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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2002
Commission File No. 000-49604
MANTECH INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-1852179
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
12015 Lee Jackson Highway, Fairfax, VA 22033
--------------------------------------------
(Address of principal executive offices)
(703) 218-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $0.01 Per Share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X ] Yes [_] No
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of July 31, 2002, was approximately $178,866,730.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of July 31, 2002: ManTech International Corp. Class A Common
Stock, $0.01 par value, 9,377,652 shares; ManTech International Corp. Class B
Common Stock, $0.01 par value, 17,131,004 shares.
ManTech International Corporation
INDEX
Page No.
PART I - FINANCIAL INFORMATION ........................................................................ 3
Item 1. Condensed Consolidated Financial Statements and Notes ........................................ 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........ 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................... 15
PART II - OTHER INFORMATION ............................................................................ 15
Item 1. Legal Proceedings ............................................................................ 15
Item 2. Changes In Securities and Use of Proceeds .................................................... 16
Item 3. Defaults Upon Senior Securities .............................................................. 16
Item 4. Submission of Matters to a Vote of Securities Holders ........................................ 16
Item 5. Other Information ............................................................................ 16
Item 6. Exhibits and Reports on Form 8-K ............................................................. 18
2
PART I
FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30, December 31
2002 2001
---- ----
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 84,916 $ 26,902
Receivables - net 102,440 92,056
Prepaid expenses and other 7,732 11,937
Assets held for sale 19,590 16,988
----------- ----------
Total current assets 214,678 147,883
Property and equipment - net 7,933 6,615
Goodwill 7,871 7,928
Other intangibles 2,824 3,028
Investments 7,983 7,782
Employee supplemental savings plan assets 8,266 7,637
Other assets 5,360 5,369
----------- ----------
TOTAL ASSETS $ 254,895 $ 186,242
=========== ==========
CURRENT LIABILITIES:
Current portion of debt $ - $ 1,969
Accounts payable and accrued expenses 23,936 26,212
Accrued salaries and related expenses 17,967 17,499
Deferred income taxes 8,309 19,161
Billings in excess of revenue earned 2,962 2,656
Liabilities held for sale 12,510 12,764
----------- ----------
Total current liabilities 65,684 80,261
Debt - net of current portion 26,104 70,343
Deferred rent 276 327
Accrued retirement 9,650 9,111
Deferred income taxes 9,626 2,140
Minority interest 44 41
----------- ----------
TOTAL LIABILITIES 111,384 162,223
----------- ----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK - 1,462
STOCKHOLDERS' EQUITY:
Common stock, Class A 249 1,179
Common stock, Class B 15 -
Common stock, Class C - 21
Additional paid in capital 113,930 2,468
Retained earnings 31,126 34,304
Accumulated other comprehensive loss (1,809) (1,443)
Deferred compensation 640 640
Treasury stock - at cost (640) (14,612)
------------ -----------
Total stockholders' equity 143,511 22,557
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 254,895 $ 186,242
=========== ==========
See notes to condensed consolidated financial statements.
3
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
Three months ended Six months ended
June 30, June 30,
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES $ 119,168 $ 105,627 $ 227,302 $ 210,708
COST OF SERVICES 97,280 86,623 185,890 173,056
----------- ----------- ----------- -----------
GROSS PROFIT 21,888 19,004 41,412 37,652
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
General and administrative 12,057 11,258 23,490 21,694
Depreciation and amortization 516 827 1,004 1,653
----------- ----------- ----------- -----------
Total costs and expenses 12,573 12,085 24,494 23,347
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 9,315 6,919 16,918 14,305
Interest expense (income) (14) 771 203 1,578
Other income (225) (749) (522) (1,192)
----------- ------------ ----------- -----------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST 9,554 6,897 17,237 13,919
Provision for income taxes (3,896) (2,953) (7,004) (5,959)
Minority interest (1) (7) (3) (14)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 5,657 3,937 10,230 7,946
Loss from discontinued operations - net (795) (1,907) (795) (4,268)
----------- ------------ ------------ -----------
NET INCOME $ 4,862 $ 2,030 $ 9,435 $ 3,678
=========== =========== =========== ===========
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ 0.21 $ 0.21 $ 0.42 $ 0.43
Loss from discontinued operations (0.03) (0.10) (0.03) $ (0.23)
----------- ------------ ------------ -----------
$ 0.18 $ 0.11 $ 0.39 $ 0.20
=========== =========== ============ ===========
Weighted average common shares outstanding 26,373,719 18,558,589 24,553,641 18,558,589
=========== ========== =========== ===========
DILUTED EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ 0.21 $ 0.21 $ 0.41 $ 0.42
Loss from discontinued operations (0.03) (0.10) (0.03) (0.22)
------------- ----------- ----------- -----------
$ 0.18 $ 0.11 $ 0.38 $ 0.20
=========== =========== =========== ===========
Weighted average common shares outstanding 26,697,911 18,718,210 24,838,112 18,718,210
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
4
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Dollars in Thousands)
Three months ended Six months ended
June 30, June 30,
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Net Income $ 4,862 $ 2,030 $ 9,435 $ 3,678
Other Comprehensive income (loss):
Cash flow hedge (380) - (151) (422)
Translation adjustments (30) (75) (215) (92)
-------- --------- -------- --------
Other comprehensive income (410) (75) (366) (514)
-------- -------- -------- --------
Comprehensive income $ 4,452 $ 1,955 $ 9,069 $ 3,164
======== ======== ======== ========
See notes to condensed consolidated financial statements.
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Six months ended
June 30,
2002 2001
---- ----
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,435 $ 3,678
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Equity in earnings of affiliates (483) (676)
Loss from discontinued operations 795 4,268
Deferred income taxes (2,995) 2,389
Minority interest in income of consolidated subsidiaries 3 18
Loss on disposals of property and equipment 8 81
Depreciation and amortization 1,749 2,640
Change in assets and liabilities - net of effects from
discontinued businesses:
Increase in receivables (11,786) (8,528)
Decrease in prepaid expenses and other 2,374 1,690
Decrease in accounts payable and accrued expenses (2,439) (19)
Increase in accrued salaries and
related expenses 467 2,388
Increase/(decrease)in billings in excess of revenue earned 306 (2,980)
(Decrease) increase in deferred rent (51) 180
Increase in accrued retirement 540 65
---------- -------------
Net cash (used in) provided by operating activities of
continuing operations (2,077) 5,194
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (1,510) (978)
Proceeds from sales of property and equipment 2 -
Proceeds from notes receivable 250 -
Loans receivable from GSE - (3,350)
Investment in capitalized software products (322) (600)
Proceeds from disposal of Commercial Environmental Business 23 -
Dividends from investments 361 285
---------- -------------
Net cash used in investing activities of
continuing operations (1,196) (4,643)
---------- -------------
MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Six months ended
June 30,
2002 2001
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in borrowings under lines of credit (32,300) (6,009)
Repayment of term loan (5,908) (1,600)
Repayment of notes payable - (1,000)
Repayment of subordinated debt (8,000) -
Proceeds from Common Stock issuance, net 110,157 -
Proceeds from Stock Option exercise 268 -
------------ ---------
Net cash provided by (used in) financing activities
of continuing operations 64,217 (8,609)
------------ ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (135) 36
------------- ---------
NET CASH USED IN DISCONTINUED OPERATIONS (2,795) (8,875)
------------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 58,014 (16,897)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 26,902 29,578
------------ ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 84,916 $ 12,681
============ =========
See notes to condensed consolidated financial statements.
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months and Six Months Ended June 30, 2002 and 2001
1. Description of the Business
ManTech International Corporation delivers a broad array of information
technology and technical services solutions to U.S. federal government
customers, focusing primarily on critical national defense programs for the
intelligence community and Department of Defense. We design, develop, procure,
implement, operate, test and maintain mission-critical, enterprise information
technology and communication systems and infrastructures for our federal
government customers in the United States and 28 countries worldwide.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
ManTech International Corporation have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in the annual financial statements, prepared
in accordance with accounting principles generally accepted in the United States
of America, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to insure that the information is not misleading.
New Accounting Pronouncements - In July 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred, if a reasonable estimate of fair value can be
made. The associated asset retirement cost would be capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 will be effective for
fiscal years beginning after June 15, 2002. The adoption of this new
pronouncement has no impact on the consolidated financial statements.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which replaces SFAS No. 121. SFAS No. 144
requires that long-lived assets be measured at the lower of carrying amount or
fair value less cost to sell, whether reported in continuing operations or in
discontinued operations. SFAS No. 144 also broadens the reporting of
discontinued operations to include all components of an entity with operations
that can be distinguished from the rest of the entity and that will be
eliminated from the ongoing operations of the entity in a disposal transaction.
The provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001. The adoption of this new
pronouncement has no impact on the consolidated financial statements.
In November 2001, the EITF issued Topic No. D-103, Income Statement
Characterization of Reimbursements Received for "Out-of-Pocket" Expenses
Incurred. EITF No. D-103 requires that companies report reimbursements received
for out-of-pocket expenses incurred as revenue, rather than as a reduction of
expenses. The provisions of EITF No. D-103 are effective for financial
statements issued for fiscal years beginning after December 15, 2001. As the
Company has historically accounted for reimbursements for out-of-pocket expenses
in the manner provided for under EITF No. D-103, the adoption of the provisions
of EITF No. D-103 did not have an impact on the Company's consolidated financial
position or results of operation.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections".
Among other things, SFAS 145 rescinds both SFAS 4, "Reporting Gains and Losses
from Extinguishment of Debt," and the amendment to SFAS 4, SFAS 64,
"Extinguishments of Debt Made to Satisfy Sinking Fund Requirements". Through
this rescission, SFAS 145 eliminates the requirement that gains and losses from
the extinguishment of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. Generally, SFAS 145 is
effective for transactions occurring after May 15, 2002. The Company does not
believe SFAS 145 will have a material impact on its future earnings or financial
position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs of Exit or
Disposal Activities". SFAS No. 146 nullifies Emerging Issues Task Force Issue
No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". This statement requires that an exit or disposal activity
related cost be recognized when the liability is incurred instead of when an
entity commits to an exit plan. The provisions of SFAS No. 146 are effective for
financial transactions initiated after December 31, 2002. The Company does not
believe SFAS 146 will have a material impact on its future earnings or financial
position.
Reclassifications - Certain reclassifications have been made to previously
reported balances to conform with the current-period presentation.
3. Earnings Per Share
Basic earnings per share has been computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during each
period. Shares issued during the period, including shares issued during the
period ended March 31, 2002, pursuant to our initial public offering, and shares
acquired during the period, if any, are weighted for the portion of the period
that
8
they were outstanding. Diluted earnings per share have been computed in a manner
consistent with that of basic earnings per share while giving effect to all
potentially dilutive common shares that were outstanding during each period. All
share data for all periods has been updated to reflect the 16.3062-for-one stock
split effected in January 2002. The weighted average number of common shares
outstanding is computed as follows:
Three months ended Six months ended
June 30, June 30,
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
Basic weighted average common shares outstanding 26,373,719 18,558,589 24,553,641 18,558,589
Effect of potential exercise of stock options 324,192 159,621 284,471 159,621
---------- ---------- ---------- ----------
Diluted weighted average common shares outstanding 26,697,911 18,718,210 24,838,112 18,718,210
========== ========== ========== ==========
4. Goodwill
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, SFAS 142 requires the Company to complete a
transitional goodwill impairment test within six months from the date of
adoption. In accordance with the standard, the Company completed the
transitional goodwill impairment test and determined a $57,000 goodwill
impairment charge was required. Under SFAS 142, goodwill is to be reviewed at
least annually thereafter for impairment; the Company has elected to perform
this review annually at the beginning of each calendar year. Goodwill
amortization for the three months and the six months ended June 30, 2001, was
$287,000 and $575,000, respectively. Net income and fully diluted earnings per
share for the six months ended June 30, 2001, assuming goodwill was not
amortized during this period would have been $4,204,000 and $0.22, respectively.
5. Business Segment and Geographic Area Information
The Company operates as one segment, delivering a broad array of information
technology and technical services solutions under contracts with the U.S.
Government, state and local governments, and commercial customers. The Company's
federal government customers typically exercise independent contracting
authority, and even offices or divisions within an agency or department may
directly, or through a prime contractor, use the Company's services as a
separate customer so long as that customer has independent decision-making and
contracting authority within its organization. No single customer accounted for
10% or more of the Company's accounts receivable or revenues as of or for the
periods ended June 30, 2002 and 2001. In addition, there were no sales to any
customers within a single country except for the United States where the sales
accounted for 10% or more of total revenue. The Company treats sales to U.S.
Government customers as sales within the United States regardless of where the
services are performed. Substantially all assets of continuing operations were
held in the United States for the periods ended June 30, 2002 and 2001. Revenues
by geographic customer and the related percentages of total revenues for the
periods ended June 30, 2002 and 2001, were as follows (in thousands):
Three months ended Six months ended
June 30, June 30,
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
United States $ 118,828 $ 104,006 225,692 207,252
International 340 1,621 1,610 3,456
---------- ------------ -------- ---------
$ 119,168 $ 105,627 227,302 210,708
========== ============ ======== =========
United States 99.7% 98.5% 99.3% 98.4%
International .3 1.5 7 1.6
---------- ------------ -------- --------
100.0% 100.0% 100.0% 100.0%
========== ============ ======== ========
6. Revenues and Receivables
The Company delivers a broad array of information technology and technical
services solutions under contracts with the U.S. Government, state and local
governments, and commercial customers. Revenues from the U.S. Government under
prime contracts and subcontracts, as compared to total contract revenues, were
approximately 96.4% and 95.8% for the six months ended June 30, 2002 and 2001
respectively. The components of contract receivables are as follows (in
thousands):
9
June 30, December 31,
-------- ------------
2002 2001
---- ----
Billed receivables $ 83,059 $ 70,291
Unbilled receivables:
Amounts currently billable 13,921 14,706
Revenues recorded in excess of estimated contract value or funding 1,044 2,548
Retainage 1,800 1,988
Indirect costs incurred in excess of provisional billing rates 4,814 4,133
Allowance for doubtful accounts (2,198) (1,610)
----------- ---------
$ 102,440 $ 92,056
=========== =========
7. Recent Events
Reincorporation, Recapitalization and Stock Split
The Company is incorporated in Delaware and is the successor by merger to
ManTech International Corporation, a New Jersey corporation. As a result of the
merger, in January 2002 the Company reincorporated from New Jersey to Delaware
and recapitalized its common stock. The predecessor corporation had three
classes of common stock outstanding prior to the effective date of the merger.
Class A common stock, Class B common stock and Class C common stock, of which
the Class B common stock was redeemable and, therefore, not counted as equity
for accounting purposes. On the effective date of the merger, each outstanding
share of the New Jersey corporation's common stock was exchanged for one share
of our Class A common stock or for one share of our Class B common stock.
Immediately after the merger, we effected a 16.3062-for-one stock split of our
Class A common stock and Class B common stock. The holders of each share of our
Class A common stock are entitled to one vote per share, and the holders of each
share of Class B common stock are entitled to ten votes per share.
Initial Public Offering
The Company successfully closed its Initial Public Offering on February 12,
2002. Net proceeds to the Company were approximately $110.2 million, after
deducting the estimated expenses related to the offering and the portion of the
underwriting discount payable by the Company. Proceeds from the offering were
used to repay subordinated debt of $8.0 million, the balance of the term loan of
$5.9 million and $17.7 million of the revolving credit facility, plus accrued
interest. The balance of the net proceeds of the offering (together with cash on
hand, additional borrowings and capital stock) will be used to fund all or a
portion of the costs of any acquisitions of complementary businesses we
determine to pursue in the future, although there are no assurances that the
Company will be able to successfully consummate any such acquisitions. To the
extent that the Company cannot pursue or consummate any acquisitions, any
remaining net proceeds will be used for working capital and general corporate
purposes.
8. Subsequent Events
Aegis Research Corporation - On August 5, 2002, the Company acquired all of the
outstanding shares of Aegis Research Corporation (Aegis) for a cash purchase
price of approximately $69.1 million. The acquisition will be accounted for
using the purchase method of accounting. The purchase price will be allocated to
the assets acquired and the liabilities assumed based upon their estimated fair
market values. The balance of the purchase price will be recorded as goodwill.
The Company funded the acquisition using proceeds from its initial public
offering, completed in February 2002. For the remainder of 2002, the Company
expects Aegis to contribute revenues of $26.7 million and provide additional
earnings per share of $0.03.
Aegis is a leading provider of enterprise protection strategies and technical
services to the federal national security community. Aegis supports key
customers and programs within the Department of Defense (DoD) and national
intelligence community, including the National Reconnaissance Office (NRO), the
United States Air Force, The Joint Strike Fighter Program Office, and the
Counterintelligence Field Activity Program under the DoD. Aegis also supports
numerous other classified customers on special access programs. Over 90 percent
of Aegis' approximately 500 employees hold government security clearances at the
Top Secret level with special accesses.
9. Discontinued Operations
ManTech's discontinued operations include three foreign and two domestic
commercial businesses. As reported previously, as of
10
April 30, 2002, negotiations for the sale of the U.S.-based Environmental
consulting business, the China-based consulting business and the U.S.-based
application hosting business have concluded. On August 8, 2002, ManTech
completed a transaction to sell the United Kingdom-based banking IT business
which resulted in an additional loss of approximately $795 thousand dollars.
With the closing of this transaction, the sole remaining discontinued operation
for disposition is the Australia-based software solutions and IT consulting
business. ManTech expects to complete a transaction to dispose of this business
during the calendar year 2002. The reason for delay from the previous guidance
remains a deteriorating market for the sale of commercial technology businesses
in Australia. Despite the adjustment to the estimated closing date, no
additional charges are anticipated to discontinued operations at this time.
* * * * * *
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read together with the consolidated financial statements and the notes
to those statements. This discussion contains forward-looking statements that
involve risks and uncertainties. The factors that could cause actual results to
differ materially from those anticipated include, but are not limited to the
following: a failure to successfully integrate Aegis Research Corporation into
the Company's operations or to realize any accretive effects from such
acquisition; changes to the tax laws relating to the treatment and
deductibility of goodwill or any change in the Company's effective tax rate;
additional costs associated with complying with the Sarbanes-Oxley Act of 2002,
any proposed additions or amendments to the NASDAQ listing requirements or
standards, any proposed additions or amendments to the SEC rules or other
corporate governance issues; failure of government customers to exercise options
under contracts; funding decisions of U.S. Government projects; government
contract procurement (such as bid protest) and termination risks; competitive
factors such as pricing pressures and/or competition to hire and retain
employees; material changes in laws or regulations applicable to the Company's
businesses and other risk factors discussed in the Company's Registration
Statement on Form S-1, filed with the SEC on February 7, 2002 and the Company's
annual report on Form 10-K, filed with the SEC on April 1, 2002. Our statements
in this report are made as of August 14, 2002, and the Company undertakes no
obligation to update any of the forward looking statements made herein, whether
as a result of new information, future events, changes in expectations or
otherwise. This discussion addresses only our continuing operations. For more
information on our discontinued operations, please see note 9 to our condensed
consolidated financial statements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based on our consolidated condensed financial statements. The preparation of
these interim financial statements requires management to make estimates and
judgments that affect the reported amount of assets, liabilities, revenues and
expenses. Actual results may differ from these estimates under different
assumptions or conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. Application of
these policies is particularly important to the portrayal of our financial
condition and results of operations. We consider our critical accounting
policies to be revenue recognition, net realizable value of long-term assets,
income taxes, and discontinued operations.
Our significant accounting policies, including the critical policies listed
above, are described in the notes to the consolidated financial statements for
the year ended December 31, 2001 included in the Company's Annual Report on Form
10-K filed with the SEC on April 1, 2002.
Overview
We deliver a broad array of information technology and technical services
solutions to U.S. federal government customers, focusing primarily on critical
national defense programs for the intelligence community and Department of
Defense. We design, develop, procure, implement, operate, test and maintain
mission-critical, enterprise information technology and communication systems
and intelligence processing infrastructures for our federal government
customers. We also provide solutions to federal government civilian agencies, as
well as to state and local governments and commercial customers.
A substantial portion of our revenues are derived from contracts with the
federal government. For the six months ended June 30, 2002 and 2001, 96.4% and
95.8%, respectively, of our revenues were derived, either as a prime or a
subcontractor, from contracts with the federal government. For the six months
ended June 30, 2002 and 2001, we derived 86.1% and 84.0%, respectively, of our
revenues from contracts with our customers in the intelligence community and
Department of Defense.
Our revenues consist primarily of payments for the work of our employees and, to
a lesser extent, the pass-through of costs for material and subcontract efforts
under contracts with our customers. We enter into three types of federal
government contracts: cost-plus, time-and-materials and fixed-price. Under
cost-plus contracts, we are reimbursed for allowable costs and paid a fee, which
may be fixed or performance-based. Under time-and-materials contracts, we are
reimbursed for labor at negotiated hourly billing rates and for certain
expenses. We assume financial risk on time-and-material contracts because we
assume the risk of performing those contracts at negotiated hourly rates. Under
fixed-price contracts, we perform specific tasks for a fixed price. Compared to
cost-plus contracts, fixed-price contracts generally offer higher margin
opportunities but involve greater financial risk because we bear the impact of
cost overruns and receive the benefit of cost savings. For the six months ended
June 30, 2002, we derived approximately 37.8%, 42.9% and 19.3% of our revenues
from cost-plus, time-and-materials and fixed-price contracts, respectively.
Our most significant expense is our cost of services, which consists primarily
of direct labor costs for program personnel and direct expenses incurred to
complete contracts, including cost of materials and subcontract efforts. Our
ability to accurately predict personnel requirements, salaries and other costs,
as well as to manage personnel levels and successfully redeploy personnel, can
have a significant impact on our cost of services. General and administrative
expenses consist primarily of costs associated with our management, finance and
administrative groups; personnel training; sales and marketing expenses which
include bid and proposal efforts; and certain occupancy, travel and other
corporate costs.
The following table sets forth, for each period indicated, the percentage of our
revenues derived from each of our major types of customers.
Three months ended Six months ended
June 30, June 30,
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
Intelligence / Department of Defense 86.4% 84.5% 86.1% 84.0%
Federal Civilian Agencies 9.8 11.9 10.3 11.8
Commercial / State / Local 3.8 3.6 3.6 4.2
------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
12
Three Months Ended June 30, 2002 Compared to the Three Months Ended June 30,
2001
Revenues. Revenues increased 12.8% to $119.2 million for the three months ended
June 30, 2002, compared to $105.6 million for 2001. This increase is
attributable primarily to additional work under contracts that were in existence
during the prior year, and the new U.S. Army Communications-Electronics Command
(CECOM) contract. Additional work from the Department of State and the Army for
secure systems and infrastructure solutions, contributed significantly to the
increased revenues. We derived approximately 39.6% of our revenues for the three
months ended June 30, 2002 from work under GSA schedule contracts, compared with
approximately 30.9% for 2001. Subcontracts accounted for 8.3% of our revenue for
the three months ended June 30, 2002, compared with 8.6% for 2001.
Cost of services. Cost of services increased 12.3% to $97.3 million for the
three months ended June 30, 2002, compared to $86.6 million for 2001. As a
percentage of revenues, cost of services decreased from 82.0% to 81.6%. Direct
labor costs increased by 17.9%, while other direct costs increased by 7.4% over
2001. Material and subcontract costs increased to $38.5 million for the three
months ended June 30, 2002, compared to $35.9 million for 2001. The significant
increase in direct labor costs is due to an increase in personnel, primarily in
support of the new CECOM contract.
Gross profit. Gross profit increased 15.2% to $21.9 million for the three months
ended June 30, 2002, compared to $19.0 million for 2001. Gross profit margin
increased to 18.4% for the three months ended June 30, 2002, compared to 18.0%
for 2001. The increase resulted from higher margins on new secure systems and
infrastructure and information technology tasks, in conjunction with our
improved realization of cost efficiencies, as a greater percentage of our work
is performed under GSA schedule contracts.
General and administrative. General and administrative expenses increased 7.1%
to $12.1 million for the three months ended June 30, 2002, compared to $11.3
million for 2001. The increased expense reflects providing for additional
management personnel and infrastructure to support the growth of our business.
As a percentage of revenues, general and administrative expenses decreased 0.5%
over the comparable period during the prior year as a result of operating
efficiencies.
Depreciation and amortization. Depreciation and amortization expense has
decreased 37.6% for the three months ended June 30, 2002 compared to the prior
year. Depreciation expense has increased slightly but amortization is
significantly reduced as a result of our adoption of SFAS No. 142, which
discontinues the amortization of acquired goodwill.
Income from operations. Income from operations increased 34.7% to $9.3 million
for the three months ended June 30, 2002, compared with $6.9 million for 2001.
The increase was primarily a result of the increase in revenues relative to the
cost of services discussed above.
Income from continuing operations. Income from continuing operations increased
43.7% to $5.7 million for the three months ended June 30, 2002, compared to $3.9
million for 2001. The increase resulted from higher operating income, reduced
interest expense and a lower effective tax rate. Comparative net interest
expense decreased by 101.8% for the three months ended June 30, 2001 as a result
of debt reduction and investment of our IPO proceeds. Our effective tax rate for
the three months ended June 30, 2002 was 40.8%, compared to 42.8% for 2001, due
primarily to the elimination of non-deductible goodwill amortization in current
earnings.
Six Months Ended June 30, 2002 Compared to the Six Months Ended June 30, 2001
Revenues. Revenues increased 7.9% to $227.3 million for the six months ended
June 30, 2002, compared to $210.7 million for 2001. This increase is
attributable primarily to additional work under contracts that were in existence
during the prior year, and the new CECOM contract. Additional work from the
Department of State and the Army for secure systems and infrastructure
solutions, contributed significantly to the increased revenues. We derived
approximately 39.8% of our revenues for the six months ended June 30, 2002 from
work under GSA schedule contracts, compared with approximately 29.9% for 2001.
Subcontracts accounted for 8.5% of our revenue for the six months ended June 30,
2002, compared with 8.4% for 2001.
Cost of services. Cost of services increased 7.4% to $185.9 million for the six
months ended June 30, 2002, compared to $173.1 million for 2001. As a percentage
of revenues, cost of services decreased from 82.1% to 81.8%. Direct labor costs
increased by 15.5%, while other direct costs decreased by 1.1% over 2001.
Material and subcontract costs decreased to $72.5 million for the six months
ended June 30, 2002, compared to $73.3 million for 2001. The decrease in
material costs is primarily in our ATE information technology work.
Gross profit. Gross profit increased 10.0% to $41.4 million for the six months
ended June 30, 2002, compared to $37.7 million for 2001. Gross profit margin
increased to 18.2% for the six months ended June 30, 2002, compared to 17.9% for
2001. The increase resulted from higher margins on new secure systems and
infrastructure and information technology tasks, in conjunction
13
with our improved realization of cost efficiencies, as a greater percentage of
our work is performed under GSA schedule contracts.
General and administrative. General and administrative expenses increased 8.3%
to $23.5 million for the six months ended June 30, 2002, compared to $21.7
million for 2001. The increased expense reflects providing for additional
management personnel and infrastructure to support the growth of our business.
As a percentage of revenues, general and administrative expenses for the six
months ended June 30, 2002 were 10.3%, which is the same as the comparable
period during the prior year.
Depreciation and amortization. Depreciation and amortization expense has
decreased 39.2% for the six months ended June 30, 2002 compared to the prior
year. Depreciation expense has increased slightly but amortization is
significantly reduced as a result of our adoption of SFAS No. 142, which
discontinues the amortization of acquired goodwill.
Income from operations. Income from operations increased 18.3% to $16.9 million
for the six months ended June 30, 2002, compared with $14.3 million for 2001.
The increase was primarily a result of the increase in revenues relative to the
cost of services discussed above.
Income from continuing operations. Income from continuing operations increased
28.7% to $10.2 million for the six months ended June 30, 2002, compared to $7.9
million for 2001. The increase resulted from higher operating income, reduced
interest expense and a lower effective tax rate. Comparative net interest
expense decreased by 87.1% for the six months ended June 30, 2001 as a result of
debt reduction and investment of our IPO proceeds. Our effective tax rate for
the six months ended June 30, 2002 was 40.6%, compared to 42.8% for 2001, due
primarily to the elimination of non-deductible goodwill amortization in current
earnings.
Liquidity and Capital Resources
Our primary source of liquidity has been cash provided by operations and our
revolving credit and term-loan facility. Proceeds from our initial public
offering also provide a source of liquidity. We fund our operations primarily
through cash provided by operating activities. Cash used in operating activities
of continuing operations was $2.1 million for the six months ended June 30,
2002, a decrease of $7.3 million from the prior year. The primary reason for
this decrease was increased contract receivables and decreased accounts payable
and tax accruals offset by an increase in income from continuing operations and
decreases in prepaid and other assets. Cash tax payments for the six months
ended June 30, 2002, include $2.7 million associated with our conversion to an
accrual-basis taxpayer.
Cash used in investing activities of continuing operations was $1.2 million for
the six months ended June 30, 2002, compared to $4.6 million for the prior year.
Investment activities in 2002 included purchase of property and equipment and
investments in intellectual property.
Cash provided by financing activities of continuing operations was $64.2 million
for the six months ended June 30, 2002, compared to cash usage of $8.6 million
for the six months ended June 30, 2001. The net cash provided during 2002 is
primarily the result of the net proceeds of our initial public offering, less
amounts used to repay debt.
On December 17, 2001, we executed a new Business Loan and Security Agreement
with Citizens Bank of Pennsylvania, PNC Bank N.A., Branch Banking and Trust
Company of Virginia, and Chevy Chase Bank, F.S.B. to refinance and replace our
prior agreement. The new agreement provides for a $65.0 million revolving credit
facility and a $6.4 million term loan. Under the term loan portion of the new
agreement, the principal balance was payable in consecutive quarterly
installments of $0.5 million on the last business day of each quarter commencing
with the last business day of December 2001. The maturity date of the new
agreement is December 31, 2004. Borrowings under the new agreement are
collateralized by our eligible contract receivables, inventory, all of our stock
in our subsidiaries and certain property and equipment and bear interest at the
London Interbank Offering Rate (LIBOR), or the lender's prime rate, plus
market-rate spreads that are determined based on a Company leverage ratio
calculation. The LIBOR spreads may range from 1.00% to 1.75% and the prime rate
spreads may range from 0.00% to 0.50%. The term loan balance and accrued
interest and all but $25 million of the revolving credit facility were repaid
during the prior quarter. At June 30, 2002, we had $25.0 million in borrowings
outstanding under the agreement.
In January 1998, we executed a seven-year Subordinated Credit Agreement with
First Source Financial LLP for $8.0 million to finance the redemption of
preferred stock. The principal balance was payable in eight consecutive
quarterly installments of $0.9 million on the first business day of each quarter
commencing with the first business day of January 2003. A ninth and final
payment was due on the last day of December 2004. The balance and accrued
interest of this credit facility was repaid during the prior quarter.
We believe the capital resources available to us under our credit agreements and
cash from our operations are adequate to fund
14
our ongoing operations and to support the internal growth we expect to achieve
for at least the next 12 months. We anticipate financing our external growth
from acquisitions as well as our longer-term internal growth through one or a
combination of the following: cash from operations; additional borrowing;
proceeds from our initial public offering and additional issuances of equity;
use of the existing revolving debt facility; or a refinancing of our credit
facilities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relates primarily to
the Company's existing credit facility. During the six months ended June 30,
2002, the Company had paid all but $25.0 million in borrowings outstanding under
the agreement. A hypothetical 10% increase in interest rates would have
increased our interest expense for the six months ended June 30, 2002, by less
than $0.1 million.
In November 2000, we entered into an interest swap agreement in order to reduce
our exposure associated with the market volatility of interest rates. This
agreement has a notional amount of $25.0 million and, as of June 30, 2002, had a
rate of 6.83%. The value of the swap at June 30, 2002 was a negative $2.4
million.
The Company does not use derivative financial instruments for speculative or
trading purposes. The Company invests its excess cash in short-term, investment
grade, interest-bearing securities.
Our investments are made in accordance with an investment policy approved by the
Board of Directors. Under this policy, no investment securities can have
maturities exceeding one year and the average maturity of the portfolio cannot
exceed 90 days.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to certain litigation and administrative proceedings
discussed in the Company's annual report on Form 10-K, filed with the SEC on
April 1, 2002, and other legal proceedings, claims and disputes which arise in
the ordinary course of our business. Like most large government defense
contractors, our contract costs are audited and reviewed on a continual basis by
an in-house staff of auditors from the Defense Contract Auditing Agency. In
addition to these routine audits, we are subject from time to time to audits and
investigations by other agencies of the federal government. These audits and
investigations are conducted to determine if our performance and administration
of our government contracts is compliant with contractual requirements and
applicable federal statutes and regulations. An audit or investigation may
result in a finding that our performance and administration is compliant or,
alternatively, may result in the government initiating proceedings against us or
our employees, including administrative proceedings seeking repayment of monies,
suspension and/or debarment from doing business with the federal government or a
particular agency, or civil or criminal proceedings seeking penalties and/or
fines. Audits and investigations conducted by the federal government frequently
span several years. Other than routine audits of the Company's contracts, the
Company is not aware of any other government audits or investigations except as
set forth in the Company's annual report on Form 10-K, filed with the SEC on
April 1, 2002, and as set forth below.
Although the Company cannot predict the outcomes of any litigation or
administrative proceedings, based on the information now available to it, and
except as set forth below and as discussed in the Company's annual report on
Form 10-K, filed with the SEC on April 1, 2002, it does not believe that the
ultimate resolution of these matters, either individually or in the aggregate,
will have a material adverse effect on the business, prospects, financial
condition or operating results of the Company.
As discussed in the Company's Form 10-K, filed with the SEC on April 1, 2002,
the Company was served with a grand jury subpoena issued by the United States
District Court for the Eastern District of Virginia on August 17, 2001. As
anticipated, the Company received a second grand jury subpoena seeking documents
relating to this investigation on August 2, 2002. The Company was advised by the
U.S. Attorney's Office for the Eastern District of Virginia that the
investigation relates to whether the Company improperly charged a portion of its
corporate merger and acquisition-related expenses and certain expenses of its
Australian-based software consulting subsidiary (which is among the businesses
included in discontinued operations) in a manner that would have resulted in
those expenses being reimbursed by the U.S. government. This investigation
remains in its preliminary stages and accordingly it is too early to tell
whether the consequences of the investigation will have a material adverse
effect on our business prospects, financial condition or operating results. We
are fully cooperating with the federal government's investigation of this
matter.
The Thomas Harris Corporation suit filed on July 29, 1999 in state court in
Rockwall County, Texas, against the Company's environmental remediation
subsidiary (which is among the businesses included in discontinued operations)
and subcontractors to
15
that subsidiary, alleging that the Company's subsidiary or its subcontractors
caused soil and groundwater contamination by improperly disposing of dry
cleaning solvents, and seeking an unspecified amount of actual, consequential
and punitive damages was settled during the second quarter of 2002 without a
material adverse effect on the business, prospects, financial condition, cash
flow or operating results of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 6, 2002, our first registration statement, filed on Form S-1 (File
No. 333-73946) under the Securities Act of 1933, relating to our initial public
offering of Class A Common Stock, was declared effective, and on February 7,
2002, our registration statement filed under Rule 462(b) (File No. 333-82310)
was declared effective. Under these registration statements, we registered a
total of 7,200,000 shares of our Class A common stock, of which 6,866,667 shares
were sold by us, and 333,333 shares were sold by the selling stockholder, who is
our Chairman of the Board of Directors, Chief Executive Officer and President,
and a 10% or greater stockholder. All such shares were sold at $16.00 per share
on February 7, 2002. The managing underwriters for the offering were Jefferies &
Company, Inc., Legg Mason Wood Walker, Incorporated and BB&T Capital Markets.
Pursuant to the terms of the underwriting agreement described in the
registration statements, the underwriters were entitled to elect, not later than
March 9, 2002, to sell up to 1,080,000 additional shares of our Class A common
stock, of which 696,487 shares were to be sold by us, and 383,513 shares were to
be sold by the selling stockholder if the underwriters elected to sell all the
additional shares. On February 12, 2002, the underwriters elected to sell an
additional 1,080,000 shares, resulting in an aggregate offering price of
$132,480,000, of which $121,010,464 pertained to shares sold by us and the
remaining $11,469,536 pertained to shares sold by the selling stockholder. The
total underwriting discount was approximately $9.3 million, of which the Company
paid $8.5 million, and we incurred other expenses (including filing, legal and
accounting fees) of approximately $2.5 million, none of which were paid to our
directors or officers or their affiliates or to persons owning 10% or more of
any class of our common stock or that of our affiliates. Our net proceeds from
the offering were approximately $110.2 million. Proceeds from the offering were
used to repay the principal and accrued interest outstanding under our term loan
and under our subordinated debt and to pay off all but $25.0 million of
principal owing under our revolving credit facility. The principal and accrued
interest under our term loan was $6.0 million, principal and accrued interest
under our subordinated debt was $8.1 million, and the principal repayment under
our revolving credit facility was $17.7 million.
We intend to use the remainder of the net proceeds of the offering (together
with cash on hand, additional borrowings and capital stock) to fund all or a
portion of the costs of any acquisitions of complementary businesses we
determine to pursue in the future, although there are no assurances that we will
be able to successfully identify or consummate any such acquisitions. To the
extent that we do not pursue or consummate any acquisitions, any remaining net
proceeds to us will be used for working capital and general corporate purposes.
We have no present commitments, agreements or understandings to acquire any
business. We have invested the net proceeds of this offering in short-term,
investment grade, interest-bearing securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Forward Looking Statements
This quarterly report contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate," "continue" and other similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, make projections of our future results of operations or financial
condition or state other "forward-looking" information. We believe that it is
important to communicate our future expectations to our investors. However,
there may be events in the future that we are not able to accurately predict or
control. The factors that could cause actual results to differ materially from
those anticipated include, but are not limited to the following: a failure to
successfully integrate Aegis Research Corporation into the Company's operations
or to realize any accretive effects from such acquisition, changes to the tax
laws relating to the treatment and deductibility of goodwill or any change in
the Company's effective tax rate; additional costs associated with complying
with the Sarbanes-Oxley Act of 2002, any proposed revisions or modifications to
the NASDAQ listing standards, SEC rule changes or other corporate governance
issues; failure of government customers to exercise options under contracts,
funding decisions of U.S. Government projects; government contract procurement
(such as bid protest) and termination risks; competitive factors such as pricing
pressures and/or competition to hire and retain employees; material changes in
laws or regulations applicable to the Company's businesses and other risk
factors discussed in the Company's Registration Statement on Form S-1, filed
with the SEC on February 7, 2002, the Company's annual report on Form 10-K,
filed with the SEC on April 1, 2002, the risks discussed in the in the section
captioned "Management's Discussion and Analysis of Financial
16
Condition and Results of Operations" of this report, as well as any other
cautionary language found elsewhere in this quarterly report. Our statements in
this report are made as of August 14, 2002, and the Company undertakes no
obligation to update any of the forward looking statements made herein, whether
as a result of new information, future events, changes in expectations or
otherwise.
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NO. DESCRIPTION
--- -----------
2.1 Form of Plan of Merger by and between ManTech International
Corporation, a New Jersey corporation, and ManTech International
Corporation, a Delaware corporation, incorporated herein by
reference from Registrant's Registration Statement on Form S-1
(File No. 333-73946), as filed with the Commission on November
23, 2001, as amended.
3.1 Second Amended and Restated Certificate of Incorporation of the
Registrant as filed with the Secretary of State of the State of
Delaware on January 30, 2002, incorporated herein by reference
from Registrant's Registration Statement on Form S-1 (File No.
333-73946), as filed with the Commission on November 23, 2001,
as amended.
3.2 Amended and Restated Bylaws of the Registrant, incorporated
herein by reference from Registrant's Registration Statement on
Form S-1 (File No. 333-73946), as filed with the Commission on
November 23, 2001, as amended.
10.1 Retention Agreement, effective as of January 1, 2002, between
John A. Moore, Jr. and ManTech International Corporation,
incorporated herein by reference from Registrant's Registration
Statement on Form S-1 (File No. 333-73946), as filed with the
Commission on November 23, 2001, as amended.
10.2 Form of Confidentiality, Non-competition and Non-solicitation
Agreement, effective as of the closing of this offering, between
specified executive officers and ManTech International
Corporation, incorporated herein by reference from Registrant's
Registration Statement on Form S-1 (File No. 333-73946), as
filed with the Commission on November 23, 2001, as amended.
10.3 Management Incentive Plan of ManTech International Corporation,
incorporated herein by reference from Registrant's Registration
Statement on Form S-1 (File No. 333-73946), as filed with the
Commission on November 23, 2001, as amended.
10.4 Retention Agreement, effective as of January 1, 2002, between
George J. Pedersen and ManTech International Corporation,
incorporated herein by reference from Registrant's Registration
Statement on Form S-1 (File No. 333-73946), as filed with the
Commission on November 23, 2001, as amended.
10.5 Form of Term Sheet for ManTech International Corporation
Management Incentive Plan Non-Qualified Stock Option, and
Standard Terms and Conditions for Non-Qualified Stock Options,
incorporated herein by reference from Registrant's Registration
Statement on Form S-1 (File No. 333-73946), as filed with the
Commission on November 23, 2001, as amended.
10.6 Form of Term Sheet for ManTech International Corporation
Management Incentive Plan Incentive Stock Option, and Standard
Terms and Conditions for Incentive Stock Options, incorporated
herein by reference from Registrant's Registration Statement on
Form S-1 (File No. 333-73946), as filed with the Commission on
November 23, 2001, as amended.
99.1 Certification Pursuant to Section 1350 of Chapter 63 of Title 18
of the United States Code - Chief Executive Officer
99.2 Certification Pursuant to section 1350 of Chapter 63 of Title 18
of the United States Code - Chief Financial Officer
(B) Reports on Form 8-K
8-K Filed on May 16, 2002 - GSA Backlog.
18
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 14/th/ day of August, 2002.
MANTECH INTERNATIONAL CORPORATION
By: /s/ George J. Pedersen
---------------------------
Name: George J. Pedersen
Title: Chairman of the Board of Directors,
Chief Executive Officer and President
By: /s/ John A. Moore, Jr.
---------------------------
Name: John A. Moore, Jr.
Title: Director, Executive Vice President
and Chief Financial Officer
19