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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2004



or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission File No. 000-49604



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ManTech International Corporation

(Exact name of registrant as specified in its charter)



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 22-1852179                         
|(State or other jurisdictionof incorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|12015 Lee Jackson Highway, Fairfax, VA                        |  | 22033                              
|(Address of principal executive offices)                      |  | (Zip Code)                         



(703) 218-6000

(Registrants telephone number, including area code)



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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



Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

x Yes ̈No



As of November 1, 2004, there were issued and outstanding 17,320,616 shares of our Class A Common Stock and 15,075,293
shares of our Class B Common Stock.



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##### Table of Contents

MANTECH INTERNATIONAL CORPORATION

FORM 10Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2004

INDEX



|                              |  |                                                                                                                   |  |         
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                   |  | Page No.
|PART I FINANCIAL INFORMATION |  | 3                                                                                                                
|                              |  |                                                                                                                  
|Item 1.                       |  | Financial Statements                                                                                              |  | 3       
|                              |  |                                                                                                                  
|                              |  | Condensed Consolidated Balance Sheets September 30, 2004 and December 31, 2003                                    |  | 3       
|                              |  |                                                                                                                  
|                              |  | Condensed Consolidated Statements of Income Three and Nine Months Ended September 30, 2004 and 2003               |  | 4       
|                              |  |                                                                                                                  
|                              |  | Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended September 30, 2004 and 2003 |  | 5       
|                              |  |                                                                                                                  
|                              |  | Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2004 and 2003                     |  | 6       
|                              |  |                                                                                                                  
|                              |  | Notes to Condensed Consolidated Financial Statements                                                              |  | 7       
|                              |  |                                                                                                                  
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 12      
|                              |  |                                                                                                                  
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                        |  | 19      
|                              |  |                                                                                                                  
|Item 4.                       |  | Controls and Procedures                                                                                           |  | 19      
|                              | 
|PART II OTHER INFORMATION    |  | 20                                                                                                               
|                              |  |                                                                                                                  
|Item 1.                       |  | Legal Proceedings                                                                                                 |  | 20      
|                              |  |                                                                                                                  
|Item 5.                       |  | Other Information                                                                                                 |  | 20      
|                              |  |                                                                                                                  
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                  |  | 20      



2



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



MANTECH INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)



|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                        |  | (unaudited)       |        
|                                                                                                                                                                                        |  | September 30,2004 |         |   | December 31,2003 |  
|ASSETS                                                                                                                                                                                  |  |                   |         |   |                  |   |         |  
|CURRENT ASSETS:                                                                                                                                                                         |  |                   |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                               |  | $                 | 17,030  |   |                  | $ | 9,166   |  
|Cash in escrow                                                                                                                                                                          |  |                   |        |   |                  |   | 829     |  
|Receivablesnet                                                                                                                                                                         |  |                   | 212,327 |   |                  |   | 204,539 |  
|Prepaid expenses and other                                                                                                                                                              |  |                   | 10,944  |   |                  |   | 17,527  |  
|Assets held for sale                                                                                                                                                                    |  |                   | 1,289   |   |                  |   | 1,332   |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                    |  |                   | 241,590 |   |                  |   | 233,393 |  
|Property and equipmentnet                                                                                                                                                              |  |                   | 12,421  |   |                  |   | 10,920  |  
|Goodwill                                                                                                                                                                                |  |                   | 155,160 |   |                  |   | 149,548 |  
|Other intangiblesnet                                                                                                                                                                   |  |                   | 21,157  |   |                  |   | 15,741  |  
|Investments                                                                                                                                                                             |  |                   | 5,646   |   |                  |   | 5,560   |  
|Employee supplemental savings plan assets                                                                                                                                               |  |                   | 11,818  |   |                  |   | 10,594  |  
|Other assets                                                                                                                                                                            |  |                   | 11,184  |   |                  |   | 10,378  |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|TOTAL ASSETS                                                                                                                                                                            |  | $                 | 458,976 |   |                  | $ | 436,134 |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                    |  |                   |         |   |                  |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                    |  |                   |         |   |                  |   |         |  
|Current portion of debt                                                                                                                                                                 |  | $                 | 79      |   |                  | $ | 77      |  
|Accounts payable and accrued expenses                                                                                                                                                   |  |                   | 55,531  |   |                  |   | 45,157  |  
|Accrued salaries and related expenses                                                                                                                                                   |  |                   | 29,364  |   |                  |   | 30,548  |  
|Deferred income taxescurrent                                                                                                                                                           |  |                   | 10,438  |   |                  |   | 20,092  |  
|Billings in excess of revenue earned                                                                                                                                                    |  |                   | 8,682   |   |                  |   | 4,514   |  
|Liabilities of operations held for sale                                                                                                                                                 |  |                   | 902     |   |                  |   | 1,164   |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                               |  |                   | 104,996 |   |                  |   | 101,552 |  
|Debtnet of current portion                                                                                                                                                             |  |                   | 25,000  |   |                  |   | 25,184  |  
|Accrued retirement                                                                                                                                                                      |  |                   | 13,246  |   |                  |   | 11,914  |  
|Other long-term liabilities                                                                                                                                                             |  |                   | 5,291   |   |                  |   | 5,178   |  
|Deferred income taxesnon-current                                                                                                                                                       |  |                   | 4,708   |   |                  |   | 4,553   |  
|Minority interest                                                                                                                                                                       |  |                   | 54      |   |                  |   | 49      |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|TOTAL LIABILITIES                                                                                                                                                                       |  |                   | 153,295 |   |                  |   | 148,430 |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                           |  |                   |         |   |                  |   |         |  
|STOCKHOLDERS EQUITY:                                                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Common stock, Class A$0.01 par value: 150,000,000 shares authorized; 17,318,949 and 17,047,820 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |  |                   | 173     |   |                  |   | 170     |  
|Common stock, Class B$0.01 par value: 50,000,000 shares authorized; 15,075,293 and 15,075,293 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively  |  |                   | 151     |   |                  |   | 151     |  
|Additional paid in capital                                                                                                                                                              |  |                   | 217,263 |   |                  |   | 212,564 |  
|Retained earnings                                                                                                                                                                       |  |                   | 89,966  |   |                  |   | 76,003  |  
|Accumulated other comprehensive loss                                                                                                                                                    |  |                   | (469    | ) |                  |   | (1,184  | )
|Unearned ESOP shares                                                                                                                                                                    |  |                   | (1,403  | ) |                  |   |        |  
|Deferred compensation                                                                                                                                                                   |  |                   | 640     |   |                  |   | 640     |  
|Shares held in grantor trust                                                                                                                                                            |  |                   | (640    | ) |                  |   | (640    | )
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                              |  |                   | 305,681 |   |                  |   | 287,704 |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                              |  | $                 | 458,976 |   |                  | $ | 436,134 |  
|                                                                                                                                                                                        |  |                   |         |   |                  |   |         |  



See notes to condensed
consolidated financial statements.



3



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##### Table of Contents

MANTECH INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands except Per Share Amounts)



|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------ |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                 |  | (unaudited)                      |            |   | (unaudited)                     |  
|                                                 |  | Three months ended September 30, |            |   | Nine months ended September 30, |  
|                                                 |  | 2004                             |            |   | 2003                            |   |            | 2004 |  |   | 2003       |  
|REVENUES                                         |  | $                                | 211,260    |   |                                 | $ | 181,590    |      |  | $ | 612,611    |   |  | $ | 506,789    |  
|COST OF SERVICES                                 |  |                                  | 176,381    |   |                                 |   | 147,461    |      |  |   | 524,775    |   |  |   | 411,593    |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|GROSS PROFIT                                     |  |                                  | 34,879     |   |                                 |   | 34,129     |      |  |   | 87,836     |   |  |   | 95,196     |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|COSTS AND EXPENSES:                              |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|General and administrative                       |  |                                  | 20,452     |   |                                 |   | 16,723     |      |  |   | 59,557     |   |  |   | 47,657     |  
|Depreciation and amortization                    |  |                                  | 845        |   |                                 |   | 1,181      |      |  |   | 3,570      |   |  |   | 3,358      |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Total costs and expenses                         |  |                                  | 21,297     |   |                                 |   | 17,904     |      |  |   | 63,127     |   |  |   | 51,015     |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|INCOME FROM OPERATIONS                           |  |                                  | 13,582     |   |                                 |   | 16,225     |      |  |   | 24,709     |   |  |   | 44,181     |  
|Interest income (expense), net                   |  |                                  | (523       | ) |                                 |   | (618       | )    |  |   | (1,661     | ) |  |   | (1,639     | )
|Other income (expense)                           |  |                                  | 162        |   |                                 |   | (58        | )    |  |   | 605        |   |  |   | (328       | )
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|INCOME BEFORE INCOME TAXES AND MINORITY INTEREST |  |                                  | 13,221     |   |                                 |   | 15,549     |      |  |   | 23,653     |   |  |   | 42,214     |  
|Income taxes                                     |  |                                  | (5,405     | ) |                                 |   | (6,321     | )    |  |   | (9,685     | ) |  |   | (17,144    | )
|Minority interest                                |  |                                  | (2         | ) |                                 |   | (1         | )    |  |   | (5         | ) |  |   | (4         | )
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|NET INCOME                                       |  | $                                | 7,814      |   |                                 | $ | 9,227      |      |  | $ | 13,963     |   |  | $ | 25,066     |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|BASIC EARNINGS PER SHARE                         |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Net income                                       |  | $                                | 0.24       |   |                                 | $ | 0.29       |      |  | $ | 0.43       |   |  | $ | 0.78       |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Weighted average common shares outstanding       |  |                                  | 32,388,777 |   |                                 |   | 32,007,957 |      |  |   | 32,269,784 |   |  |   | 31,955,522 |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|DILUTED EARNINGS PER SHARE                       |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Net income                                       |  | $                                | 0.24       |   |                                 | $ | 0.29       |      |  | $ | 0.43       |   |  | $ | 0.78       |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Weighted average common shares outstanding       |  |                                  | 32,388,777 |   |                                 |   | 32,335,226 |      |  |   | 32,436,648 |   |  |   | 32,094,136 |  
|                                                 |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  



See notes to condensed
consolidated financial statements.



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MANTECH INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)



|                                    |  |                                  |       |   |                                 |   |       |      |  |      |        |  |   |       
|----------------------------------- |  | -------------------------------- | ----- | - | ------------------------------- | - | ----- | ---- |  | ---- | ------ |  | - | ------
|                                    |  | (unaudited)                      |       |   | (unaudited)                    
|                                    |  | Three months ended September 30, |       |   | Nine months ended September 30,
|                                    |  | 2004                             |       |   | 2003                            |   |       | 2004 |  | 2003
|NET INCOME                          |  | $                                | 7,814 |   |                                 | $ | 9,227 |      |  | $    | 13,963 |  | $ | 25,066
|OTHER COMPREHENSIVE INCOME:         |  |                                  |       |   |                                 |   |       |      |  |      |        |  |   |       
|Cash flow hedge, net of tax         |  |                                  | 154   |   |                                 |   | 272   |      |  |      | 711    |  |   | 385   
|Translation adjustments, net of tax |  |                                  | (101  | ) |                                 |   | (10   | )    |  |      | 4      |  |   | 75    
|                                    |  |                                  |       |   |                                 |   |       |      |  |      |        |  |   |       
|Total other comprehensive income    |  |                                  | 53    |   |                                 |   | 262   |      |  |      | 715    |  |   | 460   
|                                    |  |                                  |       |   |                                 |   |       |      |  |      |        |  |   |       
|COMPREHENSIVE INCOME                |  | $                                | 7,867 |   |                                 | $ | 9,489 |      |  | $    | 14,678 |  | $ | 25,526
|                                    |  |                                  |       |   |                                 |   |       |      |  |      |        |  |   |       



See notes to condensed
consolidated financial statements.



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##### Table of Contents

MANTECH INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)



|                                                                                            |  |                                 |         |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                            |  | (unaudited)                     |        
|                                                                                            |  | Nine months ended September 30, |        
|                                                                                            |  | 2004                            |         |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |  |                                 |         |   |      |   |         |  
|Net income                                                                                  |  | $                               | 13,963  |   |      | $ | 25,066  |  
|Adjustments to reconcile net income to net cash used in operating activities:               |  |                                 |         |   |      |   |         |  
|Equity in (earnings) losses of affiliates                                                   |  |                                 | (419    | ) |      |   | 844     |  
|(Decrease) increase in current and deferred income taxes                                    |  |                                 | (9,499  | ) |      |   | 4,872   |  
|Depreciation and amortization                                                               |  |                                 | 4,979   |   |      |   | 4,962   |  
|Changes in assets and liabilities-net of effects from acquired and discontinued businesses: |  |                                 |         |   |      |   |         |  
|Contract receivables                                                                        |  |                                 | (7,789  | ) |      |   | (28,132 | )
|Prepaid expenses and other                                                                  |  |                                 | 6,583   |   |      |   | (5,963  | )
|Accounts payable and accrued expenses                                                       |  |                                 | 10,374  |   |      |   | 4,682   |  
|Accrued salaries and related expenses                                                       |  |                                 | (1,184  | ) |      |   | (1,656  | )
|Billings in excess of revenue earned                                                        |  |                                 | 4,168   |   |      |   | 2,549   |  
|Accrued retirement                                                                          |  |                                 | 1,332   |   |      |   | 1,348   |  
|Other                                                                                       |  |                                 | (2,794  | ) |      |   | 86      |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|Net cash flows from operating activities                                                    |  |                                 | 19,714  |   |      |   | 8,658   |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |  |                                 |         |   |      |   |         |  
|Purchase of property and equipment                                                          |  |                                 | (4,067  | ) |      |   | (2,826  | )
|Proceeds from sales of property and equipment                                               |  |                                 | 1       |   |      |   | 1       |  
|Investment in capitalized software products                                                 |  |                                 | (120    | ) |      |   | (1,488  | )
|Acquisition of businesses, net of cash acquired of $2,840 in 2003                           |  |                                 | (10,969 | ) |      |   | (68,539 | )
|Dividends from MASI U.K.                                                                    |  |                                 | 357     |   |      |   | 315     |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|Net cash flows from investing activities                                                    |  |                                 | (14,798 | ) |      |   | (72,537 | )
|                                                                                            |  |                                 |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |  |                                 |         |   |      |   |         |  
|Payment of not-to-compete financings                                                        |  |                                 |        |   |      |   | (1,000  | )
|Proceeds from exercise of stock options                                                     |  |                                 | 3,245   |   |      |   | 916     |  
|Net (decrease) in borrowings under lines of credit                                          |  |                                 | (182    | ) |      |   |        |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|Net cash flows from financing activities                                                    |  |                                 | 3,063   |   |      |   | (84     | )
|                                                                                            |  |                                 |         |   |      |   |         |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                |  |                                 | (20     | ) |      |   | (5      | )
|                                                                                            |  |                                 |         |   |      |   |         |  
|NET CASH FLOWS FROM DISCONTINUED OPERATIONS                                                 |  |                                 | (95     | ) |      |   | 2,682   |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|NET (DECREASE) IN CASH AND CASH EQUIVALENTS                                                 |  |                                 | 7,864   |   |      |   | (61,286 | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                              |  |                                 | 9,166   |   |      |   | 81,096  |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                    |  | $                               | 17,030  |   |      | $ | 19,810  |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|SUPPLEMENTAL CASH FLOW INFORMATION                                                          |  |                                 |         |   |      |   |         |  
|Cash paid for income taxes                                                                  |  | $                               | 14,168  |   |      | $ | 12,032  |  
|                                                                                            |  |                                 |         |   |      |   |         |  
|Cash paid for interest                                                                      |  | $                               | 1,924   |   |      | $ | 1,852   |  
|                                                                                            |  |                                 |         |   |      |   |         |  



See notes to condensed
consolidated financial statements.



6



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004

(Dollars in thousands, except per share amounts or where otherwise noted)

UNAUDITED



1.
Introduction and Overview



ManTech International Corporation (depending on
the circumstances, ManTech, we or our) is a leading provider of innovative technologies and solutions for mission-critical national security programs for the intelligence community, the Department of Defense, the
Department of State, the Department of Justice, the Department of Homeland Security and other federal government customers. Our expertise includes software development, enterprise security architecture, information assurance, intelligence operations
support, network and critical infrastructure protection, information technology, communications integration and engineering support. With more than 5,400 highly qualified employees, we operate in the United States and over 40 countries worldwide.



2. Basis of Presentation



The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). 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. We recommend that you read these unaudited condensed consolidated financial statements in conjunction with the financial statements and
related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2003, previously filed with the SEC. We believe that the unaudited condensed consolidated financial statements in this Form 10-Q reflect all adjustments
that are necessary to fairly present the financial position, results of operations and cash flows for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year.



Stock-Based CompensationAs permitted under Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation,we account for our stock-based compensation plan using the intrinsic value method under the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. For the quarter ended September 30, 2004, we recognized pre-tax compensation expense of approximately $14 thousand. No compensation
cost was recognized for issuances under the plan in the quarter ended September 30, 2003, and the exercise price of all other options granted pursuant to the plan was not less than 100% of the fair market value of the shares on the date of grant. In
accordance with the provisions of SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, the following table illustrates the effect on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation (in thousands, except per share data).



|                                                                                                                                            |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                            |  | Three Months Ended September 30, |        |   | Nine Months Ended September 30, |  
|                                                                                                                                            |  | 2004                             |        |   | 2003                            |   |        | 2004 |  |   | 2003   |  
|Net income, as reported                                                                                                                     |  | $                                | 7,814  |   |                                 | $ | 9,227  |      |  | $ | 13,963 |   |  | $ | 25,066 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  |                                  | (1,756 | ) |                                 |   | (1,816 | )    |  |   | (2,700 | ) |  |   | (2,550 | )
|                                                                                                                                            |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Pro forma net income                                                                                                                        |  | $                                | 6,058  |   |                                 | $ | 7,411  |      |  | $ | 11,263 |   |  | $ | 22,516 |  
|                                                                                                                                            |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Earnings per share:                                                                                                                         |  |                                  |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Basic  as reported                                                                                                                         |  | $                                | 0.24   |   |                                 | $ | 0.29   |      |  | $ | 0.43   |   |  | $ | 0.78   |  
|Basic  pro forma                                                                                                                           |  |                                  | 0.18   |   |                                 |   | 0.23   |      |  |   | 0.35   |   |  |   | 0.70   |  
|Diluted  as reported                                                                                                                       |  |                                  | 0.24   |   |                                 |   | 0.29   |      |  |   | 0.43   |   |  |   | 0.78   |  
|Diluted  pro forma                                                                                                                         |  |                                  | 0.18   |   |                                 |   | 0.23   |      |  |   | 0.35   |   |  |   | 0.70   |  



We typically issue 10-year options
that vest annually over a three-year period from the date of grant. For disclosure purposes, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted-average assumptions
were used for option grants during the three months ended September 30, 2004 and 2003, respectively: dividend yield of zero percent; expected volatility of 44.0% and 34.9%; expected average lives of 3 years; and risk-free interest rates of 2.89% and
2.20%.



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3. Earnings per Share



Basic earnings per share has been computed by dividing net income by the weighted average number of common shares outstanding during each period. Shares issued during the
period and shares re-acquired during the period, if any, are weighted for the portion of the period for which 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. The weighted average number of common shares outstanding is computed as follows:



|                                                   |  |                                  |  |                                 |  |            |  |           
|-------------------------------------------------- |  | -------------------------------- |  | ------------------------------- |  | ---------- |  | ----------
|                                                   |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|                                                   |  | 2004                             |  | 2003                            |  | 2004       |  | 2003      
|Basic weighted average common shares outstanding   |  | 32,388,777                       |  | 32,007,957                      |  | 32,269,784 |  | 31,955,522
|Effect of potential exercise of stock options      |  | 0                                |  | 327,269                         |  | 166,864    |  | 138,614   
|                                                   |  |                                  |  |                                 |  |            |  |           
|Diluted weighted average common shares outstanding |  | 32,388,777                       |  | 32,335,226                      |  | 32,436,648 |  | 32,094,136
|                                                   |  |                                  |  |                                 |  |            |  |           



Options to purchase 2.4 million and
0.1 million shares of common stock were outstanding at September 30, 2004 and September 30, 2003, respectively, but were not included in the computation of diluted earnings per share because the options exercise prices were greater than the
average market price of the common shares and, therefore, the effect would be antidilutive.



4. Goodwill and Other Intangibles



Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. Under SFAS 142, goodwill is to be reviewed at least
annually for impairment; we have elected to perform this review annually during the second quarter each calendar year. These reviews resulted in no adjustments in goodwill.



During 2004, we completed the purchase price allocation of the assets acquired in the Integrated Data Systems Corporation (IDS) transaction.
Pursuant to the valuation, there was no change to the amount of the total intangible assets; however, we reclassified $4.6 million of the allocated purchase price from goodwill to other intangibles for amounts related to contract backlog, customer
relationships and capitalized software. The impact related to adjustments in amortization expense for these intangibles was not significant.



In February and June 2004, we acquired certain assets from Affiliated Computer Services, Inc. (ACS), for $6.5 million and $1.5 million, respectively. The assets acquired
from ACS include contracts for providing support to the U.S. Air Force and North Atlantic Treaty Organization (NATO), as well as the employees who had worked on the contracts. In September 2004, we completed the allocation of the $8.0 million total
purchase price, classifying $5.0 million in goodwill and $3.0 million in other intangibles based on an independent appraisal. As a result of this classification we recorded a reduction of amortization expense of $673 thousand during the third
quarter of 2004. Recognition of goodwill is largely attributed to the highly-skilled employees we obtained from the ACS acquisitions. No liabilities were assumed as a result of these acquisitions.



The components of goodwill and other intangibles are as follows (in thousands):



|                               |  |                   |         |   |                  |   |         |  
|------------------------------ |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                               |  | September 30,2004 |         |   | December 31,2003 |  
|Goodwill                       |  | $                 | 165,267 |   |                  | $ | 159,655 |  
|Other intangibles              |  |                   | 34,530  |   |                  |   | 26,610  |  
|                               |  |                   |         |   |                  |   |         |  
|                               |  |                   | 199,797 |   |                  |   | 186,265 |  
|Less: Accumulated amortization |  |                   | (23,480 | ) |                  |   | (20,976 | )
|                               |  |                   |         |   |                  |   |         |  
|                               |  | $                 | 176,317 |   |                  | $ | 165,289 |  
|                               |  |                   |         |   |                  |   |         |  



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As of September 30, 2004, we had intangibles that consisted of the following (in thousands):



|                                           |  |                      |        |                         |   |                    |  |   |       
|------------------------------------------ |  | -------------------- | ------ | ----------------------- | - | ------------------ |  | - | ------
|                                           |  | September 30, 2004  
|                                           |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net CarryingAmount
|Amortizable intangible assets:             |  |                      |        |                         |   |                    |  |   |       
|Contract rights and customer relationships |  | $                    | 25,364 |                         | $ | 6,925              |  | $ | 18,439
|Capitalized software                       |  |                      | 9,166  |                         |   | 6,448              |  |   | 2,718 
|                                           |  |                      |        |                         |   |                    |  |   |       
|                                           |  | $                    | 34,530 |                         | $ | 13,373             |  | $ | 21,157
|                                           |  |                      |        |                         |   |                    |  |   |       



For the three months ended September
30, 2004, we had aggregate amortization expense of $0.3 million. We estimate that we will have the following amortization expense for the future periods indicated below (in thousands):



|                                                        |  |   |      
|------------------------------------------------------- |  | - | -----
|For the remaining three months ending December 31, 2004 |  | $ | 2,018
|For the years ending:                                   |  |   |      
|December 31, 2005                                       |  |   | 3,813
|December 31, 2006                                       |  |   | 2,462
|December 31, 2007                                       |  |   | 1,608
|December 31, 2008                                       |  |   | 1,171
|December 31, 2009                                       |  |   | 1,162



5. Business Segment and Geographic
Area Information



ManTech 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. Our U.S. 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 our services as a separate customer, so long as that customer has independent decision-making and contracting authority within its
organization. For example, under a blanket purchasing agreement that we have with one of the Armys contracting agencies, program managers throughout the Army and from other services and defense agencies are able to purchase a wide range of our
solutions. Even though task orders under this agreement together accounted for 14.4% and 8.0% of our revenues for the quarters ended September 30, 2004 and September 30, 2003, respectively, no single task order represented more than 6.3% and 4.8% of
our revenues during those same periods. One customer, noted below, accounted for 8.5% and 10.9% of our accounts receivable as of September 30, 2004 and December 31, 2003, respectively. 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. We treat 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 September 30, 2004 and 2003. Revenues by geographic customer and the related percentages of total revenues for the periods ended September 30, 2004 and 2003 were as
follows (in thousands):



|              |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|              |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30, |  
|              |  | 2004                             |         |   | 2003                            |   |         | 2004 |  |   | 2003    |  
|United States |  | $                                | 209,206 |   |                                 | $ | 180,899 |      |  | $ | 609,441 |   |  | $ | 502,894 |  
|International |  |                                  | 2,054   |   |                                 |   | 691     |      |  |   | 3,170   |   |  |   | 3,895   |  
|              |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|              |  | $                                | 211,260 |   |                                 | $ | 181,590 |      |  | $ | 612,611 |   |  | $ | 506,789 |  
|              |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|United States |  |                                  | 99.0    | % |                                 |   | 99.6    | %    |  |   | 99.5    | % |  |   | 99.2    | %
|International |  |                                  | 1.0     |   |                                 |   | 0.4     |      |  |   | 0.5     |   |  |   | 0.8     |  
|              |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|              |  |                                  | 100.0   | % |                                 |   | 100.0   | %    |  |   | 100.0   | % |  |   | 100.0   | %
|              |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  



Our ManTech MSM Security Services,
Inc. (MSM) subsidiary conducts personal security investigations (PSIs) pursuant to our contract with the Defense Security Service (DSS). In response to the governments request to substantially increase the number of cases assigned to us,
from 35 cases per day to 425 per day, we significantly expanded our operations at MSM. However, these cases proved to be significantly more complex than anticipated, requiring substantially more work to complete these cases than our prior experience
indicated. An adjustment to reduce unbilled revenue by $11.3 million was recorded in the second quarter of 2004 due to a change in estimate of revenue earned and level of work to be completed under this contract. We made a further



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reduction of unbilled revenue of $1.9 million to reflect our revised estimate of remaining workflow under this contract during the same period. Because of
the fixed-price nature of the contract, the increased costs associated with this contract reduced our earnings and, for the second quarter of 2004, these adjustments resulted in an approximate $13.2 million reduction in operating income, a $7.9
million reduction in net income, and a $0.25 reduction in earnings per share for the changes in estimate. In addition, the final contract results will depend on many factors, including negotiations with the customer; we estimated future costs on
this contract could exceed expected revenues by a range of approximately $4 million to $7 million. Accordingly, we recorded an estimated contract loss of $4.7 million for this contract in the second quarter of 2004, which reflects our best estimate
of loss under the circumstances, due to estimated future contract costs exceeding expected revenues. During the third quarter of 2004, we utilized approximately $3.1 million of the $4.7 million estimated contract loss. On September 27, 2004, the
government requested us to close out the DSS contract and cease investigative work on PSIs that had been assigned to us under this contract and to submit both completed and incomplete investigations. The final settlement for payment with
respect to incomplete investigations will depend on our negotiations with the customer. At September 30, 2004, the total receivable balance for this contract was $18.1 million, including $15.5 million in unbilled. The following table is in
thousands:



|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|--------------------------------- |  | ------------------------------- | ------- | ------------------------------ | ---- | - | ------- |  | - | ------- | - |  | - | -------
|                                  |  | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|                                  |  | 2004                            |         |                                | 2003 |   | 2004    |  |   | 2003   
|Revenues from external customers: |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|DSS contract                      |  | $                               | 2,974   |                                |      | $ | 8,565   |  | $ | 4,147   |   |  | $ | 12,222 
|All other contracts               |  |                                 | 208,286 |                                |      |   | 173,025 |  |   | 608,464 |   |  |   | 494,567
|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|ManTech Consolidated              |  | $                               | 211,260 |                                |      | $ | 181,590 |  | $ | 612,611 |   |  | $ | 506,789
|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|Contract profit (loss):           |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|DSS contract                      |  | $                               | (1,402  | )                              |      | $ | 3,055   |  | $ | (20,166 | ) |  | $ | 2,528  
|All other contracts               |  |                                 | 17,717  |                                |      |   | 15,575  |  |   | 56,400  |   |  |   | 49,280 
|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|ManTech Consolidated              |  | $                               | 16,315  |                                |      | $ | 18,630  |  | $ | 36,234  |   |  | $ | 51,808 
|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|Assetsaccounts receivable:       |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|DSS contract                      |  | $                               | 18,051  |                                |      | $ | 14,916  |  | $ | 18,051  |   |  | $ | 14,916 
|All other contracts               |  |                                 | 194,276 |                                |      |   | 159,204 |  |   | 194,276 |   |  |   | 159,204
|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        
|ManTech Consolidated              |  | $                               | 212,327 |                                |      | $ | 174,120 |  | $ | 212,327 |   |  | $ | 174,120
|                                  |  |                                 |         |                                |      |   |         |  |   |         |   |  |   |        



The DSS contract loss for the three
months ended September 30, 2004 was attributable to expenses that had not been included in the estimated contract loss. These expenses are largely attributable to general and administrative expenses, and severance expenses. Disclosure items required
under SFAS No. 131 including interest revenue, interest expense, depreciation and amortization and expenditures for segment assets are not applicable, as we review those items on a consolidated basis.



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6. Revenues and Receivables



ManTech 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 98.2% and 97.8% for the periods ended September 30, 2004 and 2003,
respectively. The components of contract receivables are as follows (in thousands):



|                                                                           |  |                   |         |   |                  |   |         |  
|-------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                           |  | September 30,2004 |         |   | December 31,2003 |  
|Billed receivables                                                         |  | $                 | 160,291 |   |                  | $ | 140,858 |  
|Unbilled receivables:                                                      |  |                   |         |   |                  |   |         |  
|Revenues recorded in excess of milestone billings on fixed-price contracts |  |                   | 21,026  |   |                  |   | 30,796  |  
|Amounts currently billable                                                 |  |                   | 25,082  |   |                  |   | 21,652  |  
|Indirect costs incurred in excess of provisional billing rates             |  |                   | 2,977   |   |                  |   | 7,438   |  
|Retainages                                                                 |  |                   | 3,574   |   |                  |   | 3,396   |  
|Revenues recorded in excess of estimated contract value or funding         |  |                   | 3,162   |   |                  |   | 3,473   |  
|Allowance for doubtful accounts                                            |  |                   | (3,785  | ) |                  |   | (3,074  | )
|                                                                           |  |                   |         |   |                  |   |         |  
|                                                                           |  | $                 | 212,327 |   |                  | $ | 204,539 |  
|                                                                           |  |                   |         |   |                  |   |         |  



Revenues recorded in excess of
milestone billings on fixed-price contracts consist of amounts not expected to be billed within the next month. Amounts currently billable consist principally of amounts to be billed within the next month. Indirect costs incurred in excess of
provisional billing rates on U.S. Government contracts are generally billable at actual rates less a reduction of 0.5% of the actual general and administrative rate base before a Defense Contract Audit Agency (DCAA) audit is completed. The balance
remaining, as well as any retainage, is billable upon completion of the DCAA audit. Revenues recorded in excess of estimated contract value or funding are billable upon receipt of contractual amendments or other modifications. At September 30, 2004,
the amount of receivables that we expect to collect after one year is $6.4 million.



7. Stockholders Equity



Follow-on Public Offering ManTech closed its follow-on public offering on December 20, 2002. Our net proceeds were approximately $90.9 million, after deducting the estimated expenses related to the offering and the portion of the underwriting discount payable
by us. Proceeds from the offering were used in 2003 to fund our acquisition of IDS and MSM, on February 28, 2003 and March 5, 2003, for $62.7 million and $4.9 million, respectively.



8. Commitments and Contingencies



Payments to us on cost-reimbursable contracts with the U.S. Government are provisional payments subject to adjustment upon audit by the DCAA. Audits through 2001 have
been completed and resulted in no material adjustments. The audits for 2002 and 2003 are not expected to have a material effect on the results of future operations.



In the ordinary course of business, ManTech is involved in certain governmental and legal proceedings, claims and disputes, and has
litigation pending under several suits. Management believes that the ultimate resolution of these matters will not have a material effect on our financial position or results of operations.



9. Acquisitions



Integrated Data Systems Corporation On February 28, 2003, we acquired 100 percent of the outstanding common stock of
IDS. The results of operations for IDS have been included in our consolidated financial statements since that date. Founded in 1990, IDS delivers technology solutions and products in four core areas: software development, systems
engineering/networking, information assurance, and government acquisition/procurement support software. IDS has developed secure, advanced messaging and collaboration applications and solutions in support of a wide variety of national security
networks and systems. IDS is also one of Microsofts leading certified partners supporting U.S. Government classified intelligence community programs.



The cash purchase price of approximately $62.7 million, net of cash on hand of $2.8 million, and excluding $1.0 million of acquisition-related costs, is subject to an
earnout provision. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition, as adjusted for the completion of the valuation of assets (in thousands):



|                           |  |   |        |  
|-------------------------- |  | - | ------ | -
|Current assets             |  | $ | 14,455 |  
|Property and equipmentnet |  |   | 1,364  |  
|Goodwill                   |  |   | 46,087 |  
|Intangible assets          |  |   | 12,120 |  
|Other assets               |  |   | 84     |  
|Other current liabilities  |  |   | (7,353 | )
|Deferred rent              |  |   | (199   | )
|                           |  |   |        |  
|                           |  | $ | 66,558 |  
|                           |  |   |        |  



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Intangible assets acquired included: contract rights, customer relationships and software in the amounts of $1.8 million,
$10.1 million and $270 thousand, respectively. Amounts are being amortized using weighted average lives of 2 years, 12.5 years and 2.5 years, respectively.



ManTech MSM Security Services, Inc. On March 5, 2003, ManTech acquired 100 percent of the outstanding common stock of MSM, a Maryland-based provider
of PSI services to the U.S. Government. Pursuant to the acquisition agreement, we included the results of operations for MSM in its consolidated financial statements effective March 1, 2003. MSM specializes in PSI services for the U.S. Government,
having completed over 250,000 background investigations since its founding in 1978. MSM has active investigation contracts to support various federal government agencies.



The cash purchase price was approximately $4.9 million, which excludes $0.2 million of acquisition-related costs and an earnout provision.



Acquisition of Certain Assets from Affiliated Computer Services, Inc. On February 8, 2004, ManTech acquired certain operations from ACS, a provider of systems engineering, network administration, program management, and communications systems support to Department of Defense customers for $6.5 million.
The assets acquired from ACS include contracts for providing support to the U.S. Air Force Electronic Systems Centers Information Technology Services Program. Services provided through these contracts include information technology services,
such as program management, systems engineering, network engineering and administration, test and evaluation, and data management.



On June 1, 2004, we acquired additional assets from ACS for $1.5 million. The assets acquired from ACS include contracts for providing support to NATO.



The following table summarizes the estimated fair value of the assets acquired at the date of
acquisition, based on an independent appraisal. No liabilities were assumed.



|                  |  |                |       |      |   |      
|----------------- |  | -------------- | ----- | ---- | - | -----
|                  |  | U.S. Air Force |       | NATO
|Goodwill          |  | $              | 4,500 |      | $ | 500  
|Intangible Assets |  |                | 2,000 |      |   | 1,000
|                  |  |                |       |      |   |      
|Total             |  | $              | 6,500 |      | $ | 1,500
|                  |  |                |       |      |   |      



10. Debt



On February 25, 2004, we executed the Amended and Restated Credit and Security Agreement
with Citizens Bank of Pennsylvania, KeyBank National Association, Branch Banking and Trust Company of Virginia, Chevy Chase Bank, F.S.B., and Riggs Bank, N.A., in order to increase the capacity available under our prior loan agreement. The agreement
initially provides for a $125 million revolving credit facility that can be increased to $200 million. The maturity date of the agreement is February 25, 2009. Under the agreement, we are required to maintain specified financial covenants relating
to asset coverage, fixed charge coverage, and debt coverage. The agreement also places limitations on additional borrowings, mergers, and related-party transactions, payment of dividends, and contains limitations with respect to capital
expenditures. Borrowings under the agreement are collateralized by our assets and bear interest at the London Inter-Bank Offer Rate (LIBOR), or the lenders base rate, plus market-rate spreads that are determined based on a company leverage
ratio calculation. As of September 30, 2004, we were in compliance with all covenants under the Credit Agreement.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Introduction and Overview



ManTech is a leading provider of innovative technologies and solutions for mission-critical national security programs for the intelligence community, the
Department of Defense, the Department of State, the Department of Justice, the Department of Homeland Security and other federal government customers. Our expertise includes software development, enterprise security architecture, information
assurance, intelligence operations support, network and critical infrastructure protection, information technology, communications integration and engineering support. With more than 5,400 highly qualified employees, we operate in the United States
and over 40 countries worldwide.



We derive revenue primarily
from contracts with U.S. Government agencies that are focused on national security. As a result, funding for our programs and services are generally linked to trends in U.S. Government spending in the areas of defense, intelligence and homeland
security. Leading up to and following the terrorist events of September 11, 2001, the U.S. Government substantially increased its overall defense, intelligence and homeland security budgets. Hence, our focus on national security corresponds with our
customers objective to safeguard the nation. Our business has also benefited from the U.S.



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Governments increased need for specialized support of ongoing and mission-critical operations, due in part to the growing complexity of technology. In
the third quarter of 2004, our revenue was increased by $17.2 million as a result of our expansion of the logistical readiness, telecommunications, infrastructure, maintenance, repair and sustainment support provided in military deployed
environments with U.S. and allied forces in support of peace-keeping efforts worldwide.



During the second quarter of 2004, we faced challenges associated with our personnel security investigations (PSIs) business at our ManTech MSM Security Services, Inc. (MSM) subsidiary. In response to the
governments request to substantially increase the number of cases assigned to us, from 35 cases per day to 425 cases per day, pursuant to our contract with the Defense Security Service (DSS), we significantly expanded our operations at MSM.
However, these cases proved to be significantly more complex than anticipated, requiring substantially more work to complete than our prior experience indicated. Because of the fixed-price nature of the contract, the increased costs associated with
this contract reduced our earnings and, for the second quarter, we recorded an estimated contract loss of $4.7 million for this contract. Out of the $4.7 million estimated contract loss, we utilized approximately $3.1 million in the third quarter of
2004. On September 27, 2004, the government requested us to close out the DSS contract and cease investigative work on PSIs that had been assigned to us under this contract and to submit both completed and incomplete investigations. The final
settlement for payment with respect to incomplete investigations will depend on our negotiations with the customer. At September 30, 2004, the total receivable balance net of reserves for this contract was $18.1 million, including $15.5 million in
unbilled.



During the third quarter of 2004, our other
operations had revenues of $207.4 million, including $8.5 million from the operations purchased from ACS. This third quarter revenue represents a 22.9% increase or $38.7 million over the results for our other operations during the comparable period
of 2003. Approximately $30.2 million of the increase was primarily due to an increase in our work under contracts with the Department of Defense and various intelligence agencies. For these operations, cost of services grew by 21.9%, as we added
personnel from recent acquisitions and experienced higher pass-though costs in the quarter. Operating income for these operations grew by 39.2%, to $17.6 million, including $1.0 million related to operations purchased from ACS, and net income for
these operations grew by 43.8% to $10.2 million.



The following
table presents certain operational performance measures for our MSM subsidiary, our other businesses (i.e., excluding MSM), and ManTech on a consolidated basis. This information provides additional insight into the impact of MSMs performance
on ManTechs consolidated results for the three and nine months ended September 30, 2004.



|                        |  |                                       |         |    |                 |   |         |                     |  |   |         |  
|----------------------- |  | ------------------------------------- | ------- | -- | --------------- | - | ------- | ------------------- |  | - | ------- | -
|                        |  | Three Months Ended September 30, 2004 |        
|                        |  | MSM                                   |         |    | OtherOperations |   |         | ManTechConsolidated | 
|Revenues                |  | $                                     | 3,816   |    |                 | $ | 207,444 |                     |  | $ | 211,260 |  
|Operating Income (Loss) |  | $                                     | (3,968  | )  |                 | $ | 17,550  |                     |  | $ | 13,582  |  
|Operating Margin        |  |                                       | (104.0  | )% |                 |   | 8.5     | %                   |  |   | 6.4     | %
|Net Income (Loss)       |  | $                                     | (2,411  | )  |                 | $ | 10,225  |                     |  | $ | 7,814   |  
|                        | 
|                        |  | Nine Months Ended September 30, 2004  |        
|                        |  | MSM                                   |         |    | OtherOperations |   |         | ManTechConsolidated | 
|Revenues                |  | $                                     | 10,417  |    |                 | $ | 602,194 |                     |  | $ | 612,611 |  
|Operating Income (Loss) |  | $                                     | (26,864 | )  |                 | $ | 51,573  |                     |  | $ | 24,709  |  
|Operating Margin        |  |                                       | (258.0  | )% |                 |   | 8.6     | %                   |  |   | 4.0     | %
|Net Income (Loss)       |  | $                                     | (16,107 | )  |                 | $ | 30,070  |                     |  | $ | 13,963  |  



Three Months Ended September 30,
2004 Compared to the Three Months Ended September 30, 2003



Our increase in revenue is ultimately as a result of the increased spending for national security and homeland security. We also generated an increase in revenue resulting from the recent acquisition of operations from ACS. Revenue in our
business, excluding MSM, grew to $207.4 million during the quarter, from $168.8 million for the same period last year.



Revenues



Revenues increased 16.3% to $211.3 million for the three months ended September 30, 2004, compared to $181.6 million for the same period in 2003. Part of
this increase in revenue was due to the operations purchased from ACS in the first and second quarters of 2004, which added $8.5 million in revenue. Our revenue was increased by $17.2 million as a result of our expansion of the logistical readiness,
telecommunications, infrastructure, maintenance, repair and sustainment support provided in military



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deployed environments with U.S. and allied forces in support of peace-keeping efforts worldwide.An additional $13.0 million of the increase in
revenue was due to the other contracts with the Department of Defense and various intelligence agencies. Offsetting these increases was a decrease in revenues of $9.0 million on MSM, compared to the same period in 2003. We derived approximately
44.6% of our revenue for the three months ended September 30, 2004 from work under GSA schedule contracts, compared with approximately 43.9% for the same period in 2003. Subcontracts accounted for 13.9% of our revenue for the three months ended
September 30, 2004, compared with 10.2% for the same period in 2003. We anticipate that quarterly revenues for our contracts with the Department of Defense and various intelligence agencies will continue at this level, or slightly higher levels,
largely because of the United States continuing efforts on the war on terrorism, and the specialized advanced information technology skills that we offer.



Cost of services



Cost of services increased 19.6% to $176.4 million for the three months ended September 30, 2004, compared to $147.5 million for the same period in 2003.
Over $7 million of this increase in cost of services was incurred on contracts purchased from ACS. An additional $21.7 million of this increase in cost of services was generated through contracts with the Department of Defense and various
intelligence agencies. As a percentage of revenues, cost of services increased 2.3%, to 83.5% for the three months ended September 30, 2004, compared to 81.2% for the same period in 2003. Direct labor costs increased by 23.6%, primarily due to
additional personnel from acquisitions, direct new hires and increased salaries. For the three months ended September 30, 2004, other direct costs increased by 11.5% over third quarter 2003, from $59.8 million to $66.7 million. As a
percentage of revenues, other direct costs decreased slightly from 32.9% for the three months ended September 30, 2003 to 31.6% for the same period in 2004.



Gross profit



Gross profit increased 2.2% to $34.9 million for the three months ended September 30, 2004, compared to $34.1 million for the same period in 2003. Gross
profit margin was 16.5% for the three months ended September 30, 2004, compared to 18.8% for the same period in 2003. Gross profit for the third quarter 2004 was impacted by a $9.0 million decrease in revenue from MSM, while cost of services only
decreased $1.8 million for MSM. Time-and-materials contracts and fixed-price contracts comprised 72.0% of revenues for the three months ended September 30, 2004, compared with 66.5% for same period in 2003.



General and administrative



General and administrative expenses increased 22.3% to $20.5 million for the
three months ended September 30, 2004, compared to $16.7 million for the same period in 2003. The increased expenses reflect additional management personnel and infrastructure related to our acquisitions and expansions that are necessary to support
the growth of our business. As a percentage of revenues, general and administrative expenses increased to 9.7% for the three months ended September 30, 2004, compared to 9.2% for the same period in 2003.



Depreciation and amortization



Depreciation and amortization expense decreased 28.5% to $0.8 million for
the three months ended September 30, 2004, compared to $1.2 million for the same period in 2003. This decrease was due primarily to a reverse of amortization expenses related to the operations purchased from ACS. The independent appraisal of the
assets acquired from ACS was completed during third quarter 2004, which resulted in a $5.0 million addition to goodwill and a $5.0 million reduction in amortizable intangible assets.



Income from operations



Income from operations decreased 16.3% to $13.6 million for the three months ended September 30, 2004, compared with income of $16.2 million for the same
period in 2003. Income from operations is lower, primarily due to the $9.0 million decrease in revenues at MSM that resulted in a $2.4 million net loss at MSM for the quarter ended September 30, 2004.



Interest Income (Expense), net



Interest expense, net, decreased to $523 thousand for the three months ended
September 30, 2004, compared with $618 thousand for the same period in 2003. The decrease in interest expense is a result of interest revenue from letters of credit granted as discussed in the Off-Balance Sheet Arrangements section. The average
levels of indebtedness were approximately $31.4 million and $25 million, in the three months ended September 30, 2004 and September 30, 2003, respectively.



Other Income (Expense)



Other income for the third quarter of 2004 of $162 thousand consisted primarily of income from an investment in a joint venture offset by foreign currency
conversion losses. In the third quarter of 2003, a $58 thousand loss was due primarily to investment in a joint venture.



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Net income



Net income decreased 15.3% to a $7.8 million for the three months ended September 30, 2004, compared to $9.2 million in net income for the same period in
2003. The decrease resulted from $2.6 million less in operating income, offset by decreased income tax expense of $0.9 million. Our effective tax rate for the three months ended September 30, 2004 and September 30, 2003 was 40.9% and 40.7%,
respectively.



Nine Months Ended September 30, 2004 Compared to Nine Months
Ended September 30, 2003



Revenues



Revenues increased 20.9% to $612.6 million for the nine months ended
September 30, 2004, compared to $506.8 million for the same period in 2003. Our revenue was increased by $47.5 million as a result of our expansion of the logistical readiness, telecommunications, infrastructure, maintenance, repair and sustainment
support provided in military deployed environments with U.S. and allied forces in support of peace-keeping efforts worldwide. Approximately $30.0 million of this increased revenue is attributable to year-to-date revenues from acquisitions of IDS in
early 2003, and from operations purchased from ACS in the first and second quarters of 2004. In addition, we derived approximately $10 million in revenue from our contract to support relocation of a U.S. Army Special Operations Command Center. The
remaining amount of increase is due to increased work from Department of Defense and various intelligence agencies. Offsetting these increases was $11.8 million decrease in revenues at MSM as previously discussed.



We derived approximately 44.1% of our revenues for the nine months ended
September 30, 2004 from work under GSA schedule contracts, compared with approximately 40.0% for the same period in 2003. Subcontracts accounted for 13.4% of our revenue for the nine months ended September 30, 2004, compared with 10.2% for the same
period in 2003.



Cost of services



Cost of services increased 27.5% to $524.8 million for the nine months ended
September 30, 2004, compared to $411.6 million for the same period in 2003. As a percentage of revenues, cost of services increased from 81.2% to 85.7%, or 4.5% of revenue. The increase by 4.5% of revenue is due primarily to the $11.8 million
decrease in revenues at MSM and a $16.6 million increase in cost of services at MSM, which includes the $4.7 million contract loss recorded in the second quarter of 2004. Excluding MSM, cost of services as a percentage of revenue remained the same
at 81.8% for both 2004 and 2003. Direct labor costs excluding MSM increased by 22.1% due to an increase in personnel, primarily related to our acquisitions and direct new hires and increased salaries. For the nine months ended September 30, 2004,
other direct costs including MSM increased by 30.3% over the first nine months of 2003, from $162.5 million to $211.7 million. This increase was attributable to an increase in pass-through costs in 2004 over 2003, the $4.7 million contract loss
noted above, year-to-date results from IDS, and costs incurred on contracts purchased from ACS. As a percentage of revenues, other direct costs including MSM increased to 34.6% for the nine months ended September 30, 2004 from 32.1% for the same
period in 2003. Over $25 million of this increase in cost of services is attributable to a full three quarters of cost from IDS, and cost incurred on operations purchased from ACS during the first and second quarters of 2004.



Gross profit



Gross profit decreased 7.7% to $87.8 million for the nine months ended September 30, 2004, compared to $95.2 million for the
same period in 2003. Gross profit margin decreased to 14.3% for the nine months ended September 30, 2004, compared to 18.8% for the same period in 2003. The decrease in the gross profit margin was primarily the result of the $11.8 million decrease
in revenues at MSM and a $16.6 million increase in cost of services, noted above. This profit reduction was partially offset by a one-time profit of $1.0 million on a fixed-price contract attributable to performance improvements taken in the first
quarter of 2004. Time-and-materials and fixed-price contracts comprised 70.7% of revenues for the nine months ended September 30, 2004, compared with 64.9% for the same period in 2003.



General and administrative



General and administrative expenses increased 24.9% to $59.6 million for the nine months ended September 30, 2004, compared to $47.7 million for the same
period in 2003. The increased expenses reflect additional management personnel and infrastructure related to our acquisitions that support the growth of the business. In addition, we recorded $800 thousand in costs related to terminating a lease
agreement for an idle facility. As a percentage of revenues, general and administrative expenses increased to 9.7% for the nine months ended September 30, 2004 from 9.4% for the same period in 2003.



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Depreciation and amortization



Depreciation and amortization expense increased 6.3% to $3.6 million for the nine months ended September 30, 2004, compared
to $3.4 million for the same period in 2003. The increase resulted primarily from an additional $0.2 million of amortization of intangible assets established in connection with our recent acquisitions.



Income from operations



Income from operations decreased 44.1% to $24.7 million for the nine months ended September 30, 2004, compared with $44.2
million for the same period in 2003. The decrease was primarily a result of the losses at MSM, noted above.



Net income



Net income
decreased 44.3% to $14.0 million for the nine months ended September 30, 2004, compared to $25.1 million for the same period in 2003. Our effective tax rate for the three months ended September 30, 2004 and September 30, 2003 was 40.9% and 40.6%,
respectively.



Backlog



At September 30, 2004 and December 31, 2003, our backlog was $1.5 billion
and $1.5 billion, respectively, of which $466 million and $375 million, respectively, was funded backlog. At September 30, 2003, our backlog was $1.5 billion, of which $411 million was funded backlog. Backlog and funded backlog represent estimates
that we calculate on a consistent basis. Additional information on how we determine backlog is included in our annual report on Form 10-K for the fiscal year ended December 31, 2003, previously filed with the SEC.



Liquidity and Capital Resources



Our primary source of liquidity is cash provided by operations and our
$125.0 million revolving credit facility. At September 30, 2004, we had outstanding loans of $25.0 million under the credit facility. Generally, cash provided by operating activities is adequate to fund our operations. We maintain a $25.0 million
outstanding loan balance, related to our interest rate swap agreements, which has a fixed rate of 6.83%. In addition, due to fluctuations in our cash flows and the growth in the operations, it is necessary from time to time to borrow above the $25.0
million level. In the future, we may borrow greater amounts in order to finance acquisitions or major new contract start ups. Net proceeds of $67.6 million from our follow-on public offering in 2002 were used to fund our acquisitions and related
expenses of IDS and MSM during the first quarter of 2003.



Net cash flows
from operating activities



Cash provided by operating
activities for the nine months ended September 30, 2004 was $19.7 million, compared to $8.7 million of cash provided by operating activities for the nine months ended September 30, 2003. In the nine months ended September 30, 2004, cash provided by
operating activities was increased and is primarily the result of improvement in billing and collection processes of newly-acquired subsidiaries contracts receivables and increase in accrued liabilities.



Net cash flows from investing activities



Cash used in investing activities of operations was $14.7 million for the
nine months ended September 30, 2004, compared to $72.5 million for the same period in 2003. Investing activities in the first nine months of 2004 included the acquisitions of certain assets from ACS for $8.0 million, a $2.9 million payment for an
earnout on a prior years acquisition, and purchases of property of $4.1 million. Investing activities in the first nine months of 2003 included the acquisitions of IDS and MSM for $62.7 million and $4.9 million, respectively; purchases of
property and equipment of $2.8 million; and investments in intellectual property of $1.5 million. Investing activities have primarily consisted of investments in intellectual property, acquisitions of businesses, and purchases of property and
equipment. In the future, we expect to continue with selective acquisitions that are consistent with our strategic plan for growth.



Net cash flows from financing activities



Cash provided by financing activities was $3.1 million for the nine months ended September 30, 2004, compared to cash used in financing activities of
$0.08 million for the nine months ended September 30, 2003. The net cash provided in the first nine months of 2004 resulted primarily from a decrease in our borrowings of $182 thousand and proceeds from the exercise of stock options of $3.2 million.
The cash provided by financing activities was primarily used for the acquisitions. The net cash used in the first nine months of 2003 resulted primarily from our payment of the final installment of a not-to-compete financing offset by proceeds
received from employees upon the exercise of stock options.



Credit
Agreement



On February 25, 2004, we executed the Amended
and Restated Credit and Security Agreement with Citizens Bank of Pennsylvania, KeyBank National Association, Branch Banking and Trust Company of Virginia, Chevy Chase Bank, F.S.B., and Riggs Bank, N.A., in order to increase the capacity available
under our prior loan agreement. The agreement initially provides for a $125 million revolving credit facility that can be increased to $200 million. The maturity date of the agreement is February 25,



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2009. Under the agreement, we are required to maintain specified financial covenants relating to asset coverage, fixed charge coverage, and debt coverage.
The agreement also places limitations on additional borrowings, mergers, and related-party transactions, payment of dividends, and contains limitations with respect to capital expenditures. Borrowings under the agreement are collateralized by our
assets and bear interest at the London Inter-Bank Offer Rate (LIBOR), or the lenders base rate, plus market-rate spreads that are determined based on a company leverage ratio calculation. To manage our exposure to the fluctuations in these
variable interest rates, we executed an interest swap in December 2001. The swap agreement has a notional principal amount of $25.0 million and currently has a fixed LIBOR rate of 6.83%. As of September 30, 2004, we were in compliance with all
material covenants under the Credit Agreement.



We
believe the capital resources available to us under our credit agreements and cash from our operations are adequate to fund 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 and our longer-term internal growth through one or more of the following sources: cash from operations; additional borrowing; issuance of equity; use of the existing revolving facility; or a
refinancing of our credit facilities.



Off-Balance Sheet Arrangements



Effective September 20, 2003, our lenders issued two
letters of credit to Fianzas Guardiana Inbursa, S.A. (FGI) on behalf of GSE Systems, Inc. (GSE). The first letter of credit supports an advance payment bond of approximately $1.8 million, issued by FGI to a customer of GSEs power business, and
has a term of 30 months. The second letter of credit supports a performance bond of approximately $1.3 million issued by FGI to the same customer, and has a term of 42 months. FGI can draw upon both letters of credit in the event that the
performance bonds are drawn on by the customer, which would only occur in the event of a contractual default by GSE. In the event that the letters of credit are drawn upon, we have entered into a collateral agreement with GSE whereby GSE has agreed
to indemnify us from any and all costs, damages, claims, actions, demands, losses and expenses (including the value of the letters of credit drawn upon, reasonable attorneys fees, collection fees or enforcement fees). In exchange for issuing
the letters of credit, we received 100,000 warrants to purchase GSEs common stock at the market price of GSEs common stock on the close of business on July 8, 2003, and will receive a 7% annual fee, payable on a quarterly basis,
calculated on the total amount of the then-existing value of the letters of credit.



In accordance with Financial Accounting Standards Board Interpretation No. 45, we have established a $3.1 million long-term liability for these guarantees and have increased the carrying value of our investment in GSE
by an equivalent amount.



George J. Pedersen, our Chairman of
the Board and Chief Executive Officer, and John A. Moore, our Executive Vice President, each beneficially own shares and options of GSE stock representing less than 5% of GSE. Messrs. Pedersen and Moore also both serve on GSEs board of
directors and are members of its compensation committee.



Discontinued
Operations



In September 2001, we decided to exit certain
lines of business involving foreign operations or operations that primarily serve commercial customers. Since then, we have disposed of several of our businesses and have classified them as discontinued operations in our consolidated financial
statements. We disposed all of these businesses prior to December 31, 2002, except our Australia-based software solutions business, which we sold in February 2003.



Critical Accounting Estimates and Policies



Critical accounting policies are defined as those policies that reflect significant judgments and uncertainties, and can 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.



Revenue Recognition and Cost Estimation



We recognize revenue when persuasive evidence of an arrangement exists,
services have been rendered, the contract price is fixed or determinable, and collectibility is reasonably assured. We have a standard internal process that we use to determine whether all required criteria for revenue recognition have been met.
This standard internal process includes a monthly review of contract revenues and expenses by several levels of management. This review covers, among other matters, progress against schedule, project staffing and levels of effort, risks and issues,
subcontract management, incurred and estimated costs, and disposition of prior action items, and is designed to determine whether the overall progress on a contract is consistent with the effort expended and revenue recognized to date.



Our revenues consist primarily of payments for the work of our employees,
and to a lesser extent, the pass through of costs for materials and subcontract efforts under contracts with our customers. Cost of services consists primarily of compensation expenses for program personnel, the fringe benefits associated with this
compensation, and other direct expenses incurred to complete programs, including cost of materials and subcontract efforts.



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We derive the majority of our revenue from cost-plus-fixed-fee, cost-plus-award-fee, firm-fixed-price, or
time-and-materials contracts. Absent evidence to the contrary, we recognize revenue as follows: revenues for cost-reimbursement contracts are recorded as reimbursable costs are incurred, including a pro-rata share of the contractual fees. For
time-and-material contracts, revenue is recognized to the extent of billable rates times hours delivered plus material and other reimbursable costs incurred. For long-term fixed-price production contracts, revenue is recognized at a rate per unit as
the units are delivered, or by other methods to measure services provided. Revenue from other long-term fixed-price contracts is recognized ratably over the contract period or by other appropriate methods to measure services provided. Contract costs
are expensed as incurred except for certain limited long-term contracts noted below. For long-term contracts which are specifically described in the scope section of American Institute of Certified Public Accountants (AICPA) Statement of
Position (SOP) No. 81-1, Accounting for Performance of Construction Type and Certain Production-Type Contracts, or other appropriate accounting literature we apply the percentage of completion method. Under the percentage of
completion method, income is recognized at a consistent profit margin over the period of performance based on estimated profit margins at completion of the contract. This method of accounting requires estimating the total revenues and total contract
cost at completion of the contract. During the performance of long-term contracts, these estimates are periodically reviewed and revisions are made as required. The impact on revenue and contract profit as a result of these revisions is included in
the periods in which the revisions are made. This method can result in the deferral of costs or the deferral of profit on these contracts. Because we assume the risk of performing a fixed-price contract at a set price, the failure to accurately
estimate ultimate costs or to control costs during performance of the work could result, and in some instances has resulted, in reduced profits or losses for such contracts. Estimated losses on contracts at completion are recognized when identified.
In certain circumstances, revenues are recognized when contract amendments have not been finalized. Prior to agreeing to commence work directed by the customer and before receipt of the written modification or amendment to the existing contract, we
require the completion of an internal memo that assesses the probability of the modification being executed in a timely fashion and our ability to subsequently collect payment from the customer.



Contract revenue recognition inherently involves estimation. Examples of
estimates include the contemplated level of effort to accomplish the tasks under contract, the cost of the effort, and an ongoing assessment of our progress toward completing the contract. From time to time, as part of our standard management
processes, facts develop that require us to revise our estimated total costs or revenues. In most cases, these revisions relate to changes in the contractual scope of our work. To the extent that a revised estimate affects contract profit or revenue
previously recognized, we record the cumulative effect of the revision in the period in which the facts requiring the revision become known. Anticipated losses are recognized in the accounting period in which they are first determined.



Goodwill



Goodwill represents the excess of cost over the fair value of net tangible and identifiable intangible assets of acquired
companies. Effective January 1, 2002, we adopted SFAS No. 142, and no longer amortize goodwill; rather, we review goodwill at least annually for impairment. We have elected to perform this review annually during second quarter of each calendar year
and no adjustments were necessary.



Other Matters



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, 2003, included in our Annual Report on Form 10-K for the same period, filed with the SEC on March 15, 2004.



Forward-Looking Statements



This quarterly report on Form 10-Q contains forward-looking statements that
involve substantial risks and uncertainties, many of which are outside of our control. ManTech believes these statements to be within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these
statements by forward-looking words such as may, will, should, expect, plan, 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 predict accurately or control. The factors that could cause actual results to differ materially from anticipated results include, but are
not limited to, the following:



| |  | adverse changes in U.S. Government spending priorities;
| | - | -------------------------------------------------------



| |  | failure to retain existing U.S. Government contracts or win new contracts;
| | - | --------------------------------------------------------------------------



| |  | risk of adverse consequences resulting from contract negotiations on existing U.S. Government contracts;
| | - | --------------------------------------------------------------------------------------------------------



| |  | adverse results of U.S. Government audits of our government contracts;
| | - | ----------------------------------------------------------------------



| |  | risk of contract performance or termination;
| | - | --------------------------------------------



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| |  | failure to obtain option awards, task orders or funding under contracts;
| | - | ------------------------------------------------------------------------



| |  | risks associated with complex U.S. Government procurement laws and regulations;
| | - | -------------------------------------------------------------------------------



| |  | additional costs associated with complying with new laws and regulations relating to corporate governance issues.
| | - | -----------------------------------------------------------------------------------------------------------------



| |  | failure to successfully integrate recently acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | failure to identify, execute or effectively integrate future acquisitions.
| | - | --------------------------------------------------------------------------



These and other risk factors are more fully described and discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003, filed
with the SEC on March 15, 2004, and from time to time, in our other filings with the SEC. The statements in this quarterly report are made as of the date of this quarterly report, and we undertake 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.



|Item 3. | Quantitative and Qualitative Disclosure about Market Risk
|------- | ---------------------------------------------------------



Our exposure to market risk relates to changes in interest rates for borrowings under our senior term loan and revolving credit facility. These borrowings
bear interest at variable rates. As of September 30, 2004, we had $25.0 million in borrowings outstanding under our revolving credit facility. A hypothetical 10% increase in interest rates would have increased our interest expense for the nine
months ended September 30, 2004 by less than $0.1 million.



In
December 2001, we entered into an interest swap agreement in order to reduce our exposure associated with the market volatility of fixed London Inter-Bank Offer Rate (LIBOR) interest rates. This agreement has a notional principal amount of $25.0
million and, as of September 30, 2004, had a rate of 6.83%. This agreement is a hedge against revolving debt of $25.0 million, which bears interest at monthly floating LIBOR plus 1.00%. At stated monthly intervals the difference between the interest
on the floating LIBOR-based debt and the interest calculated in the swap agreement are settled in cash. The value of the swap at September 30, 2004 was a negative $3.8 million.



We do not use derivative financial instruments for speculative or trading purposes. We invest our 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.



|Item 4. | Controls and Procedures
|------- | -----------------------



As of September 30, 2004, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (our principal
executive officer and principal financial officer, respectively), management evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon this evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of September 30, 2004, such that the information relating to us that is required to be disclosed in our reports
filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to management, including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required disclosure.



There were no significant changes in our internal control over financial reporting during the three months ended September 30, 2004 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.



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PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



From time to time, we are subject to legal proceedings, investigations, claims and disputes that arise in the ordinary course of its business. Although we
cannot predict the outcomes of these and other legal proceedings, investigations, claims and disputes, based on the information now available to us, we do not believe that the ultimate resolution of these matters, either individually or in the
aggregate, will have a material adverse effect on our business, prospects, financial condition or operating results.



|Item 5. | Other Information
|------- | -----------------



In accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by section 202 of the Sarbanes-Oxley Act of 2002, we are required to
disclose any non-audit services approved by the Audit Committee to be performed by our independent registered public accounting firm.



Non-audit services are defined as services other than those provided in connection with an audit or a review of our financial statements. During the
quarter ended September 30, 2004, the Audit Committee approved the engagement of Deloitte & Touche LLP to provide employee benefit plan audit services and tax compliance and related services to ManTech.



In June 2004, ManTech formed a Nominations Committee for the purpose of
identifying individuals qualified to become members of the Board of Directors and recommending persons for the Board of Directors to select as nominees for election as directors of ManTech. Pursuant to our Nominations Committee charter, the
Nominations Committee has adopted a formal policy, which such policy was ratified by the Board of Directors, to describe (i) the circumstances pursuant to which it will consider candidates for the Board of Directors who are recommended by our
stockholders, and (ii) the procedures to be followed by such stockholders in submitting their recommendations (the Stockholder Policy). Pursuant to the Stockholder Policy, the Nominations Committee will consider candidates recommended by
our stockholders who beneficially own, at the time of the recommendation, not less than 1% of our outstanding common stock (a Qualifying Stockholder). The Nominations Committee generally employs the same evaluation process for all
potential director nominees, including candidates for director who are recommended by Qualifying Stockholders. Details and other information regarding the Stockholder Policy, and the procedures to be followed in submitting stockholder
recommendations, are available from us upon written request made to our Corporate Secretary at 12015 Lee Jackson Highway, Fairfax, Virginia 22033-3300. We will also post these materials on our website at www.mantech.comprior to the end of
2004. In addition to making a recommendation directly to our Nominations Committee, stockholders who wish to nominate a person for election as a director at the next annual meeting of our stockholders may do so in accordance with the procedures
contained in our bylaws and as described in our most recent proxy statement.



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



(a) Exhibits required by Item 601 of Regulation S-K:



|            |  |                                                                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                                                        
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.                            
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.                            
|            | 
|32          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.



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##### Table of Contents

(b) Reports on Form 8-K



|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|FILING DATE       |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                  | 
|July 19, 2004     |  | On July 19, 2004, ManTech filed a report on Form 8-K relating to its issuance of a press release announcing that it was unable to reconfirm the second quarter and fiscal year 2004 revenue and
earnings guidance it had previously provided on May 26, 2004.                                                                                                                                                                                                                                                              
|                  | 
|August 2, 2004    |  | On August 2, 2004, ManTech filed a report on Form 8-K relating to an administrative manner concerning the change of record keepers under the ManTech International 401(k) Plan. As a result,
and in order to implement the change, participants would be temporarily unable to engage in certain plan transactions, and pursuant to Section 306(a) of the Sarbanes-Oxley Act, ManTechs directors and executive officers would be prohibited from
purchasing, selling or otherwise acquiring or transferring ManTech stock.
|                  | 
|August 16, 2004   |  | On August 16, 2004, ManTech filed a report on Form 8-K relating to its issuance of a press release announcing financial results for the three- and six-month periods ended June 30, 2004, as
well as earnings guidance for the third quarter and full fiscal year 2004.                                                                                                                                                                                                                                                    
|                  | 
|September 14,2004 |  | On September 14, 2004, ManTech filed a report on Form 8-K relating to the promotion of Robert A. Coleman to the positions of President and Chief Operating Officer.                                                                                                                                                                                                                                                                                                                                                        



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##### Table of Contents

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.



|                       |  |  |  |                                   |  |                        |  |                                       
|---------------------- |  |  |  | --------------------------------- |  | ---------------------- |  | --------------------------------------
|                       |  |  |  | MANTECH INTERNATIONAL CORPORATION
|                       |  |  | 
|Date: November 5, 2004 |  |  |  | By:                               |  | /s/ George J. Pedersen
|                       |  |  |  |                                   |  | Name:                  |  | George J. Pedersen                    
|                       |  |  |  |                                   |  | Title:                 |  | Chairman of the Board of Directors and
|                       |  |  |  |                                   |  |                        |  | Chief Executive Officer               
|                       |  |  | 
|Date: November 5, 2004 |  |  |  | By:                               |  | /s/ Ronald R. Spoehel 
|                       |  |  |  |                                   |  | Name:                  |  | Ronald R. Spoehel                     
|                       |  |  |  |                                   |  | Title:                 |  | Executive Vice President,             
|                       |  |  |  |                                   |  |                        |  | Chief Financial Officer and Director  



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