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ManTech International Corp. Reports Operating Results (10-Q)

April 30, 2010 | About:
10qk

10qk

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ManTech International Corp. (MANT) filed Quarterly Report for the period ended 2010-03-31.

Mantech International Corp. has a market cap of $1.64 billion; its shares were traded at around $45.63 with a P/E ratio of 14.7 and P/S ratio of 0.8. Mantech International Corp. had an annual average earning growth of 18.6% over the past 10 years.MANT is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

Effective April 13, 2010, the Company issued $200.0 million of 7.25% senior unsecured notes in a private placement that were resold inside the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, and outside the United States to non-U.S. persons in reliance on Regulation S under Securities Act of 1933. The 7.25% senior unsecured notes mature on April 15, 2018 with interest payable semi-annually starting on October 15, 2010. We incurred issuance costs of approximately $4.7 million which will be amortized over the life of the 7.25% senior unsecured notes. Proceeds from the issuance were used to pay off our outstanding balance under our credit agreement. For additional information, see Note 12 to the Condensed Consolidated Financial Statements in Item 1.

Cost of services increased 34.9% to $499.6 million for the three months ended March 31, 2010, compared to $370.3 million for the same period in 2009. The increase in cost of services is primarily due to direct labor costs, which include applicable fringe benefits and overhead, and other direct costs, which include subcontractors, related to our IED and property management contracts and contracts obtained through our recent acquisition of STI. As a percentage of revenues, cost of services increased 2.6% to 85.0% for the three months ended March 31, 2010 as compared to 82.4% for the same period in 2009. Direct labor costs increased by 12.8% over the same period in 2009 primarily due to growth in staff supporting global logistics and supply chain management. As a percentage of revenues, direct labor costs decreased 5.8% to 36.1% for the three months ended March 31, 2010, compared to 41.9% for the same period in 2009. The decrease in direct labor as a percentage of revenues is primarily due to the relative mix of direct labor and other direct costs. Other direct costs, which include subcontractors and third party equipment and materials used in the performance of our contracts, increased by 57.7% over the same period in 2009. The increase in other direct costs was primarily due to subcontractors related to STI contracts. As a percentage of revenues, other direct costs increased by 8.4% from 40.5% for the three months ended March 31, 2009 to 48.9% for the same period in 2010.

General and administrative expenses increased 9.9% to $42.8 million for the three months ended March 31, 2010, compared to $38.9 million for the same period in 2009. The increase is primarily due to the acquisition of STI, including the associated amortization of acquisition related intangible assets, partially offset by a reduction in expense related to the consolidation of back office functions in late 2009. As a percentage of revenues, general and administrative expenses decreased to 7.3% from 8.6% for the three months ended March 31, 2010 and 2009, respectively.

Interest expense increased $0.7 million to $1.0 million for the three months ended March 31, 2010, compared to $0.3 million for the same period in 2009. The increase in interest expense is due to an increase in our average outstanding debt balance and higher interest rates. Our average outstanding debt balance for the three months ended March 31, 2010 was $141.8 million as compared to $90.6 million for the three months ended March 31, 2009. Our weighted-average interest rate increased from 0.73% for the three months ended March 31, 2009 to 1.96% for the three months ended March 31, 2010. The interest rate we incur on our credit facility is impacted by changes in the Federal Funds Rate or London Interbank Offer Rate (LIBOR). For additional information, see Credit Agreement, below.

With the issuance of the 7.25% senior unsecured notes on April 13, 2010 (see Recent Event above) our interest expense will increase significantly. For the remainder of 2010, we anticipate that the interest expense related to the 7.25% senior unsecured notes will be approximately $10.7 million.

Net income increased 12.5% to $27.5 million for the three months ended March 31, 2010, compared to $24.5 million for the same period in 2009. The increase in net income was primarily driven by our acquisition of STI and our contracts supporting forward deployments. These increases were partially offset by a reduction in profitability on some of our other contracts. Our effective tax rates for the three months ended March 31, 2010 and 2009 were 37.8% and 39.0%, respectively. The decrease in our effective tax rate for the three months ended March 31, 2010 compared to the same period in 2009 was largely due to the impact of non-taxable gains related to our Employee Supplemental Savings Plan.

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