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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
AUGUST 5, 2002
Date of Report (Date of earliest event reported)
MANTECH INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 000-49604 22-1852179
---------------------------- ------------------------ ---------------------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification No.)
of Incorporation)
12015 Lee Jackson Highway, Fairfax, VA 22033
--------------------------------------------
(Address of principal executive offices)
(703) 218-6000
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported on Form 8-K filed with the Securities and Exchange
Commission on August 20, 2002, on August 5, 2002, ManTech International
Corporation, a Delaware corporation ("ManTech"), announced that its acquisition
by way of merger of Aegis Research Corporation had closed. As a result of the
merger, Aegis Research Corporation became a wholly owned subsidiary of ManTech.
This Form 8-K/A is being filed for the purpose of providing the required
financial statements and pro forma financial information.
Under the terms of the merger agreement by and among Aegis Research Corporation,
ManTech Beta Corporation, ManTech International Corporation, and Citibank, N.A.,
as Escrow Agent, ManTech Beta Corporation, a newly formed subsidiary of ManTech
International Corporation, merged with and into Aegis Research Corporation, with
Aegis Research Corporation surviving the merger as a wholly owned subsidiary of
ManTech International Corporation operating under the new name ManTech Aegis
Research Corporation. The consideration for the shareholders to consent to the
merger was a purchase price of approximately $69.1 million in cash. ManTech
International Corporation funded the acquisition using proceeds from its initial
public offering completed in February 2002. The purchase price was determined
based on arm's length negotiations among the parties. Aegis Research
Corporation, based in Falls Church, VA., is a leading provider of secrecy
management and enterprise security services for key customers in the Department
of Defense and intelligence community.
The summary of the transaction described above is qualified by reference to the
Agreement and Plan of Merger, by and among Aegis Research Corporation, ManTech
Beta Corporation, ManTech International Corporation, and Citibank, N.A., as
Escrow Agent, dated July 1, 2002, the press release dated July 1, 2002,
regarding the signing of the transaction and the press release dated August 5,
2002, regarding the closing of the transaction, all of which are incorporated
herein by reference to the Company's Form 8-K filed on August 20, 2002.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The following financial statements omitted from the Current Report on Form 8-K
dated August 5, 2002 in reliance upon Item 7 (a)(4) of Form 8-K are filed
herewith.
Financial Statements of Aegis Research Corporation ("Aegis") as of
December 31, 2001, and June 30, 2002 and 2001 (unaudited):
Report of Independent Auditors
Balance Sheets
Statements of Income
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
(b) Pro Forma Financial Information.
The following pro forma financial information omitted from the Current Report on
Form 8-K dated August 5, 2002 in reliance upon Item 7 (b)(2) of Form 8-K are
filed herewith.
Unaudited Pro Forma Condensed Consolidated Financial Statements of
ManTech:
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2002
Pro Forma Condensed Consolidated Statement of Income for the fiscal
year ended December 31, 2001
Pro Forma Condensed Consolidated Statement of Income for the six months
ended June 30, 2002
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits
2.1 *Agreement and Plan of Merger, by and among Aegis Research Corporation,
ManTech Beta Corporation, ManTech International Corporation, and
Citibank, N.A., as Escrow Agent, dated July 1, 2002. Pursuant to Item
601(b)(2) of Regulation S- K, the exhibits and schedules to the
Agreement and Plan of Merger are omitted. A list of such exhibits and
schedules appears in the table of contents to the Agreement and Plan
of Merger.
99.1 *Press Release regarding the signing of the Agreement and Plan of Merger
dated July 1, 2002.
99.2 *Press Release regarding completion of the acquisition dated
August 5, 2002.
*Incorporated by reference to ManTech's Current Report on Form 8-K dated August
5, 2002 filed on August 20, 2002.
Aegis Research Corporation
Financial Statements
As of and for the year ended December 31, 2001
Contents
Report of Independent Auditors 1
Financial Statements
Balance Sheets 2
Statements of Income 3
Statements of Shareholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Report of Independent Auditors
Sole Director
Aegis Research Corporation
Falls Church, Virginia
We have audited the accompanying balance sheet of Aegis Research Corporation
(the Company) as of December 31, 2001, and the related statements of income,
changes in shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aegis Research Corporation at
December 31, 2001, and the results of its operations and its cash flows for the
year ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
March 29, 2002
Aegis Research Corporation
Balance Sheets
(In Thousands of Dollars)
December 31, June 30,
2001 2002
----------- --------
(unaudited-Note 1)
Assets
Current assets
Cash and cash equivalents (Note 1) $ 118 $ 1,894
Accounts receivable (Note 2) 16,369 10,740
Note receivable from shareholder (Note 9) 1,500 1,725
Investments - short-term (Notes 1 and 3) 501 600
Prepaid expenses 477 180
Other current assets 266 323
------- -------
Total current assets 19,231 15,462
Property and equipment (Note 1)
Furniture and fixtures 137 137
Office equipment and software 806 1,209
Leasehold improvements 622 656
------- -------
1,565 2,002
Less accumulated depreciation and amortization (494) (654)
------- -------
Net property and equipment 1,071 1,348
Long-term investments (Notes 1, 3 and 8) 2,208 2,072
Deposits 108 113
------- -------
Total assets $22,618 $18,995
======= =======
Liabilities and shareholders' equity
Current liabilities
Line of credit (Note 4) $ 4,497 $ -
Accounts payable 1,479 622
Accrued compensation and related taxes (Note 8) 2,568 3,419
Accrued profit-sharing plan (Note 8) 628 5
Dividends payable for income taxes (Notes 1 and 5) 5,770 6,150
------- -------
Total current liabilities 14,942 10,196
Long-term liabilities (Note 8) 1,452 1,418
Shareholders' equity
Class A voting common stock, $0.01 par value, 750,000 shares authorized,
issued and outstanding at December 31, 2001 and June 30, 2002 (unaudited) 8 8
Class B nonvoting common stock, $0.01 par value, 350,000 shares
authorized, 156,750 and 158,250 shares issued and outstanding at
December 31, 2001 and June 30, 2002 (unaudited), respectively 2 2
Capital in excess of par value 471 479
Retained earnings 5,743 6,892
------- -------
Total shareholders' equity 6,224 7,381
------- -------
Total liabilities and shareholders' equity $22,618 $18,995
======= =======
See accompanying notes.
Aegis Research Corporation
Statements of Income
(In Thousands of Dollars, Except per Share Data)
Year Ended Six Months Ended
December 31, June 30,
2001 2002 2001
---- ---- ----
(unaudited-Note 1)
Revenues (Note 1) $ 51,369 $ 27,539 $ 24,044
Direct costs 29,831 14,507 14,018
Indirect and G&A expenses 18,120 10,793 8,516
-------- -------- --------
Total expenses 47,951 25,300 22,534
-------- -------- --------
Operating Income 3,418 2,239 1,510
Other income and expense
Interest income 223 103 93
Interest expense (227) (45) (182)
-------- -------- --------
Net income $ 3,414 $ 2,297 $ 1,421
======== ======== ========
Net income as reported above $ 3,414 $ 2,297 $ 1,421
Pro forma adjustment
Dividends payable provision for income taxes
(Notes 1 and 5) (1,707) (1,148) (710)
-------- -------- --------
Pro forma net income $ 1,707 $ 1,149 $ 711
======== ======== ========
Basic earnings per share (Note 7)
Net income before pro forma adjustment $ 3.79 $ 2.53 $ 1.59
Pro forma adjustment (1.89) (1.26) (0.79)
-------- -------- --------
Pro forma net income $ 1.90 $ 1.27 $ 0.80
-------- -------- --------
Diluted earnings per share (Note 7)
Net income before pro forma adjustment $ 3.65 $ 2.42 $ 1.53
Pro forma adjustment (1.82) (1.21) (0.76)
-------- -------- --------
Pro forma net income $ 1.83 $ 1.21 $ 0.77
-------- -------- --------
See accompanying notes.
Aegis Research Corporation
Statements of Shareholders' Equity
(In Thousands of Dollars, Except Share Data)
Capital in
Class A Common Class B Common Excess of Retained
Shares Amount Shares Amount Par Value Earnings Total
------ ------ ------ ------ --------- -------- -----
Balance at December 31, 2000 750,000 $8 140,050 $2 $397 $ 4,036 $ 4,443
Stock issuance--Class B Common - - 17,050 - 85 - 85
Stock repurchase--Class B Common - - (350) - (2) - (2)
Stock option repurchase--Class B Common - - - - (9) - (9)
Dividends payable for income taxes (Note 5) - - - - - (1,707) (1,707)
Net income for the year ended
December 31, 2001 - - - - - 3,414 3,414
------- - ------- - ---- ------- -------
Balance at December 31, 2001 750,000 8 156,750 2 471 5,743 6,224
Stock issuance--Class B Common - - 2,000 - 14 - 14
Stock repurchase--Class B Common - - (500) - (3) - (3)
Stock option repurchase--Class B Common - - - - (3) - (3)
Dividends payable for income taxes (Note 5) - - - - - (1,148) (1,148)
Net income for the six months ended
June 30, 2002 - - - - - 2,297 2,297
------- - ------- - ---- ------- -------
Balance at June 30, 2002 (unaudited) 750,000 $8 158,250 $2 $479 $ 6,892 $ 7,381
======= = ======= = ==== ======= =======
See accompanying notes.
Aegis Research Corporation
Statements of Cash Flows
(In Thousands of Dollars)
Year Ended Six Months Ended
December 31, June 30,
2001 2002 2001
---- ---- ----
(unaudited)
Operating activities
Net income $ 3,414 $ 2,297 $ 1,421
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Depreciation and amortization 275 210 107
Changes in assets and liabilities:
Accounts receivable (2,132) 5,250 932
Prepaid expenses (388) 298 (201)
Deposits and other current assets (76) (61) (54)
Accounts payable and accrued expenses 787 (1,397) (190)
Long-term liabilities 534 (34) 130
-------- -------- --------
Net cash and cash equivalents provided by operating
activities 2,414 6,563 2,145
Investing activities
Note receivable from shareholder (496) (225) 4
Net acquisition of property and equipment (496) (108) (208)
Purchase of investments (550) (65) (148)
Maturities of investments 500 100 200
-------- -------- --------
Net cash and cash equivalents used in investing activities (1,042) (298) (152)
Financing activities
Proceeds from line of credit and notes payable 17,568 17,734 13,588
Principal payments on line of credit and notes payable (19,123) (22,231) (15,868)
Net proceeds from issuance of capital stock 85 14 73
Payments for repurchase of capital stock (11) (6) (4)
Dividends paid to shareholders - - -
-------- -------- --------
Net cash used in financing activities (1,481) (4,489) (2,211)
-------- -------- --------
Net change in cash and cash equivalents (109) 1,776 (218)
Cash and cash equivalents at beginning of period 227 118 227
-------- -------- --------
Cash and cash equivalents at end of period $ 118 $ 1,894 $ 9
======== ======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 227 $ 45 $ 182
======== ======== ========
Dividend distributions for income taxes payable $ 89 $ 303 $ 89
======== ======== ========
See accompanying notes.
Aegis Research Corporation
Notes to Financial Statements
(In Thousands of Dollars, Except per Share Data)
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
The Company provides comprehensive strategy, protection planning and
professional technical services for the federal national security community,
state and local governments, and United States corporations. Client support is
focused on information operations, information protection, risk management,
intelligence, space operations support, mission visualization and modeling,
mission decision aids development, information systems, security operations
support, and training.
The financial information presented as of the dates other than December 31, 2001
has been prepared from the books and records without audit. In the opinion of
management, the accompanying unaudited interim financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the Company's financial position as of June 30, 2002, and the results of
its operations and cash flows for the periods ended June 30, 2002 and 2001. The
results of operations are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002.
Revenue Recognition
The Company provides engineering and consulting services to the United States
government, primarily the military, on a contractual basis. Revenues on
cost-plus-fee contracts are recognized to the extent of costs incurred plus a
proportionate amount of fees earned. Revenues on time-and-materials contracts
are recognized to the extent of billable rates times hours delivered plus other
direct costs. Revenues on fixed-price contracts are recognized on the
percentage-of-completion method based on costs incurred in relation to total
estimated costs. Anticipated contract losses are recognized as soon as they
become known and estimable.
Significant Customers
During the year ended December 31, 2001 and six months ended June 30, 2002, a
significant percentage of Company revenues were derived from two customers. One
of these customers comprises greater than 29% of revenues for both periods, and
the other approximately 11% and 9%, respectively, of revenues for the year ended
December 31, 2001 and six months ended June 30, 2002 (unaudited).
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Investments
Management determines the appropriate classification of debt securities at the
time of purchase. Debt securities are classified as held-to-maturity when the
Company has positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income.
Accounting for Stock Based Compensation
The Company accounts for stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
25) and provides the pro forma disclosures pursuant to Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation (SFAS
123).
Property and Equipment
Property and equipment are stated at cost and are depreciated over their
estimated useful lives of five years using the straight-line method. Effective
January 1, 2000, the Company adopted Statement of Position (SOP) No. 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. SOP No. 98-1 requires the capitalization of certain costs incurred in
connection with developing or obtaining software for internal use. These costs
are included in the software balance and amortized over a seven-year period. All
other software is depreciated over three years using the straight-line method.
Leasehold improvements are amortized over the terms of the related leases using
the straight-line method.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the associated amounts of revenues and
expenses during the reporting period. Actual results could differ from the
estimates.
Income Taxes
The Company elected S Corporation status in January 1987, and as such, is not
taxed at the corporate level. Consequently, no provision for income tax is
recorded in the accompanying financial statements. All income, losses, and tax
credits flow through to the individual shareholders of the Company and are taxed
at that level.
The Board of Directors has determined that the Company would declare and pay a
dividend to the shareholders approximately equal to the taxes payable by them on
the current and future taxable income of the Corporation. Therefore, dividends
payable for tax liabilities have been recognized for the future tax consequences
attributable to taxes currently due and differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
2. Revenue and Accounts Receivable
The majority of the Company's revenues resulted from contracts with the United
States government. The components of receivables are as follows:
December 31, June 30,
2001 2002
---- ----
(unaudited)
Amounts billed $ 9,927 $ 5,645
Amounts currently billable 5,300 4,574
Other unbillable amounts 1,258 942
Reserves (116) (421)
------- -------
$16,369 $10,740
======= =======
In general, the reserves are for any potential adjustments arising from future
government audits and contract-related items.
3. Investments
The Company purchased U.S. Treasury Notes in 2001 and 2002, all of which are
classified as held-to-maturity securities. The following is a summary of those
investments:
Gross
Unrealized
Gains/ Estimated
U.S. Treasury Notes Cost (Losses) Fair Value
------------------- ---- -------- ----------
December 31, 2001 $1,257 $41 $1,298
June 30, 2002 (unaudited) $1,251 $35 $1,286
The amortized cost and estimated fair value of debt securities, as determined by
outside market sources, at December 31, 2001 and June 30, 2002, by contractual
maturity, are shown below:
December 31, 2001
Estimated
Cost Fair Value
---- ----------
Due in one year or less $ 501 $ 513
Due after one year through three years 756 785
Due after three years through five years - -
------ ------
$1,257 $1,298
====== ======
June 30, 2002
(unaudited)
Estimated
Cost Fair Value
---- ----------
Due in one year or less $ 600 $ 611
Due after one year through three years 554 577
Due after three years through five years 97 98
------ ------
$1,251 $1,286
====== ======
4. Line of Credit
The Company has available a line of credit which provides for advances based
upon a borrowing base, limited to percentages of eligible receivables as defined
in the line of credit agreement. Effective December 31, 2001, the maximum
borrowing base was $10.0 million. The line is scheduled to decrease to $6.0
million in April 2002. The interest rate per annum applicable to the line of
credit is based upon the Federal Funds Rate. As of December 31, 2001 and June
30, 2002, the rate was 4.27% and 4.48% (unaudited), respectively. The line of
credit is secured by substantially all assets of the Company.
Under the terms of the line of credit, the Company is required to maintain
certain financial ratios relating to tangible net worth. The Company was in
compliance with the financial covenants of the line of credit at December 31,
2001 and June 30, 2002 (unaudited).
5. Dividends Payable for Income Taxes
The Company will make dividend distributions to the shareholders for income
taxes payable currently and in the future on the taxable income of the Company.
Therefore, the financial statements reflect the dividends payable provision for
income taxes as if the Company was accounting for income taxes pursuant to
Statement of Financial Accounting Standards No. 109. In addition, the pro forma
effect of the dividends payable provision for income taxes has been presented on
the face of the financial statements and the significant components of the
provision attributable to continuing operations are detailed below. The income
tax rates used reflect the maximum rate that would be paid by the shareholders
on distribution of profits.
The dividends payable for income taxes would include the following:
Six Months
Year Ended Ended
December 31, June 30,
2001 2002
---- ----
(unaudited)
Current:
Federal $ 686 $3,556
State 85 440
------ ------
Total current dividends payable for income taxes 771 3,996
Deferred:
Federal 833 (2,534)
State 103 (314)
------ ------
Total deferred dividends payable for income taxes 936 (2,848)
------ ------
$1,707 $1,148
====== ======
The deferred income tax provisions include the following source and tax effect
timing differences:
Six Months
Year Ended Ended
December 31, June 30,
2001 2002
---- ----
(unaudited)
Accrual to cash conversion $ 907 ($ 2,862)
Depreciation and amortization 29 14
------ --------
Total deferred dividends payable for income taxes $ 936 ($ 2,848)
====== ========
The dividend payable for income taxes varies from the amount of income taxes
determined by applying the maximum U.S. federal income tax effective rates to
income before taxes as follows:
Six Months
Year Ended Ended
December 31, June 30,
2001 2002
---- ----
(unaudited)
Maximum effective federal income tax rates 42% 42%
State income tax, net of federal income tax benefit 3 3
Other taxes 5 5
---- ----
Effective tax rate 50% 50%
==== ====
Significant components of the dividends payable for income taxes are as follows:
December 31, June 30,
2001 2002
---- ----
(unaudited)
Accrual to cash conversion $5,891 $6,279
Depreciation and amortization (121) (129)
------ ------
Total deferred dividends payable for income taxes $5,770 $6,150
====== ======
6. Common Stock
The Company has two classes of common stock, Class A common stock and Class B
common stock. All voting rights are vested exclusively in the Class A common
stock (except to the extent required by law). As of December 2001, authorized
shares for Class A common stock and Class B common stock were 750,000 shares and
350,000 shares, respectively. On March 15, 2002, the Company increased the
authorized shares for Class B common stock to 500,000 shares. A portion of the
common stock is subject to a Share Repurchase Agreement, providing the Company
the option to repurchase stock from terminating employees.
The Company has two nonqualified Employee Stock Option Plans, one for employees
and one for consultants. Under the Plans, 315,000 shares of non-voting Class B
Common Stock, $0.01 par value per share, are reserved for issuance. The option
price per share is determined by the Board of Directors, but shall be no less
than fair value on the date of the latest audited financial statements. When the
options are exercisable depends upon the tax basis of the Company at date of
grant. If the Company is an S Corporation, options are first exercisable on the
eighth (8th) anniversary of grant date. If the Company becomes a C Corporation,
options are first exercisable on the fifth (5th) anniversary. Options
surrendered, lapsed, expired, forfeited, or terminated are available for option
again.
Option activity is summarized as follows:
Weighted-
Number of Option Price Average Price
of Shares Per Share Per Share
--------- --------- ---------
Shares under option, December 31, 2000 126,240 ($2.00-$4.45) $3.01
Options granted 44,760 $4.57-$4.99 $4.96
Options forfeited (8,050) ($2.00-$4.99) $3.63
-------
Shares under option, December 31, 2001 162,950 $2.00-$4.99 $3.50
=======
Options vested December 31, 2001 131,480 $2.00-4.99 $3.29
=======
Option activity is summarized by price range as set forth below at December 31,
2001:
Weighted-
Average
Weighted- Remaining
Number of Average Contractual Life
Exercise Price Shares Exercise Price (years)
-------------- ------ -------------- -------
$2.00-2.70 53,040 $2.04 3.07
$3.39-3.50 50,310 $3.50 5.30
$4.20-4.99 59,600 $4.80 8.76
-------
162,950
=======
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123) establishes financial accounting and reporting standards
for stock-based compensation plans and for transactions in which an entity
issues its equity instruments to acquire goods and services from nonemployees.
The accounting standards prescribed by SFAS 123 are optional, and the Company
has elected to continue to follow APB 25. Had the Company adopted SFAS 123, net
income would have decreased by approximately $86, and basic and diluted earnings
per share would have decreased by approximately $0.09 per share for the year
ended December 31, 2001.
7. Earnings Per Share
Basic and diluted earnings per share for the year ended December 31, 2001 and
the six months ended June 30, 2002 and 2001 are computed based on net earnings.
For these years, the weighted average number of common shares outstanding during
each year was used in the calculation of basic earnings per share, and this
number of shares was increased by the effects of dilutive stock options based on
the treasury stock method in the calculation of diluted earnings per share.
The following table sets forth the computation of basic and diluted earnings per
share:
December 31, June 30,
2001 2002 2001
---- ---- ----
(unaudited)
Numerator for basic earnings per share:
Net income $ 3,414 $ 2,297 $ 1,421
Dividends payable provision for income taxes
(Note 5) (1,707) (1,149) (710)
-------- -------- --------
Pro forma net income $ 1,707 $ 1,148 $ 711
======== ======== ========
Denominator for basic earnings per share:
Weighted-average shares outstanding 900,247 907,772 893,894
Dilutive stock options--based on the treasury
stock method 33,900 40,095 35,386
-------- -------- --------
Denominator for diluted earnings per share--
adjusted weighted-average shares and
assumed conversions 934,147 947,867 929,280
======== ======== ========
December 31, June 30,
2001 2002 2001
---- ---- ----
(unaudited)
Basic earnings per share:
Net income before pro forma adjustment $ 3.79 $ 2.53 $ 1.59
Pro forma adjustment (1.89) (1.26) (0.79)
------ ------ -------
Pro forma net income $ 1.90 $ 1.27 $ 0.80
====== ====== =======
Diluted earnings per share:
Net income before pro forma adjustment $ 3.65 $ 2.42 $ 1.53
Pro forma adjustment (1.82) (1.21) (0.76)
------ ------ -------
Pro forma net income $ 1.83 $ 1.21 $ 0.77
====== ====== =======
8. Commitments, Contingencies and Other
Government Audits
Substantially all payments to the Company on contracts are provisional payments
which are subject to adjustment upon audit by the United States government.
Audits through 1996 were completed as of the date of this report. Audits for
1997, 1998 and 1999 were closed subsequent to the issuance of this report
without material adjustment (unaudited). Audits for 2000 and subsequent years
are not expected to result in material adjustments.
Leases
The Company has entered into lease agreements for office space and personal
property. The lease agreements for office space include escalation clauses,
which allow increased operating costs to be passed through to the Company.
Future minimum payments, by year and in the aggregate, under noncancellable
operating leases with remaining terms are as follows at December 31, 2001:
2002 $ 2,077
2003 1,736
2004 1,444
2005 1,280
2006 1,216
Thereafter 3,990
-------
Total minimum lease payments $11,743
=======
Rent expense for operating leases was $2,460 and $1,029 (unaudited) for the year
ended December 31, 2001 and six months ended June 30, 2002, respectively.
Deferred Compensation Plan
The Company established a deferred compensation plan for key employees effective
December 1997. The plan receives no employer contributions and is maintained by
the Company primarily for the purpose of providing deferred compensation for a
select group of highly compensated management personnel. Under the terms of the
deferred compensation plan, employees may elect to defer payment of all or a
portion of their salaries and incentive bonuses until retirement or termination
of employment with the Company. At December 31, 2001 and June 30, 2002, the
investment in this plan totaled $1,452 and $1,421 (unaudited), respectively, and
is included in long-term investments. The corresponding liability totaled $1,452
and $1,418 (unaudited), respectively, and is classified in long-term
liabilities.
Profit-Sharing Plan
The Company established a qualified 401(k) profit-sharing plan in 1992.
Employees become eligible to participate in this Plan upon attainment of age 21.
Eligible employees may defer a portion of their salary. At the discretion of the
Company, the Company may contribute to the plan. During 2001 and 2002
(unaudited), the Company approved a matching contribution up to 75% of the first
$4 of eligible employees' deferrals.
In addition, the Company also made a discretionary profit-sharing contribution
to all employees for 2001 and 2002 (unaudited). To share in the Company's
profit-sharing contributions, employees must complete a certain number of hours
of service within the Plan year and must be employed on the last day of the Plan
year. Contributions were approximately $1,615 for the year ended December 31,
2001 and $708 (unaudited) for the six months ended June 30, 2002. Employees
participating in the plan vest at 20% per year based on completion of a certain
number of hours of service within the Plan year.
Self-Insurance
The Company is self-insured for a portion of its health insurance and has an
excess reimbursement policy to cover individual and aggregate claims over
certain limits.
Contingencies
During the ordinary course of business, the Company has been and is likely to be
involved in legal or administrative proceedings. It is management's opinion that
the resolution of any such proceedings will not have a material adverse effect
on the Company's financial condition and results of operations.
9. Related Party Transactions
During 2002, 2001 and 2000, the Company advanced $225 (unaudited), $500 and
$1,000, respectively, to the President of the Company, which accrued interest at
10.5% through October 9, 2001 and 7.5% thereafter, and is due on demand. The
Company leased artwork from its Corporate Secretary, who is the spouse of the
President, during 2001 and 2002. Rental expense was $10 and $5 (unaudited) for
the year ended December 31, 2001 and six months ended June 30, 2002,
respectively.
In 2001, the Company purchased all of the fixed assets of MindSim Corporation in
exchange for settlement of an outstanding note plus interest valued at $180.
These assets will be used by the Company in normal operations.
10. Subsequent Event
In January 2002, the Company purchased substantially all of the remaining assets
of MindSim Corporation in exchange for the forgiveness of outstanding
receivables of approximately $380.
11. Event Unaudited Subsequent to Date of Independent Auditor's Report
On August 5, 2002, ManTech International Corporation acquired the Company for
approximately $69.1 million in cash.
ManTech International Corporation
Unaudited Pro Forma Condensed Consolidated Financial Statements
On August 5, 2002, ManTech International Corporation ("ManTech" or the
"Company") acquired Aegis Research Corporation ("Aegis") for approximately $69.1
million in cash. The following unaudited pro forma condensed consolidated
balance sheet as of June 30, 2002 and the unaudited pro forma condensed
consolidated statements of income for the fiscal year ended December 31, 2001
and for the six months ended June 30, 2002 give effect to the Company's purchase
of Aegis. The acquisition has been accounted for using purchase price accounting
in accordance with Statement of Financial Accounting Standards No. 141, Business
Combinations.
The pro forma condensed consolidated balance sheet presents the financial
position of the Company as if the acquisition of Aegis occurred on June 30,
2002. The pro forma condensed consolidated statements of income have been
prepared as if the acquisition occurred on January 1, 2001.
These pro forma condensed consolidated financial statements, which have been
prepared in accordance with rules prescribed by Article 11 of Regulation S-X,
are provided for informational purposes only and are not necessarily indicative
of the past or future results of operations or financial position of the
Company.
This information should be read in conjunction with the previously filed Current
Report on Form 8-K, dated August 5, 2002, the previously filed historical
consolidated financial statements and accompanying notes of the Company,
contained in its Annual Report on Form 10-K for the fiscal year ended December
31, 2001, and its Report on Form 10-Q for the six months ended June 30, 2002,
and in conjunction with the historical financial statements and accompanying
notes of Aegis included in this Report on Form 8-K/A.
ManTech International Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(In Thousands)
ManTech Aegis
International Research
Corporation Corporation Pro Forma Pro Forma
June 30, 2002 June 30, 2002 Adjustments June 30, 2002
------------- ------------- ----------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 84,916 $ 1,894 $ (1,894) A $ 15,653
(69,263) B
Receivables - net 102,440 10,741 - 113,181
Investments - 600 (600) A -
Prepaid expenses and other 7,732 2,227 (1,931) C 8,028
Assets held for sale 19,590 - - 19,590
-------- ------- -------- --------
Total current assets 214,678 15,462 (73,688) 156,452
Property and equipment - net 7,933 1,022 - 8,955
Goodwill 7,871 - 60,811 B 68,682
Other intangibles 2,804 326 - 3,130
Investments 7,983 651 (651) A 7,983
Employee supplemental savings plan assets 8,266 1,421 (1,421) D 8,266
Other assets 5,360 113 - 5,473
-------- ------- -------- --------
TOTAL ASSETS $254,895 $18,995 $(14,949) $258,941
======== ======= ======== ========
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 23,936 $ 432 $ - 24,368
Accrued salaries and related expenses 17,967 3,614 - 21,581
Deferred income taxes 8,309 - - 8,309
Billings in excess of revenue earned 2,962 - - 2,962
Liabilities held for sale 12,510 - - 12,510
-------- ------- -------- --------
Total current liabilities 65,684 4,046 - 69,730
Debt - net of current portion 26,104 - - 26,104
Deferred rent 276 - - 276
Accrued retirement 9,650 1,418 (1,418) D 9,650
Deferred income taxes 9,626 - - 9,626
Minority interest 44 - - 44
-------- ------- -------- --------
TOTAL LIABILITIES 111,384 5,464 (1,418) 115,430
-------- ------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, Class A 249 8 (8) B 249
Common stock, Class B 15 2 (2) B 15
Common stock, Class C - - - -
Additional paid in capital 113,930 479 (479) B 113,930
Retained earnings 31,126 13,042 (13,042) B 31,126
Accumulated other comprehensive loss (1,809) - - (1,809)
Deferred Compensation 640 - - 640
Treasury stock - at cost (640) - - (640)
-------- ------- -------- --------
Total stockholders' equity 143,511 13,531 (13,531) 143,511
-------- ------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $254,895 $18,995 $(14,949) $258,941
======== ======= ======== ========
ManTech International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Income
(Dollars in Thousands Except Per Share Amounts)
ManTech Aegis
International Research
Corporation Corporation Pro Forma
Year Ended Year Ended Year Ended
December 31, December 31, Pro Forma December 31,
2001 2001 Adjustments 2001
---- ---- ----------- ----
REVENUES $ 431,436 $ 51,369 $ - $ 482,805
COST OF SERVICES 353,337 43,484 - 396,821
----------- ----------- ---------- -----------
GROSS PROFIT 78,099 7,885 - 85,984
COSTS AND EXPENSES:
General and administrative 44,787 4,549 - 49,336
Depreciation and amortization 3,262 86 - 3,348
----------- ----------- ---------- -----------
Total costs and expenses 48,049 4,635 - 52,684
----------- ----------- ---------- -----------
INCOME FROM OPERATIONS 30,050 3,250 - 33,300
Interest expense 2,922 4 1,402 E 4,328
Other income (1,202) (168) - (1,370)
----------- ----------- ---------- -----------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST 28,330 3,414 (1,402) 30,342
Income tax (provision) benefit (12,083) - 583 E (12,920)
(1,420) F
Minority interest (7) - - (7)
----------- ----------- ---------- -----------
INCOME FROM CONTINUING OPERATIONS $ 16,240 $ 3,414 $ (2,239) $ 17,415
=========== =========== ========== ===========
BASIC EARNINGS PER SHARE:
Income from continuing operations $ 0.87 $ 0.94
=========== ===========
Weighted average common shares outstanding 18,589,976 18,589,976
=========== ===========
DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 0.87 $ 0.93
=========== ===========
Weighted average common shares outstanding 18,749,597 18,749,597
=========== ===========
ManTech International Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Income
(Dollars in Thousands Except Per Share Amounts)
ManTech Aegis
International Research
Corporation Corporation Pro Forma
Six Months Six Months Six Months
Ended Ended Pro Forma Ended
June 30, 2002 June 30, 2002 Adjustments June 30, 2002
------------- ------------- ----------- -------------
REVENUES $ 227,302 $ 27,539 $ - $ 254,841
COST OF SERVICES 185,890 22,369 - 208,259
------------- ------------- ----------- -------------
GROSS PROFIT 41,412 5,170 - 46,582
COSTS AND EXPENSES:
General and administrative 23,490 2,733 (57) G 26,166
Depreciation and amortization 1,004 205 - 1,209
------------- ------------- ----------- -------------
Total costs and expenses 24,494 2,938 (57) 27,375
------------- ------------- ----------- -------------
INCOME FROM OPERATIONS 16,918 2,232 57 19,207
Interest expense (income) 203 (58) 695 840
Other income (522) (7) - (529)
------------- ------------- ----------- -------------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST 17,237 2,297 (638) 18,896
Income tax (provision) benefit (7,004) - 289 E (7,694)
(955) F
(24) G
Minority interest (3) - - (3)
------------- ------------- ----------- -------------
INCOME FROM CONTINUING OPERATIONS $ 10,230 $ 2,297 $ (1,328) $ 11,199
============= ============= =========== =============
BASIC EARNINGS PER SHARE:
Income from continuing operations $ 0.42 $ 0.46
============= =============
Weighted average common shares outstanding 24,553,641 24,553,641
============= =============
DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 0.41 $ 0.45
============= =============
Weighted average common shares outstanding 24,838,112 24,838,112
============= =============
ManTech International Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Balance Sheets
A. Pro forma adjustment to give effect to the exclusion of cash and investments
as these assets were distributed to shareholders prior to closing.
B. Pro forma adjustment to give effect to the cash purchase of Aegis Research
Corporation for $69.3 million (including transaction costs), as if the
acquisition occurred on June 30, 2002. The excess of the purchase price over
the estimated fair value of assets and liabilities acquired will result in
the recognition by the Company of $60.8 million in goodwill. Goodwill will
not be amortized in accordance with SFAS No. 142, Goodwill and Other
Intangible Assets, but will be subject to annual impairment tests.
C. Pro forma adjustment to give effect to the exclusion of a shareholder note
receivable and the related accrued interest as these assets were repaid prior
to the closing.
D. Pro forma adjustment to give effect to the exclusion of deferred compensation
assets and the related liability as these items were distributed to
participants prior to the closing.
Statements of Income for the year ended December 31, 2001 and the six months
ended June 30, 2002
E. Pro forma adjustment to reflect the elimination of interest income associated
with the funds utilized by the Company to consummate the acquisition. The
interest rate is estimated at 2.0% per annum based on the applicable rate of
interest being earned on the invested cash as of the date of the transaction.
F. Pro forma adjustment to reflect the incremental provision for federal and
state income taxes at a consolidated effective tax rate of 41.6% for both the
year ended December 31, 2001 and the six months ended June 30, 2002. Prior to
the acquisition, the acquired company was an S Corporation and all income,
losses and tax credits flowed through to the individual shareholders.
G. Pro forma adjustment to eliminate acquisition-related expenses.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fairfax in the
Commonwealth of Virginia, on this 18th day of October, 2002.
MANTECH INTERNATIONAL CORPORATION
/s/ George J. Pedersen
---------------------------------------------
Name: George J. Pedersen
Title: Chairman of the Board of Directors,
Chief Executive Officer and President
/s/ John A. Moore, Jr.
---------------------------------------------
Name: John A. Moore, Jr.
Title: Director, Executive Vice President
and Chief Financial Officer