EXHIBIT 99.1
MANTECH INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On January 15, 2010, ManTech International Corporation (ManTech) completed the acquisition of all outstanding equity securities of Sensor Technologies Inc. (STI) for approximately $242.0 million in cash. The STI acquisition has been accounted for as a business combination using the acquisition method of accounting. Under the acquisition method of accounting, the initial purchase price was allocated to STI underlying assets and liabilities based on their fair values at the date of the acquisition. The excess of the purchase price over the underlying assets and liabilities was recorded as goodwill. The STI acquisition is already reflected in the condensed consolidated balance sheet as of March 31, 2010 included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2010.
The unaudited pro forma condensed consolidated statements of income included in this report for the twelve months ended December 31, 2009 and the three months ended March 31, 2010 have been prepared by management as if the STI acquisition had occurred on January 1, 2009.
The unaudited pro forma adjustments are based on management’s preliminary estimates of the value of the tangible and intangible assets and liabilities acquired. As a result, the final adjustments may differ from those presented in this unaudited pro forma consolidated financial information. A change in the unaudited pro forma adjustments of the purchase price for the acquisition would primarily result in a reallocation affecting the value assigned to intangible assets and goodwill. The income statement effect of these changes would depend on the nature and amount of the assets or liabilities adjusted.
The accompanying unaudited pro forma condensed consolidated statements of income have been prepared by management in accordance with rules prescribed by Article 11 of Regulation S-X. This pro forma consolidated financial information is provided for illustrative purposes only and is not intended to represent what the actual consolidated results of operations would have been had the acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations. No effect has been given for operational efficiencies that may have been achieved if the acquisition had occurred on January 1, 2009.
This information should be read in conjunction with ManTech’s historical financial statements and the accompanying notes in both our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2010, and with STI’s historical financial statements and the accompanying notes that are included in this Current Report on Form 8-K.
MANTECH INTERNATIONAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
| | | | | | | | | | | | | | | | | | |
| | | Twelve months ended December 31, 2009 | |
(In Thousands Except Per Share Amounts) | | ManTech
International
Corporation | | | Sensor
Technologies
Inc. | | | Acquisition
Adjustments
(Notes below) | | | | | Pro forma
Combined | |
REVENUES | | $ | 2,020,334 | | | $ | 336,810 | | | $ | (75 | ) | | (a) | | $ | 2,357,069 | |
Cost of Services | | | 1,668,763 | | | | 306,167 | | | | (75 | ) | | (a) | | | 1,974,855 | |
General and administrative expenses | | | 172,492 | | | | 2,226 | | | | 12,465 | | | (b) | | | 187,183 | |
| | | | | | | | | | | | | | | | | | |
OPERATING INCOME | | | 179,079 | | | | 28,417 | | | | (12,465 | ) | | | | | 195,031 | |
Interest expense | | | (1,141 | ) | | | (3 | ) | | | (4,135 | ) | | (c) | | | (5,279 | ) |
Interest income | | | 215 | | | | 57 | | | | — | | | | | | 272 | |
Other income (expense), net | | | 355 | | | | (6 | ) | | | — | | | | | | 349 | |
| | | | | | | | | | | | | | | | | | |
INCOME FROM CONTINUING OPERATIONS | | | 178,508 | | | | 28,465 | | | | (16,600 | ) | | | | | 190,373 | |
BEFORE INCOME TAXES | | | | | | | | | | | | | | | | | | |
Provision for income tax | | | (66,744 | ) | | | — | | | | (4,520 | ) | | (d) | | | (71,264 | ) |
| | | | | | | | | | | | | | | | | | |
INCOME FROM CONTINUING OPERATIONS | | $ | 111,764 | | | $ | 28,465 | | | $ | (21,120 | ) | | | | $ | 119,109 | |
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| | | | | |
BASIC EARNINGS (LOSS) PER SHARE: | | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 3.13 | | | | | | | | | | | | | $ | 3.34 | |
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| | | | | |
Weighted average common shares outstanding | | | 35,687 | | | | | | | | | | | | | | 35,687 | |
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DILUTED EARNINGS (LOSS) PER SHARE: | | | | | | | | | | | | | | | | | | |
Diluted earnings per share | | $ | 3.11 | | | | | | | | | | | | | $ | 3.31 | |
| | | | | | | | | | | | | | | | | | |
| | | | | |
Weighted average common shares outstanding | | | 35,985 | | | | | | | | | | | | | | 35,985 | |
| | | | | | | | | | | | | | | | | | |
See notes to pro forma condensed consolidated financial statements.
MANTECH INTERNATIONAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
| | | | | | | | | | | | | | | | | |
| | | Three months ended March 31, 2010 | |
(In Thousands Except Per Share Amounts) | | ManTech
International
Corporation | | | Sensor
Technologies
Inc. | | Acquisition
Adjustments
(Notes below) | | | | | Pro forma
Combined | |
REVENUES | | $ | 587,557 | | | $ | 17,965 | | $ | — | | | | | $ | 605,522 | |
Cost of Services | | | 499,566 | | | | 16,623 | | | — | | | | | | 516,189 | |
General and administrative expenses | | | 42,759 | | | | 170 | | | 368 | | | (b) | | | 43,297 | |
| | | | | | | | | | | | | | | | | |
OPERATING INCOME | | | 45,232 | | | | 1,172 | | | (368 | ) | | | | | 46,036 | |
Interest expense | | | (997 | ) | | | — | | | (155 | ) | | (c) | | | (1,152 | ) |
Interest income | | | 128 | | | | — | | | — | | | | | | 128 | |
Other income (expense), net | | | (62 | ) | | | — | | | — | | | | | | (62 | ) |
| | | | | | | | | | | | | | | | | |
INCOME FROM CONTINUING OPERATIONS | | | 44,301 | | | | 1,172 | | | (523 | ) | | | | | 44,950 | |
BEFORE INCOME TAXES | | | | | | | | | | | | | | | | | |
Provision for income tax | | | (16,760 | ) | | | — | | | (248 | ) | | (d) | | | (17,008 | ) |
| | | | | | | | | | | | | | | | | |
INCOME FROM CONTINUING OPERATIONS | | $ | 27,541 | | | $ | 1,172 | | $ | (771 | ) | | | | $ | 27,942 | |
| | | | | | | | | | | | | | | | | |
| | | | | |
BASIC EARNINGS (LOSS) PER SHARE: | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.76 | | | | | | | | | | | | $ | 0.78 | |
| | | | | | | | | | | | | | | | | |
| | | | | |
Weighted average common shares outstanding | | | 36,020 | | | | | | | | | | | | | 36,020 | |
| | | | | | | | | | | | | | | | | |
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DILUTED EARNINGS (LOSS) PER SHARE: | | | | | | | | | | | | | | | | | |
Diluted earnings per share | | $ | 0.76 | | | | | | | | | | | | $ | 0.77 | |
| | | | | | | | | | | | | | | | | |
| | | | | |
Weighted average common shares outstanding | | | 36,332 | | | | | | | | | | | | | 36,332 | |
| | | | | | | | | | | | | | | | | |
See notes to pro forma condensed consolidated financial statements.
MANTECH INTERNATIONAL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
| 1. | Basis of Pro Forma Presentation |
The accompanying unaudited pro forma consolidated financial information has been prepared to give effect to the completed acquisition. The unaudited pro forma condensed consolidated statements of income are based on the individual statements of income of ManTech and STI and combine the results of operations of ManTech and of STI for the year ended December 31, 2009 and the three months ended March 31, 2010 as if the acquisition had occurred on January 1, 2009 for both pro forma statements of income.
The STI acquisition has been accounted for as a business combination using the acquisition method of accounting under the Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations. Under the acquisition method of accounting, the initial purchase price was allocated to STI underlying assets and liabilities based on their fair values at the date of the acquisition. The excess of the purchase price over the underlying assets and liabilities was recorded as goodwill. Detailed information regarding the purchase price allocation was included in the accompanying notes to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the three months ended March 31, 2010.
Pro forma adjustments are necessary to reflect the allocation of the purchase price, including adjusting assets and liabilities to fair value and recognizing intangibles, with related changes in depreciation and amortization expense, and to reflect the effects of the financing necessary to complete the acquisition.
The pro forma adjustments included in the unaudited pro forma condensed consolidated statements of income are as follows:
a) To offset the impact of work that STI subcontracted to ManTech during the periods presented in the pro forma statements of income.
b) To reflect the amortization expense relating to the identifiable intangible assets recorded as a result of the acquisition STI on January 15, 2010. Intangible assets are being amortized using the pattern of benefits method. The following table sets forth the components of intangible assets associated with the acquisition (Dollars in Thousands):
| | | | | |
| | | Preliminary
Fair Value | | Estimated
Useful Life |
Backlog | | $ | 7,750 | | 1 year |
Customer Relationships | | | 85,200 | | 20 years |
Non-Compete Agreements | | | 250 | | 4 years |
| | | | | |
Total Intangible Assets | | $ | 93,200 | | |
| | | | | |
Backlog and customer relationships represent the underlying relationships and agreements with STI’s existing customers. Non-compete agreements represent the amount of lost business that could occur if the sellers, in the absence of non-compete agreements, were to compete with the Company.
c) To record additional interest expense had increased borrowings under our credit facility for the acquisition of STI been in place at the beginning of the earliest period presented. These adjustments are not meant to be representative of the debt level and interest expense that might have been required had the acquisition taken place at the beginning of the periods and is not indicative of past or future performance. The adjustments have been calculated by applying the
average LIBOR rate for the twelve months ended December 31, 2009 and the three months ended March 31, 2010, plus the applicable market-rate spread determined based on the Company’s leverage ratio calculation, with an assumed debt level of $200.0 million during each respective period.
Deferred financing fees of approximately $0.7 million were capitalized in conjunction with amending our revolving credit agreement. All capitalized loan costs have been amortized over the expected life of the loan. Additional loan costs related to the amendment of our revolving credit agreement in connection with the STI acquisition have been amortized over the remaining expected life of the loan.
d) To record an income tax provision for STI historical and pro forma adjustments at a statutory rate of 38.1% and 38.2% for the twelve months ended December 31, 2009 and the three months ended March 31, 2010, respectively.
| 3. | Pro Forma Earnings Per Share |
The pro forma basic and diluted earnings per share are based on the weighted average number of shares of ManTech common stock outstanding during the periods. The diluted weighted average number of shares does not include outstanding stock options if their inclusion would be anti-dilutive.
