
Net income (loss) $ (.16) $ .28 $ .19 $ .50
----------- ----------- ----------- -----------
Weighted average
common shares
outstanding 32,289,318 31,941,783 32,209,633 31,928,870
=========== =========== =========== ===========
DILUTED EARNINGS
(LOSS) PER SHARE
Net income (loss) $ (.16) $ .28 $ .19 $ .50
----------- ----------- ----------- -----------
Weighted average
common shares
outstanding 32,289,318 31,994,687 32,411,365 31,964,829
=========== =========== =========== ===========
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(unaudited)
June 30, December 31,
2004 2003
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,609 $ 9,166
Cash in escrow 831 829
Receivables--net 211,201 204,539
Prepaid expenses and other 11,842 17,527
Assets held for sale 1,320 1,332
------------ ------------
Total current assets 231,803 233,393
Property and equipment--net 11,705 10,920
Goodwill 148,253 149,548
Other intangibles--net 26,439 15,741
Investments 5,902 5,560
Employee supplemental savings plan assets 11,752 10,594
Other assets 10,720 10,378
------------ ------------
TOTAL ASSETS $ 446,574 $ 436,134
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of debt $ 66 $ 77
Accounts payable and accrued expenses 51,026 45,157
Accrued salaries and related expenses 26,137 30,548
Deferred income taxes 7,014 20,092
Billings in excess of revenue earned 6,628 4,514
Liabilities of operations held for sale 1,086 1,164
------------ ------------
Total current liabilities 91,957 101,552
Debt--net of current portion 33,000 25,184
Accrued retirement 13,193 11,914
Other long-term liabilities 5,350 5,178
Deferred income taxes 5,221 4,553
Minority interest 52 49
------------ ------------
TOTAL LIABILITIES 148,773 148,430
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, Class A -- $0.01 par value:
150,000,000 shares authorized; 17,283,038
and 17,047,820 shares issued and
outstanding at June 30, 2004 and December
31, 2003, respectively 173 170
Common stock, Class B -- $0.01 par value:
50,000,000 shares authorized; 15,075,293
and 15,075,293 shares issued and
outstanding at June 30, 2004 and December
31, 2003, respectively 151 151
Additional paid in capital 216,575 212,564
Retained earnings 82,153 76,003
Accumulated other comprehensive loss (522) (1,184)
Unearned ESOP shares (729) --
Deferred compensation 640 640
Shares held in grantor trust (640) (640)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 297,801 287,704
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 446,574 $ 436,134
============ ============
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
Six months
ended June 30,
---------------------
2004 2003
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,150 $ 15,839
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in (earnings) losses of affiliates (278) 781
Decrease in deferred income taxes (12,410) (1,928)
Minority interest in income of consolidated
subsidiaries 4 3
Loss on disposals of property and equipment 44 11
Depreciation and amortization 3,782 3,107
Changes in assets and liabilities-net of
effects from acquired and discontinued
businesses:
Contract receivables (6,662) (5,752)
Prepaid expenses and other 5,685 (1,643)
Accounts payable and accrued expenses 5,869 (708)
Accrued salaries and related expenses (4,411) (3,159)
Billings in excess of revenue earned 2,114 1,988
Accrued retirement 1,279 403
Other (1,153) 86
---------- ---------
Net cash flows from operating activities 13 9,028
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,498) (1,884)
Proceeds from sales of property and equipment 1 1
Investment in capitalized software products (120) (1,015)
Acquisition of businesses, net of cash
acquired of $2,840 in 2003 (10,969) (68,279)
---------- ----------
Net cash flows from investing activities (13,586) (71,177)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of not-to-compete financings -- (1,000)
Proceeds from exercise of stock options 3,245 160
Net increase in borrowings under lines of
credit 7,805 --
---------- ----------
Net cash flows from financing activities 11,050 (840)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 19 (11)
---------- ----------
NET CASH FLOWS FROM DISCONTINUED OPERATIONS (53) 2,317
---------- ----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (2,557) (60,683)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,166 81,096
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,609 $ 20,413
========== ==========
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