Executives Joe Cormier - VP of Corporate DevelopmentGeorge Pederson - Chairman and CEO Bob Coleman - President and COOKevin Phillips - EVP and CFOAnalysts Michael Lewis - BB&T Capital MarketsJoseph Vafi - Jeffries & Company Ed Caso - WachoviaBill Loomis - Stifel Nicolaus. Mark Jordan - Noble FinancialBrian Kinstlinger - Sidoti & CompanyTim Quillin - StephensOperator Good afternoon my name is Dwayne, and I will be the conference facilitator for today. At this time, I would like to welcome everyone to the ManTech second quarter 2008 Earnings Call.All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer period. (Operators Instructions). Now at this time I would like to turn the conference over to Joe Cormier. Please go ahead.Joe Cormier Thank you, and welcome to ManTech International Corporation second quarter 2008 earnings conference call, and again, we thank you for joining us today. I am Joe Cormier, Vice President, Corporate Development. With me today leading today's call from ManTech is George Pedersen our Chairman and Chief Executive Officer, Bob Coleman, our President and Chief Operating Officer and Kevin Phillips our Executive Vice President and Chief Financial Officer.In our prepared remarks George will discuss our strategic positioning and outlook for ManTech. Bob will touch on our operational highlights and Kevin will review our second quarter financial performance and guidance for the third quarter and full year 2008.Before we begin our discussion, it's important that we remind you on this call; we will make statements that do not address historical facts and thus are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Security Litigation Reform Act of 1995.These forward-looking statements are subject to factors that could cause actual results to differ materially from anticipated results, and include the risks and uncertainties identified in our earnings press release under the caption, Forward-looking Information For a full discussion of these factors and other risks and uncertainties, please refer to the section entitled Risk Factors in ManTech's annual report on Form 10-K filed with the SEC on March 17, 2008, and in ManTech's other public filings. Also, we undertake no obligation to update any of the forward-looking statements made on this call.Now I would like to turn the call over to George Pedersen. George?George Pederson Good afternoon and thank you for participating in today's call. We are pleased to report our second quarter 2008 financial results as you see from our press release, our second quarter operating performance was strong on all fronts, with growth of 33% for revenue, 45% for operating income, and net income and 41% for EPS over the last year's second quarter results.Operating margin was 8%, up from 7.3% in the second quarter of 2007. We have raised our forward guidance as a result of our continued operating visibility and momentum for the remainder of 2008. This is consistent with our historical performance and is based upon robust demand we are experiencing for our mission-focused services and solutions here and around the world. To augment our organic revenue growth we will continue to pursue strategic acquisition to enhance our mission capabilities, strengthen our market position and increase our revenue and earnings growth.We have the financial capacity to execute this plan, and M&A pipeline is solid with several near-term full file candidates. As you know the DoD `08 supplemental funding bill and the amount of $103 billion was passed in early July, which was a positive factor for the department and industry. The supplemental also included an advance funding for '09 of 63 billion. This procedure is a new approach which will be helpful for the DoD on 1, October, when the new fiscal year begins.As we look forward to FY '09, DoD appropriation process, we are hopeful that our base bill of $487 billion can be passed in September as currently planned rather than using the continued resolutions CR procedure. This would be very positive as it would allow funding to continue to flow and new awards to proceed in the fourth quarter of calendar 2008.The congress chooses a CR procedure for ManTech's programs send to be received priority funding and we are likely to continue their current pace because of the focus of the key mission as we indicated on many occasions. We look forward to continued growth in our business throughout 2008, and we look to continue executing the support of our nation, our customers, our employees and you, our shareholders.We are very proud of our over 7,400 employees serving here and 40 nations and the world, including those on the battlefield in Iraq and Afghanistan. They are a key part of the critical mission confronting global terrorism. The most recent example was the support that ManTech personnel provided to the very successful rescue mission in Colombia several weeks ago.We have already received several letters of accommodation related to our employee's participation. They were part of the planning and the successful execution of this mission, by providing support to the intelligence collection, communication, and other strategic technology requirements we are very proud of our people.And with that I will turn the call over to Bob Coleman. Bob?Bob Coleman Thank you, George. Q2 was another great quarter for ManTech on all fronts. We continued our strong revenue and earnings growth, which is driven by our year-to-date bookings, our direct labor growth, and our priority funding position on many of our National Security contracts.I am pleased to say that this has driven a 70 basis point improvement in our operating margins over the last year's second quarter. We are all very pleased with the result, and are excited about our growth prospects for the rest of 2008.This growth outlook is a function of the continued demand for our mission-critical solutions and services combined with our market position in the high end intelligence in Defense sector.Once again, we had another strong bookings quarter with 600 million in bookings. Approximately 40% of our bookings came from expansion of existing contracts and new business awards, such as our $118 million RAID or elevated sensor program.We also had approximately $250 million in classified contract awards and our year-to-date book-to-bill ratio now stands at 1.5 times revenue. Awards continue to be at the heart of our customers missions and demonstrate ManTech's strategic positioning and national security market space.As we expand our market, we continue to see increased opportunities for our mission-critical services. Our qualified pipeline currently stands at over $11 billion and we are tracking 27 opportunities that are over $100 million each. As noted in our release, our momentum from the first half of the year has continued into the third quarter as we have already booked two large contract awards in July.A $124 million Department of State Global Information Technology Modernization or GITM re-compete contract and our new $151 million NAVSEA information technology support contract.Under our five-year GITM contract, ManTech continues to be the State Department's contractor of choice for supporting the modernization of their IT systems around the world. Working as a partner with state, we have significantly improved the efficiency and effectiveness of their classified and unclassified IT investments while reducing total cost of ownership for 1,200 systems at 400 worldwide locations.We are pleased that state has selected ManTech to continue our partnership on this mission-critical program and we look forward to working with them in the future. The new $151 million five year NAVSEA awards positions us for growth with Norfolk Naval Shipyard delivering IT support to the Navy's legacy ship maintenance and logistic support information systems program. Our work includes the development of formal processes and lifecycle planning, documentation, program management, program control, testing, training and deployment.Finally, I want to provide you with an update on Countermine sole-source award. We believe that the government has concluded its review of our proposal and we hope to sign the contract shortly. We look forward to continuing our route clearing mission under a new prime contract vehicle.The current Countermine contract delivered $83 million of revenue during the second quarter, which is a result of increased requirements in theater. Based on our visibility into continued demand for support on the program, we have increased our outlook for revenue on the contract and we are now expecting $85 million in the third quarter and $315 million from Countermine for the full year.There are numerous growth initiatives occurring throughout the company. I want to take a moment to talk about our focus on the National Cyber initiative. This initiative, which is driven by the increased cyber threat against US government and domestic computers systems and networks, is a comprehensive initiative to improve our computer and network operations capabilities over the next decade.We believe that Congress will commit billions of dollars and new funding for this mission-critical initiative and we look forward to playing a key role in that program going forward.As I mentioned last quarter, we were the recipient of a major contract award related to the cyber initiative with a classified agency. We have already seen increased demand from the initial contract award value, and we are ramping as quickly as possible. Our contract is one of many large opportunities that we are tracking and we look forward to leveraging across the government agencies task with this critical initiative. This is a key area of growth for the company as we look forward into 2009 and beyond.The combination of strong bookings and potential growth on existing contracts create significant demand for additional employees. Through July, we have added 184 full-time equivalence and today we have over 700 open jobs requisitions, which combined with the expected ramp up on recent wins provides us confidence and meeting our labor requirements for 2008.Turnover remains consistent at 20%, driven by the tight labor market for highly cleared employees in the region. That said, during the quarter, our percentage of top secret cleared employees rose to over 44% up from 40%, a clear differentiator for ManTech.Going forward, we will maintain our focus in mission-critical markets, yet remain diversified across the intelligence and DoD community. We are well positions for continued long-term growth in revenue and earnings. As a result of the demand, we see across our contract base, and our expected head count growth, we have significantly increased our 2008 revenue guidance to $1.8450 billion to 1.88 billion. This represents 27% to 30% revenue growth off our 2007 base.In closing, we are excited about our growth prospects for the rest of 2008 and going forward as we continue to leverage market position to build ManTech into the premiere mid-tier national security company.At this point, I would like to turn the call over to Kevin Phillips. Kevin?Kevin Phillips Thank you, Bob. As you saw in our press release, second quarter revenues of $465 million represents 33% total revenue growth. The 20% coming organically from the second quarter, compared to last year's second quarter revenues of $349 million.Our core markets continue to be strong and we continue to benefit from our positioning across our DoD and intelligence community customers. As Bob mentioned, Countermine generated over $83 million in revenue in the second quarter, based on increased mission requirements. We expect this increase to continue in the second half of 2008, and as such are expecting $85 million revenue from the contract in the third quarter and $315 million for the full year.Contract revenue mix remained relatively unchanged during the quarter. 98% of our revenue came from Federal Government sources of Defense, Intelligence, Homeland Security, State Department and Law Enforcement related business comprised 94%.The proportion of revenues in the quarter coming from contracts billed on a time and material basis was 65% of revenue, fixed price was 14%, cost-plus was 21%.As of June 30th, total backlog was $3.44 billion, and funded backlog grew 33% over last year to $989 million at the end of the second quarter. This continued strength in funded walk lock demonstrates ManTech's positioning in the center of the nation's mission-critical security operations.Our operating profit was $37.1 million in the second quarter, up from $25.5 million in last year's second quarter. Our operating margin of 8% was up significantly from 7.3% in last year's second quarter. In the second quarter, Countermine contributed approximately $2.2 million in operating income. The rest of ManTech's core services business delivered over 9% operating margin.Based on our business expansion and strong operating margin, our second quarter net income was $21.9 million, up 45% from $15.1 million in last year's second quarter. Our effective tax rate for the quarter was 39.6%, performance translated into diluted earns per share of $0.62 up 41% over last year's second quarter.Turning to the balance sheet and clash flows, as of June 30th the company had $10 million of cash and $98 million of debt, down from $148 million at the end of the first quarter. During the quarter, we generated over $35 million in operating cash flows or over 160% conversion to net income. This was primarily driven by improvement in receivable day sales outstanding at the end of June, which was down five days to 69 days.We expect to maintain cash flows from operations of approximately 100% of net income during the remainder of 2008 while we find our strong organic growth. As a reminder, we received a deferred tax benefit from 338(h) (10) tax elections on prior acquisitions of approximately $7 million annually.Focusing now on the guidance in our press release, we have provided our initial third quarter 2008 guidance and increased our full year 2008 guidance. Our third quarter 2008 revenue guidance of $473 million to $488 million represents 23% to 27% total growth over last year's third quarter with 20% to 23% coming organically. We are forecasting an operating margin between 7.95% and 8.05%.Our net income range of $22.3 million to 23.3 million, results in earnings per share guidance of $0.63 to $0.66 per share on weighted average shares of $35.5 million. This represents 24% to 29% growth over last year's third quarter earnings per share. This guidance assumes interest expense of 650,000 in the third quarter and 39.6% effective tax rate.Based upon our strong performance and outlook, we are increasing our full year 2008 guidance which does not including any future acquisitions or divestitures to between $1.845 billion and $1.88 billion. This represents 27% to 30% revenue growth from our 2007 full year results and applies organic growth of 17% to 19% in 2008.Based on our headcount growth, balance against increased amount of ODCs we are forecasting operating margins of 8% for the full year 2008 which is up with the 2007 operating margin of 7.8%. We estimate our 2008 net income to be $87.1 million to $89.3 million, which results in earnings per share guidance of $2.46 to $2.53 per share, based on weighted average shares and 35.35 million.These earnings per share range represent 26% to 30% growth over the 2007 results of $1.95. Our guidance assumes an overall interest expense of $3.5 million and a 39.6% effective tax-rate for 2008. In closing, we are excited about the prospects of our business as well, and we are operationally well-positioned for continued growth in revenue and profits supported by a strong balance sheet and cash flows.We will be pleased to take any calls you may.Question-and-Answer Session Operator (Operator Instructions). Our first question will come from Michael Lewis with BB&T Capital Markets.Michael Lewis - BB&T Capital Markets Hi nice quarter. And Bob or George, I was wondering if we could talk about Countermine for a just one second here. Should we assume going forward into say 2009, and I know the contract hasn't been awarded yet, but just for modeling purposes, should we assume almost like a lockstep increase equivalent to say the Q3 revenue guidance of $85 million in the quarter going out into 2009? In other words, should our expectation be between, say, $330 million to $350 million of revenue of Countermine next year?Bob Coleman Yeah, Mike, given the, again, it's a requirements driven contract, but I think it's safe to assume those levels of burn on the contract.Michael Lewis - BB&T Capital Markets And just remind me, Bob, are you applying some of these services in Afghanistan as well?Bob Coleman Yes, absolutely.Michael Lewis - BB&T Capital Markets Okay. And if I could just shift gears real quickly on CNTPO, have you been seeing any activity on this contract, and if so, has this been accelerating at all due to the searching activities that we are witnessing right now in Afghanistan?Bob Coleman I assume your talking about our DNDO effort.Michael Lewis - BB&T Capital Markets The counter narc work?Bob Coleman No, we have not seen any increase in demand on that program. It's been steady state.Michael Willis - BB&T Capital Markets Okay. Thank you very much.Operator Next question is from Joseph Vafi with Jeffries & Company.Joseph Vafi - Jeffries & Company Hi, guys, good quarter here.Joe Cormier Thanks, Joe.Joseph Vafi - Jeffries & Company Just back on the Countermine contract. Historically, we have been at run rates that included a lot of ODCs on Countermine, and just listening to Mike's question here a second ago, it sounds like given the run rates are going to continue on this contract at current levels.Are we just assuming that the army is still kind of staffing up on spares and the like on the contract is that's what is going to be driving the high levels of revenue moving forward?Bob Coleman Yeah, it's a combination. It's primarily driven by the ODCs. But there is an increase in DL as well.Kevin Phillips Joe it's Kevin, There continue to be an increasing number of vehicles being fielded and supported and that's driving it's not a static number.Joseph Vafi - Jeffries & Company Right, so we're seeing more spares for the new vehicles? As that comes online and more labor activity on the fielded vehicles I guess that's the way to think about it? Kevin Phillips Correct. Yeah, that's over 6,000 in theatre now.Joseph Vafi - Jeffries & Company So in general, it sounds like given that we'll have a larger amount of fielded vehicles. Overtime, we might see margins actually come up on this contract with revenue run rates that are going to stay pretty healthy?Bob Coleman Yes. We do expect continued expansion at the labor components of the business. What is unclear is how quickly the ODCs will expand based on mission requirements. So that variability is still unknown. But we do expect higher returns on the labor component.Joseph Vafi - Jeffries & Company Okay, great. And then this NAFC contract, that's a new contract if I am not.Bob Coleman Yes, it is. It's a new award for us.Joseph Vafi - Jeffries & Company And you've disclosed if that's some timely materials or a cost based contract?Bob Coleman We haven't said.Joseph Vafi - Jeffries & Company Okay.Bob Coleman It's a CPFF contract.Joseph Vafi - Jeffries & Company Okay. And then it sounds like your labor force with now 44% clear, that's a nice bump up. Is that a function of hiring or are you getting more people into the system of your own people and getting them clearances? Is there anything that's driving that? Typically we should be thinking about in this kind of higher level in growth in the cleared employee basis out of the growth there sustainable?Joe Cormie Joe, it's a combination of increase requirements for those types of people across the company, I mean we continue to hire across all areas from the secret level up to the top secret level. So that's really what's driving that increase.Joseph Vafi - Jeffries & Company Okay. And then finally, just wanted to make sure it sounded like excluding Countermine, you were running over 9% in operating margin in the business now is that right?Joe Cormier That's correct.Joseph Vafi - Jeffries & Company Great, thanks a lot.Operator Our next question is from Ed Caso with WachoviaEd Caso - Wachovia Hi Ed Caso, Wachovia. Thanks for taking my question. I'd like to talk a little bit about the balance sheet and acquisition. I see you have got $98 million in current maturities. Can you talk a little bit about how, if that's going to be refinanced or what you plan to do about that, and can you maybe give us a sense of dry powder, and then maybe a sense of what areas you might be looking for acquisitions?Kevin Phillips I'll speak to the first part, and the areas I'll leave to George and Bob. We have $98 million, $88 million of net debt; we expect to get catch conversions for the next half of the year at one time's net income. A very strong balance sheet is going to bring us somewhere below $50 million indebted into the year. We have a $300 million line that has an accordion feature to $400, so we have a lot of dry powder to use should the right opportunity come along we don't need to refinance we don't plan on refinancing we have a very good facility right now. I'll leave the opportunities to George and Bob.Bob Coleman In terms of the focus areas for the company; strategically, anything that we see that will enhance our cyber capabilities, increase our global logistics and supply chain management capabilities and biometrics, particularly in the analysis side, we would be interested in.George Pedersen A number of firms that we've been talking to as we always engage with, there are two or three that we hope one or more of them can be closed in a reason being short period of time, there's no lack of opportunities out there that, as far as I'm concerned, depends on whether they meet our criteria, and our criteria as always is you cannot buy sales, you have to have new technology, new customers, new people; it has to be a accretive bump from the get-go. We think we will find more of them as we have in the past.Ed Caso - Wachovia But does your guidance assume completion of the defense appropriations bill in September or this guidance holds and if we go CR into the -- sort of January-February timeframe?George Pederson Our guidance from my point of view holds whether we do an appropriation bill or whether we do a CR. It's a little unusual this year and that I've never seen it before, but they had advanced funding of the '09 bill of $63 billion.There is hope to put the funding in place 487 as a base bill by September. The House and the Senate have worked very hard on these bills. It's not a normal process this year because of the political type things, and it is not likely that any of this will be resolved until the second week of September. And until that point in time, it's kind of hard to predict something with certainty other than there will be no such thing as a gap as we experience in 1994, where there will be no bill in any form -- that's not in the cause. And whether it's a CR or whether it's an appropriation bill in the programs that we are involved in, we will be funded.Ed Caso - Wachovia Any reason why, at last conference call you sounded very confident that Countermine would be all signed, sealed and delivered in the June quarter, anything you can offer as far as potential risks that this thing may not be signed?Bob Coleman No, Ed, it's a high profile, high business contract, it's a sole-source award, so the government is dotting the I's and crossing the T's. They want to make sure everything is done properly. The awards should be imminent. We expect to sign that contract shortly.Ed Caso - Wachovia Thank youOperator Our next question is from Bill Loomis with Stifel Nicolaus.Bill Loomis - Stifel Nicolaus. Hi, thank you. Great quarter, everyone.George Pederson Thanks.Bill Loomis - Stifel Nicolaus. Can you just give the revenues for the Regional Logistic Support contract and Countermine and JERV? And then the second question just on the backlog. Why is it flat sequentially, with awards higher than revenue? I thought it was a couple of hundred million bump on that?Bob Coleman Sure, Bill, I will. Countermine again, $83 million JERV was about $21 million for the quarter. And RSC bummed up to over $38 million for the quarter. In terms of the backlog, we post the awards that we have and we review for non-IDIQ contracts or regular contracts and contract value or run rate, and if there are any adjustments or changes to the expected run rate, we will adjust downward the contract value that we have and bring it back up as performance grows or increases.So what we did was we adjusted the amount of backlog on existing contracts down a little bit in the quarter based on the expected run rate.Bill Loomis - Stifel Nicolaus. Is there anyone in particular that dominated that adjustment?Bob Coleman No, there is no one that's having performance issues or anything like that. It's just expected run rate for several contracts.Bill Loomis - Stifel Nicolaus. And is there anything we can extrapolate from that in terms of the governments may be phasing out, generally some older contracts, favoring new or anything unusual?Bob Coleman No, I think that as we near the end of some contracts that may be rotating into other ones. There may be some amounts are not going to be used that we have to reflect accordingly. That's not government intent, it's more the of timing of the lifecycle of the contract that we have.Bill Loomis - Stifel Nicolaus. And on the Regional Logistic Support contract, that has had a very strong sequential growth. Where is most of that level of efforts? Isn't that mostly a US or supporting area in the US?Bob Coleman Yes. RSC is mostly US support. There are two sites overseas. The growth has been driven by the RAID program or the elevated sensor program that was initially prototyped on that contract and we continue to do work under that even though we have the other award as well.Bill Loomis - Stifel Nicolaus. Is that contract going (inaudible) going to decline a little bit as you move on your way to your new contract?Bob Coleman I think we expected to hold pretty steady going forward.Bill Loomis - Stifel Nicolaus. And I know when you went through that re-compete a couple of years ago, year and a half ago, and revenue got down to $14 million a quarter, you thought it would go up a little bit, but certainly not to the level now. Is work coming from other areas into this contract?George Pederson Bill, I'll speak briefly, there are continued discussions about it, additional requirements in the United States. There's also additional up-tempo in our existing areas. So it looks like there's a lot of opportunity in that area and it is proven out over the last few quarters, and we didn't expect, and I think speaking for Bob, we didn't expect the level of growth, but demand is certainly there for the support.Bill Loomis - Stifel Nicolaus. Thank you.Operator Our next question is from Mark Jordan, Noble FinancialMark Jordan - Noble Financial Good afternoon, gentlemen. A question, first relative to the organic growth that you saw in the second quarter and what you are estimating for the full year. If you were to back out Countermine, do you know what the organic growth would have been for those two periods?Kevin Phillips Yeah, it would have been 11% for the quarter and 13% to 14%, 13% for the year.Mark Jordan - Noble Financial Thanks. Would you give any guidance at this point in time as to what would be a reasonable target organic growth goals that you would have for '09?Bob Coleman All we can tell you is that we do continue to expect to have double-digit growth in most or all components of our business.Mark Jordan - Noble Financial Okay, final question relative to Countermine. Under the new contract will there be any changes in the profit margin opportunity that you have, or should it be consistent with the run rate that you are currently experiencing?Bob Coleman Should be consistent with the run rate we are experiencing.Mark Jordan - Noble Financial Thank you.Operator Our next question is from Brian Kinstlinger with Sidoti & CompanyBrian Kinstlinger - Sidoti & Company Thanks for taking my questions. The first one I had related to the classified programs $215 million. How much of that was new work?Kevin Phillips I don't have the exact number of that. There was new work we might be able to look up here.Brian Kinstlinger - Sidoti & Company Okay. Second question I had