To Our Shareholders
As we enter 2013, ManTech remains a trusted solutions provider for
national security programs working at the forefront of our customers’ most
important missions. Our dedicated employees make vital contributions
to cyber security, global logistics, defense technology for all branches of
the DoD, intelligence agencies, NSA, Homeland Security and many other
agencies of the U.S. government. Our staff ’s outstanding credentials and
top security clearances enable ManTech to provide exceptional service to
our customers around the world.
The government-services market experienced the slowing of contract awards and
revenue across the entire industry. ManTech’s revenue declined 10% in 2012, primarily
the result of reduced requirements for materials and subcontractors. Demand for
our services remained robust, and we grew our direct staff during the year. The
federal budget also aff ected our mergers and acquisitions strategy during 2012.
We were cautious in our approach to defense acquisitions and have refocused our
acquisition strategy on healthcare, commercial cyber, and other non-defense-related
marketplaces. With our strong balance sheet and visibility into future cash fl ows, we
expect to be more acquisitive this year.
We remain strong. At $2.6 billion in revenue, ManTech is one of the largest providers of
technology and engineering services to the federal government. Record year-end levels
of funded backlog, bookings, and cash provide tremendous stability. We are rapidly
adding staff to some of our most critical programs. During 2012, we also grew our
IV
ManTech International Corporation
2012 Annual Report
working capital and stockholder’s equity. With $135
million in cash, and an untapped $500 million credit
revolver, we have the balance sheet and financial
flexibility to position the business advantageously. We
currently have $200 million in long-term debt.
The federal government will continue to require
substantial support for national and homeland
security programs, sophisticated intelligence-
gathering and information-sharing activities, and new
healthcare systems and policies. Even with limited
growth, the market is immense, and we believe that
we have significant ability to capture market share
based on a compelling value proposition. Customers
are more focused on costs—an opportunity for
price-competitive providers such as ManTech. To
position ourselves for future growth, we are focusing
on execution, competing aggressively for new work,
building business in growth areas, and allocating
capital prudently.
Focus on ExEcution
Our customers are increasingly focusing their
constrained resources on their central missions and
relying on their most trusted prime contractors.
ManTech has an enviable position; approximately 90%
of our work is as a prime contractor, and our people
often work side by side with customers. We can
anticipate our customers’ emerging requirements and
craft solutions to improve their operations.
We understand that quality work and a reputation
for sterling performance is the best marketing.
Every year we receive hundreds of letters of
commendation about the dedication, value, and
impact of our employees to government missions.
Our commendations from 2012 include AMBIANCE
and the FBI’s Criminal Justice Information Services
(CJIS). First, our AMBIANCE contract is at the heart of
some of the most compelling technology imperatives,
including cyber, cloud computing, and data analytics.
We refresh our customer’s analytical environment
and help spearhead the Intelligence Community’s
approach to cloud computing. Second, we provide
operations and maintenance support to the FBI’s
CJIS—one of the world’s largest data centers.
ManTech sustains systems that support millions of
requests each day, including those used by police to
check license plates or look for fingerprint matches,
in the largest biometrics database in the world. Both
programs grew significantly this year as customers
moved new tasking to ManTech.
1
COMPETE AGGRESSIVELY FOR NEW WORK
2012 was a banner year for business development,
with a record $4.8 billion in contract awards. We were
awarded the largest contract in our history—a $2.9
billion contract to provide logistics sustainment and
support for the Mine-Resistant Ambush-Protected
(MRAP) Family of Vehicles. This award continues
our long-standing support of mission-critical work
that has been instrumental to the protection of the
nation’s warfi ghters. We are also consolidating work
under this contract from other companies who
supported these vehicles. Sustaining the large fl eet
of vehicles should ensure service work for years to
come.
In addition to these defi nite contract awards, we won
prime positions on multiple-award contracts with
an aggregate potential ceiling value of more than
$51 billion, including two multi-billion-dollar awards.
The $7 billion Software and Systems Engineering
Services—Next Generation contract, enables us to
pursue higher-end services and solutions work while
preserving our ability to transition our current eff orts
to this contract in the future. We also formed a joint
venture with Fluor Corporation and received a $23
billion basic ordering agreement to manage logistics
on an installation basis, covering maintenance,
supply, and transportation. Both of these contracts
expand ManTech’s footprint in vital and enduring
Army programs.
With Government-Wide Acquisition Contracts
(GWACs) becoming increasingly important, we
established a GWAC center that will enable us to
drive business through these contracts from all
organizations across the company. At the end of 2012,
we were tracking a pipeline of qualifi ed opportunities
of approximately $29 billion.
To strengthen our competitive position, we
aggressively addressed our cost structure by
implementing shared services for back-offi ce
functions and shrinking leased facilities. We strive to
effi ciently manage our operations in order to perform
our customers’ missions eff ectively.
BUILD BUSINESS IN GROWTH AREAS
In 2012, we entered two new markets—healthcare
and commercial cyber—with the acquisitions
of Evolvent Technologies, Inc., and HBGary. The
healthcare IT and analytics market allows us to take
skills that we have gained in our core business—
analyzing, manipulating, and protecting massive
amounts of data—and apply them to new customers
and issues. Evolvent’s strong capabilities and
reputation for innovation in the Military Health
System provides an excellent foundation. In January
2013, we augmented our capability in healthcare
IT with the acquisition of ALTA Systems, Inc., which
provides entry into the Centers for Medicare and
Medicaid Services. With these two acquisitions, we
HBGARY
HBGary provides enterprise incident
response solutions and services to enable
organizations to detect zero-days and other
unknown malware, validate incidents,
and respond to incidents. Customers
include Fortune 50 corporations and U.S.
government agencies.
2
ManTech International Corporation
2012 Annual Report
attractive assets at reasonable multiples. We have the
capital and integration experience to take advantage
of that environment.
POSITIONED FOR THE FUTURE
Our markets are more challenging than they have
been in more than a decade, but we believe ManTech
is well-positioned for that challenge. Our core
business is comprised of high-priority programs, and
we have emerging business in growth markets. We
have seen basic changes in our customers’ missions
in the past, and we transitioned at those times to
new and expanding marketplaces. We believe we
have the technology strength, cash fl ow, and market
position to grow and adapt to change. We expect that
our fi nancial means will allow us to thrive in the new
market due to our cash balance and a $500 million
line of credit.
George J. Pedersen
Chairman of the Board and CEO
are now actively pursuing more than $4 billion in
healthcare opportunities.
Using our acquisition of the HBGary business, we
are building a complete cyber solutions practice
that combines products and services and addresses
commercial and federal markets. HBGary provides a
comprehensive suite of software products to detect,
analyze, and diagnose advanced persistent threats
and targeted malware. This acquisition off ers a natural
synergy that allows us to off er incident-response
services to HBGary customers. With the expanded
team and broader services off ering, we will target
larger opportunities in new and existing markets.
ALLOCATE CAPITAL PRUDENTLY
ManTech continues to be a great cash generator,
delivering $126 million in operating cash fl ow, or
1.3 times net income, against $15 million in capital
expenditures. As a result, we can support regular cash
dividends to shareholders and an acquisition program
for growth.
Our careful decision to preserve cash in 2012
strategically positions us for 2013. With a record
year-end cash balance and a strong balance sheet,
we expect to be more acquisitive this year, as we
gain experience in our recent investment areas
and identify new markets to pursue. We expect the
market to create outstanding opportunities to gather
EVOLVENT
Evolvent transforms healthcare through
a variety of benefi t management, health
logistics, health IT, and clinical intelligence
programs. Our solutions empower patients and
providers by providing better, richer, and more
timely data, care coordination solutions, and
imaging management.
3
Meeting the Mission
MORE THAN A COMPANY
ManTech is a trusted partner because our business is built on absolute dedication to our customers’
missions. This dedication is not just a business model—it is a company value. It has helped us build
partnerships with customers working throughout the United States and in 19 foreign countries. It
has inspired us to pursue new areas of business and technology, and it helps us attract and retain
the best talent available.
MAKING OUR MARK IN SPACE WITH
THE MARS SCIENCE LABORATORY
ROVER, CURIOSITY
Recently, ManTech Vice President Dave Eidson
provided a good overview of the pride with
which ManTech views our partnership with
NASA’s Curiosity team.
“We are honored to take part in the
development of space-fl ight hardware
systems, including those that collect
[scientifi c] data onboard the Curiosity
rover. This is a critical mission and we look
forward to the new discoveries it will bring.”
Photograph courtesy of NASA
CONTRACTOR LOGISTICS
SUSTAINMENT AND SUPPORT
CASE STUDY
ManTech provides services to rapidly assess
and repair battle-damaged MRAP Family of
Vehicles systems and mechanical failures,
insert technology, integrate systems, and
perform upgrades and modifi cations to
enhance and sustain fl eet operational
readiness. ManTech has supported MRAP
and route clearance vehicles since 2003.
Photograph courtesy of U.S. Marines Corps
4
ManTech International Corporation
2012 Annual Report
CORE COMPETENCIES
C4ISR SOLUTIONS AND SERVICES
IT MODERNIZATION AND SUSTAINMENT
Our experts design, develop, and deploy large,
sophisticated, secure systems for government and
commercial customers and develop solutions to
improve operational processes.
INTELLIGENCE/COUNTER-INTELLIGENCE
SOLUTIONS AND SUPPORT
We collect, analyze, and disseminate signals
intelligence; translate and analyze intelligence;
manage computer network operations; and develop,
integrate, and maintain advanced signal-processing
systems.
MISSION ASSURANCE
We provide comprehensive mission assurance for
space-lift, satellite, and other systems; develop
mission-assurance and safety requirements; and carry
out all reviews and verifi cations.
SYSTEMS ENGINEERING
We provide talent, management, and technical
processes from concept through deployment across
a wide array of complex, large-scale programs used
by government and industry.
TEST AND EVALUATION
We provide comprehensive services for C4ISR and
other systems, ensuring that technical solutions are
complete and aligned with test requirements.
We have designed, developed, operated, and
supported Command, Control, Communications,
Computers, Intelligence, Surveillance and
Reconnaissance (C4ISR) systems and technology for
the U.S. government worldwide, including for every
major military deployment since Operation Desert
Storm.
CYBER SECURITY
We specialize in comprehensive, integrated security
support, tackling some of the most challenging cyber
security and IT problems facing our nation.
ENVIRONMENTAL, RANGE, AND
SUSTAINABILITY SERVICES
Our planners, scientists, analysts, and managers
develop and execute comprehensive sustainability
strategies and environmental compliance programs in
support of government and industry.
GLOBAL LOGISTICS SUPPORT
We provide a full range of logistics and maintenance
support for U.S. military weapons and equipment
systems, including battlefi eld support, with the ability
to deploy rapidly anytime, anywhere.
HEALTHCARE ANALYTICS AND IT
We are a focused healthcare-systems integrator
with solutions that empower patients and providers
through better, richer, and more-timely data, care
coordination, and imaging management.
FBI CJIS OPERATIONS AND
MAINTENANCE PROFESSIONAL
SERVICES CASE STUDY
ManTech operates, maintains, and enhances
the FBI’s CJIS large-scale IT systems that
support the law enforcement community
nationwide. We conducted an incentivized
challenge-based initiative that identifi ed
millions in cost savings for our customer.
Photograph courtesy of FBI
5
Our People
We are proud that approximately 10,000 highly-skilled people have chosen to become part of the
ManTech team. Half of our employees have a military background, and more than 70 percent hold
a government security clearance. We hired over 1,000 military veterans during 2012. We especially
seek candidates who have served in the military or as civilian experts in the Intelligence Community
and Department of Defense, as well as technology experts.
An employee referral program helps us identify and recruit top-quality candidates. Our competitive
benefi ts and opportunities for professional development continue to attract stellar applicants.
WE OFFER:
COMMUNITY SUPPORT
• Challenging assignments that serve the nation
• Job security, competitive compensation, and
incentive plans
• Opportunities for professional growth and
development
• A Career Mobility Program
In 2012, Fortune magazine recognized ManTech
as one of the World’s Most Admired Companies,
and G.I. Jobs magazine named ManTech a Top
Ten Military Friendly Employer for the sixth year
in a row.
Our tradition of philanthropic giving and volunteerism
is driven by a desire to make a diff erence in our
communities. Employees choose and participate in a
variety of charitable activities including:
• Support for deployed troops, military families, and
wounded warriors
• Local organizations such as CharityWorks, which
connects companies with non-profi t organizations
helping families and children in need
• Ivymount School’s Transition-to-Work Program for
special students
• Fund-raising for research to cure diabetes, breast
cancer, and other illnesses
6
ManTech International Corporation
2012 Annual Report
Financial Results
Results fRom Continuing opeRations (in thousands, except EPS)
2008
2009
2010
2011
2012
Revenues
$1,870,879
$2,020,334
$2,604,038
$2,869,982
$2,582,295
Operating income
$153,358
$179,079
$215,140
$227,354
$170,988
Income from continuing operations
$90,292
$111,764
$125,096
$133,306
$95,019
Diluted earnings per share
$2.55
$3.11
$3.43
$3.63
$2.57
BalanCe sheet summaR y
Cash and cash equivalents
$4,375
$86,190
$84,829
$114,483
$134,896
Accounts receivable
$407,248
$399,239
$528,765
$540,468
$548,309
Working capital
$140,744
$276,087
$282,496
$300,366
$357,909
Total assets
Total debt
$1,021,712
$1,100,747
$1,590,477
$1,760,206
$1,841,909
$44,100
$0
$200,000
$200,000
$200,000
Total stockholders’ equity
$680,536
$817,465
$966,343
$1,089,257
$1,165,228
Additional Financial Information
Revenue (in millions)
Operating Income (in millions)
Earnings Per Share
7
Leadership Team
MANAGEMENT TEAM
• George J. Pedersen – Chairman of the Board and Chief Executive Offi cer, ManTech International Corporation
• Kevin M. Phillips – Executive Vice President and Chief Financial Offi cer, ManTech International Corporation
• Louis M. Addeo – Executive Vice President of Corporate Development and Strategic Acquisitions,
ManTech International Corporation
• Daniel J. Keefe – President and Chief Operating Offi cer, ManTech Technical Services Group
• L. William Varner – President and Chief Operating Offi cer, ManTech Mission, Cyber & Intelligence Solutions Group
BOARD OF DIRECTORS
• George J. Pedersen – Chairman of the Board and Chief Executive Offi cer, ManTech International Corporation
• Richard L. Armitage – President, Armitage International; Former Deputy Secretary of State; Former Assistant
Secretary of Defense; Former Presidential Special Envoy during the Gulf War
• Mary K. Bush – Founder and President, Bush International; Former Managing Director, Federal Housing
Finance Board
• Barry G. Campbell – Former Chairman and Chief Executive Offi cer, Tracor Systems Technology, Inc.
• Walter R. Fatzinger, Jr. – Director, Chevy Chase Trust Company and Director, ASB Capital Management, Inc.
• Admiral David E. Jeremiah – USN (Ret.) – Former Vice Chairman of the Joint Chiefs of Staff
• Richard J. Kerr – Former Deputy Director and Offi cer, Central Intelligence Agency
• Lieutenant General Kenneth A. Minihan – USAF (Ret.) – Managing Director of the Homeland Security Fund
for Paladin Capital Group; Former Director, National Security Agency; Former Director, Defense Intelligence Agency
• Stephen W. Porter, Esq. – Managing Director, Four Points Development
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the fiscal year ended December 31, 2012
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
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
22-1852179
(I.R.S. Employer Identification No.)
12015 Lee Jackson Highway, Fairfax, VA 22033
(Address of principal executive offices)
(703) 218-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Class A Common Stock, Par Value $0.01 Per Share
Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
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. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2012 was $554,861,671 (based on the closing
price of $23.44 per share on June 29, 2012, as reported by the Nasdaq National Market).
There were the following numbers of shares outstanding of each of the registrant's classes of common stock as of February 20, 2013: ManTech
International Corp. Class A Common Stock, $0.01 par value per share, 23,849,719 shares; ManTech International Corp. Class B Common Stock, $0.01 par value
per share, 13,192,845 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement to be filed with the Securities Exchange Commission pursuant to Regulation 14A in connection with
the registrant's 2013 Annual Meeting of Stockholders, to be filed subsequent to the date hereof, are incorporated by reference into Part III (Items 10, 11, 12, 13
and 14) of this Annual Report on Form 10-K. Such definitive Proxy Statement will be filed with the Commission not later than 120 days after the end of the fiscal
year covered by this Annual Report on Form 10-K.
TABLE OF CONTENTS
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved SEC Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part I
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Part III
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedule
Signatures
Schedule II
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2
PART I
In this document, unless the context indicates otherwise, the terms “Company” and “ManTech” as well as the words
“we”, “our”, “ours” and “us” refer to both ManTech International Corporation and its consolidated subsidiaries. The term
“registrant” refers only to ManTech International Corporation, a Delaware corporation.
Industry and market data used throughout this Annual Report on Form 10-K were obtained through surveys and studies
conducted by third parties, industry and general publications and internal company research. We have not independently verified
any of the data from third-party sources nor have we ascertained any underlying economic assumptions relied upon therein. While
we are not aware of any misstatements regarding the industry data presented herein, estimates involve risks and uncertainties and
are subject to change based on various factors, including those discussed in Item 1A “Risk Factors.”
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties,
many of which are outside of our control. We believe that these statements are within the definition of the Private Securities
Litigation Reform Act of 1995. You can identify these statements by the use of words such as “may”, “will”, “expect”, “intend”,
“anticipate”, “believe”, “estimate”, “continue”, or the negative of these terms or words of similar import. 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.
Although forward-looking statements in this Annual Report reflect our good faith judgment, such statements can only
be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks
and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. 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. Factors that could cause actual
results to differ materially from the results we anticipate include, but are not limited to, those discussed in Item 1A “Risk Factors”
below, as well as those discussed elsewhere in this Annual Report. We urge you not to place undue reliance on these forward-
looking statements, which speak only as of the date of this Annual Report. We undertake no obligation to update any forward-
looking statement herein after the date of this Annual Report, whether as a result of new information, subsequent events or
circumstances, changes in expectations or otherwise. We also suggest that you carefully review and consider the various disclosures
made in this Annual Report that attempt to advise interested parties of the risks and factors that may affect our business, financial
condition, results of operations and prospects.
Item 1.
Business
Business and Corporate Overview
ManTech is a leading provider of innovative technologies and solutions for mission-critical national security programs
for the intelligence community; the departments of Defense, State, Homeland Security, Energy and Justice, including the Federal
Bureau of Investigation (FBI); the healthcare and space communities; and other U.S. federal government customers.
We support critical national security programs for approximately 50 federal agencies through approximately 1,000 current
contracts. ManTech supports major national missions, such as military readiness and wellness, terrorist threat detection, information
security and border protection.
ManTech was founded in 1968 as a New Jersey corporation, and was reincorporated as a Delaware corporation in January
2002, just prior to our Initial Public Offering (IPO) in February 2002. We have grown substantially over the last decade, from
revenues of $0.43 billion at the end of 2001 to revenues of $2.58 billion for the year ended December 31, 2012. We have
approximately 9,700 employees. For additional financial information, see Item 8 “Financial Statements and Supplemental Data.”
Industry Background
Our primary customer is the U.S. federal government, the largest consumer of services and solutions in the United States.
In 2012, the U.S. federal government spent about $255 billion on contracted services.
Our principal focus is on national security and homeland defense customers, the largest of which, the Department of
Defense (DoD), is the largest purchaser of services and solutions in the federal government. With a government fiscal year 2012
3
budget of $646 billion, the DoD accounts for approximately 54% of the total discretionary budget and nearly 59% of contracted
services. Currently, for government fiscal year 2013, the government is operating under a continuing resolution, which keeps
spending other than for Overseas Contingency Operations essentially unchanged from 2012 levels, with the potential for reductions
in the event of sequestration as part of the American Taxpayer Relief Act of 2012.
After a decade of uninterrupted growth, federal spending has come under pressure given continued budget deficits and
mounting levels of debt. In addition, the operations and financial welfare of government contractors are impacted as uncertainty
about funding levels has led certain customers to delay awards and spending. The government has also adopted policies adverse
to our industry. We expect our customers to continue to be motivated by minimizing costs in this challenging environment, which
we expect to lower margins across the whole industry. However, we believe this setting may provide opportunities for price
competitive providers such as ManTech.
Moreover, we believe that the federal government's spending will remain robust in key areas for which ManTech is well
positioned, including national and homeland security programs, sophisticated intelligence gathering and information sharing
activities required in an increasingly dangerous world and implementation of new healthcare systems and policies. The U.S. is
committed to maintaining its superiority in capabilities that we support, such as intelligence, surveillance and reconnaissance
(ISR), cyber security and intelligence analysis and operations. With an increasing veteran population and an aging national
population, investments in healthcare will continue. The government is actively looking for cloud-based solutions and data center
consolidation to save money as well as systems integration and interoperability to enable better coordination and communication
within and among agencies and departments. Based on these priorities, we believe that ManTech remains well positioned.
Our Strategy
We believe the Company is well positioned to compete in the current market. We aspire to be recognized by customers,
employees, job applicants and investors as the premier provider of technology and engineering services and solutions to the federal
government market. We are executing a multi-year strategy for achieving this objective, which is comprised of the following:
•
Provide Direct Support to Our Customers' Most Critical Missions
When resources are constrained, we believe that our customers will increasingly focus on mission and rely on their most
trusted prime contractors. Since our founding in 1968, we have focused on providing technology-based solutions and services
for mission-critical national security programs. Most of our work centers around our customers' core mission as opposed to support
functions. We have several long standing customer relationships; many of our early customers are still our customers today.
Because our personnel are on-site with, or work in close proximity to, our customers, we understand their requirements and are
often able to enhance their operations by rapidly identifying and developing solutions for customer-specific requirements.
The prime contractor position is increasingly important, and we have aggressively pursued new prime positions both
organically and through acquisitions. In fiscal year 2012, we derived 89.9% of our revenues as a prime contractor, compared to
85.6% and 75.9% in fiscal years 2011 and 2010, respectively. As a prime contractor, we are able to enhance the relationship with
our customers, ensure overall program success, foresee emerging requirements and manage project resources.
•
Compete Aggressively on New Opportunities
We closely track our customers' requirements and funding and have built our capability and capacity to pursue the
opportunities that arise. We intend to capitalize on our global footprint and long-term relationships with our customers and our
reputation within the intelligence community, DoD and other government agencies to attract new customers and to cross-sell our
broad array of solutions to our existing customers. Our successful track record and technical expertise give us credibility with
our current customers and enhance our ability to gain follow-on contracts and compete for new programs. In 2012, we won a
record $4.8 billion in new business awards, and we finished the year with a pipeline of qualified opportunities of $28.8 billion.
•
Build Presence in New Growth Markets
We believe the projected growth in government technical services spending will offer opportunities for development and
delivery of advanced technology solutions for enterprise applications and information systems. We intend to expand our service
offerings in such high growth program areas. In particular, we intend to focus on providing new or improved solutions in cyber
security, information assurance and command, control, communications, computers, intelligence, surveillance and reconnaissance
(C4ISR) solutions and services, and health IT, and we have established plans around the potential growth area of border security.
4
We plan to pursue strategic acquisitions of businesses that can broaden our domain expertise and service offerings and
allow us to establish relationships with new customers. We have successfully acquired 21 businesses since our IPO in February
2002. Since December 31, 2011, we completed the following acquisitions:
• ALTA Systems, Inc. (ALTA) - On January 8, 2013, we acquired ALTA, a provider of IT and professional services
with valuable applications in healthcare systems and capital planning. The acquisition will enable ManTech to
deliver technology services through ALTA's prime position on the Centers for Medicare and Medicaid Services
(CMS) Enterprise Systems Development (ESD) contract, an Indefinite Delivery/Indefinite Quantity (ID/IQ)
contract vehicle with a $4 billion ceiling and period of performance through May 2018.
HBGary, Inc. (HBGary) - On April 2, 2012, we acquired the business of HBGary, a provider of software products
to detect, analyze and diagnose Advance Persistent Threat and targeted malware to customers for their cyber
security needs in the financial services, energy, critical infrastructure and technology sectors.
Evolvent Technologies, Inc. (Evolvent) - On January 6, 2012, we acquired Evolvent, a provider of services in
clinical IT, clinical business intelligence, imaging cyber security, behavioral health, tele-health, software
development and systems integration to the DoD health organizations, the Veterans Administration and the
Department of Health and Human Services.
We will continue to seek out new growth areas. Our balance sheet and $500.0 million revolving credit facility provide
us with ample capacity to expand our business through strategic acquisitions.
•
Focus on Shareholder Returns
During fiscal year 2012, we generated $126.3 million in operating cash flow and paid $31.0 million in dividends to our
shareholders. We believe that ManTech is a compelling investment due to our regular cash dividend program and our strong
competitive positioning.
Our Solutions and Services
We combine deep domain understanding and technical capability to deliver comprehensive IT, systems engineering,
technical and other services and solutions, primarily in support of mission critical national security programs for the intelligence
community; DoD; and healthcare and space communities, including the National Aeronautic and Space Administration (NASA).
We deploy our broad set of services in custom combinations to best address the requirements of our customers' long-term programs.
The following solution sets that we provide are aligned with the long-term needs of our customers: C4ISR solutions and services;
cyber security; global logistics support; IT modernization and sustainment intelligence/counter-intelligence solutions and support;
systems engineering; test and evaluation; environmental, range and sustainability services; and healthcare analytics and IT.
C4ISR Solutions and Services
Military operations increasingly rely on communication and information architectures that offer global connectivity and
interoperability between joint, interagency and multi-national forces. We provide the full-spectrum of C4ISR solutions and services
in support of national defense, intelligence and homeland security missions. Our C4ISR solutions and services include systems
engineering, systems integration and software engineering using the latest Agile methodologies. Our end-to-end lifecycle services
enable our customers to accomplish critical, complex missions using the latest in technology. We integrate systems, sensors, multi-
source intelligence information, data dissemination systems and applications to ensure the troops have the right information at the
right time on the battlefield. Our support spans the entire lifecycle continuum, from initial requirements assessment and program
management support, through engineering, development and integration, test and evaluation, deployment and training to the
ultimate operation and maintenance of C4ISR solutions. Our experience spans all of the military services, with support provided
in the U.S. and in deployed locations worldwide. We are also engaged at Fort Bliss, TX in support of the Army's Network Integration
Evaluation exercises and provide network engineering and other technical support to the C4ISR lifecycle.
Through various roles from program management and acquisition support to software development and integration, we
have supported the delivery of C4ISR-related solutions for the U.S. Army Communications-Electronics Command (CECOM),
the U.S. Navy Space & Naval Warfare Systems Command (SPAWAR) and the U.S. Marine Corps Systems Command
(MARCORSYSCOM). Our experience in delivering new capabilities includes many critical systems such as the Joint Network
Node (JNN), the Distributed Common Ground Systems-Army (DCGS-A), the Advanced Monitoring Display System (AMDS),
the EQ-36 RADAR system and many others. ManTech has a proven record in successful post-development support for C4ISR
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systems. For major systems like the Army's DCGS-A and Base Expeditionary Targeting and Surveillance Systems-Combined
(BETSS-C), we provide training, fielding, logistics support and forward maintenance.
Cyber Security
Ubiquitous security challenges threaten not just traditional IT, but also C4ISR and other national security systems;
embedded electronics on ground, sea and aerospace platforms; classified and law enforcement networks & systems; health IT;
and systems providing critical civilian services. Our team of security experts tackles some of the most challenging cyber security
problems facing the nation, such as identifying and neutralizing external cyber attacks, engineering tailored defensive security
solutions and controls, managing security operations centers (SOCs), developing robust insider threat detection programs and
creating enterprise vulnerability management programs. We have provided computer network operations support to important
national security customers for more than a decade, working across the three domains of computer network attack, defense and
exploitation. We provide comprehensive cyber warfare and cyber defense security solutions and services to the DoD, agencies
in the intelligence community, Department of State, Department of Justice, NASA and other federal agencies. We operate 24/7
SOCs for several key government customers, including the departments of Justice and Agriculture and the FBI.
We are also trusted partners in the area of information assurance (IA). Our understanding of IT security guidance and
policy allows us to assist our customers in ensuring their programs are protected in accordance with that policy and in developing
mitigation strategies to reduce the risks of cyber threats. Our vulnerability assessment and penetration testing capabilities allow
us to emulate threats to information, whether from wired or wireless networks, software applications or through social engineering.
If a customer is unfortunate enough to have experienced a compromise, we can deploy our incident response team, comprised in
part of former cyber federal law enforcement agents, around the world to assist them.
We operate the DoD IA (Cyber) Range for the Defense Information Systems Agency (DISA) and the Office of the
Secretary of Defense (OSD) under the operational control of the Marine Corps. In unclassified and classified venues, we provide
a full range of services to train cyber warriors; test programs, systems and products; and exercise cyber warfighters and system
operations/procedures in a low risk/highly realistic environment to prepare for cyber warfare. We develop operationally realistic,
scalable and rapidly configurable environments that replicate or emulate the customer's environment. Our DOD IA (Cyber) Range
customer interface includes: Cyber Range infrastructure design and hosting; Cyber Range operations development; Cyber exercise
support; Immersive Cyber environments; and real and virtual Red Team activities for providing offensive challenges to cyber
defenders.
Our solutions also support unique mission areas such as computer forensics, cyber threat analysis, computer crimes
investigations, security operations center management and specialized cyber training. We perform advanced services in the areas
of data mining analysis, atypical data recovery techniques and data extraction. For example, in support of a customer, we developed
and staff a national level computer forensic laboratory and provide a broad spectrum of subject matter expertise, including reverse
engineering and code analysis; forensic signature creation, detection and analysis; damaged media recovery; hidden data processing;
protected data processing; forensic software development; and custom training development and implementation.
Global Logistics Support
In recent years the DoD, Department of State and other federal agencies have experienced an increased need for logistics
support worldwide. For decades, ManTech has provided a wide range of core services to meet such needs, including supply chain
management support (such as warehousing, logistics management, shipping/receiving and property management), maintenance
and reset of ground vehicles and electronics, transportation using contracted and government provided services and other field
services support (including fielding, training and operations support).
We provide logistics, repair and maintenance services, unique system training and development curriculum support,
resource management and inventory tracking technologies for complex, critical and specialized customer systems in deployed,
isolated and remote locations worldwide. On behalf of the U.S. Army in Southwest Asia, we maintain critical and life-sustaining
operational readiness levels for counter-improvised explosive device (IED) vehicles and systems, including Mine-Resistant
Ambush-Protected (MRAP) vehicles and MRAP All-Terrain Vehicles (M-ATV). To that end, we develop and manage supply
levels and the streamlined operation of supply-chain channels, including vendor partnerships with original equipment
manufacturers to ensure the expedient, unencumbered delivery of systems and parts to forward operating theater locations.
We also support the U.S. Department of State Global IT Modernization Program by centrally managing the worldwide
modernization of their computer networks. We design, support the procurement of and integrate the latest system software and
hardware technologies including servers, switches, workstations and network printers. Our installation teams travel to Department
of State locations worldwide to complete each installation.
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IT Modernization and Sustainment
IT plays an increasingly central role in the missions of our defense, intelligence and federal civilian customers, and as a
result, is an important part of many of our solution areas. We design, develop, deploy, modernize, operate and maintain IT systems
and infrastructure as a stand-alone service offering to improve mission performance and lower costs for our government customers.
For the Department of State, we modernize classified and unclassified networks and systems in locations around the world. The
backbone of our global capabilities is a comprehensive ISO 9001:2000-certified management and control system designed to
provide best value for our customers and to lower the total cost of ownership across the systems' lifecycles. For the Defense
Commissary Agency, we provided Network Operations Center services to sustain its global network infrastructure and manage
hardware and software at remote sites from headquarters.
We leverage our strong engineering discipline to aid our customers in moving their IT enterprise infrastructure and
applications from disparate instances into cloud offerings. The migration towards customer private secure cloud architectures is
compelling because it enables our customers to integrate their global IT infrastructure optimally, while still providing the geo-
specific requirements where necessary. For a DoD customer we are consolidating multiple instances of stove-piped applications
onto a single utility cloud backbone, allowing these legacy applications to continue supporting their mission while lowering the
overall operations cost.
We also support the FBI's Criminal Justice Information Services (CJIS), where we are providing operations and
maintenance support to one of the world's largest data centers. FBI CJIS equips the law enforcement, national security and
intelligence community with the criminal justice information they need to protect the United States while preserving civil liberties.
ManTech operates, maintains, refreshes and enhances FBI CJIS IT systems required to process and share mission-critical
information for members of the law enforcement community in the United States and abroad. ManTech is sustaining systems that
support millions of requests each day, including when police check vehicle license plates or look for a fingerprint match against
the largest biometrics database in the world. The mission-critical systems we support must be operational and available 24x7; we
understand that the impact to police officers, FBI agents, customs agents and government agencies nationwide would be significant,
even life-threatening, if the systems were to go down. Specific functions supported include IT system operations and maintenance,
database administration, cyber security and hardware and data center support.
Intelligence/Counter-Intelligence Solutions and Support
We provide robust information technology solutions and mission support services that the national intelligence agencies
and other classified program customers need to assure continuous operations, improve data gathering and analysis, collaborate
securely and protect program security.
The ability to collaborate and share information across non-traditional boundaries in a trusted fashion has become critically
important for national security. For example, we developed A-Space, a next-generation analytic sharing and collaboration program
used by intelligence analysts, and the DoD Intelligence Information Systems (DoDIIS) service-oriented architecture (SOA)
framework, which helps intelligence analysts comb through millions of intelligence reports to find relevant and meaningful answers
to national security questions.
Our network architecture planning and implementation services and systems engineering services support enterprise-
wide network infrastructures and components that include local area network/wide area network architectures, messaging
architectures, network management solutions, directory services architecture and web hosting. These services are provided within
secure environments requiring the application of multi-level security policies across the enterprise. For example, we developed
a state-of-the-art analytic environment that provides access to regional, national and international information with appropriate
security level access controls, providing direct operational support to time-sensitive counterterrorism activities in support of an
intelligence community customer.
We support strategic and tactical intelligence systems, networks and facilities across the intelligence community and
DoD. We develop and integrate collection and analysis systems and techniques. We also provide support to the development and
application of analytical techniques to counterintelligence, Human-Intelligence operations/training and counter-terrorist
operations. For example, we support intelligence operations designed to counter narcotics trafficking along our nation's southwest
border.
Highly-classified programs, including intelligence operations and military programs, require secrecy management and
security infrastructure services. These services can include vulnerability assessment, exposure analysis, secrecy architecture
design, security policy development and implementation, lifecycle acquisition program security, operations security, information
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assurance, Anti-Tamper, Export Compliance support, foreign disclosure, system security engineering, security awareness and
training, comprehensive security support services and technical certification and accreditation services. We provide integrated
security support for a number of programs, including the Joint Strike Fighter (JSF) Program, which presents one of the most
complex security problem sets of any weapon system in our nation's history due to the numerous highly classified technologies
incorporated in its design and international content in both its development and its usage.
Systems Engineering
Since 1968, ManTech's scientists and engineers have provided disciplined systems engineering support to a wide range
of customers that presently includes programs and offices within the Department of Homeland Security (DHS), DoD, intelligence
community and NASA. For example, we perform comprehensive systems engineering services to analyze, develop and integrate
solutions for U.S. Navy hardware and software requirements across subsurface, surface, ground, air and space domains; provide
acquisition and program management support for the DHS's Customs and Border Protection (CBP) Office of Technology,
Innovation and Acquisition; and support current and future space launch operations for the U.S. Air Force Launch and Range
Systems Wing with systems engineering and integration services. We also provide scientific, engineering and technical support
services to the Department of Energy's SunShot Initiative, which aims to reduce by 75% the cost of utility-scale electricity at the
grid by the year 2020.
Our proprietary systems engineering toolset, the ManTech Enterprise Framework, provides a regimented and
interdisciplinary approach to transition from a stated need to an operationally effective and suitable system, service or capability.
Based in “Systems Thinking,” the framework is an overarching and proven process that integrates the full spectrum of project
management, systems engineering and acquisition practices necessary to effectively manage a project or system over its lifecycle.
Through it, we address a full 360-degree perspective of a program, including disciplines of system, software, hardware, acoustics,
communications, reliability, safety and test engineering, as well as modeling, simulation and analysis. Our long-term commitment
to the systems engineering discipline is exemplified by our achievement of our Capability Maturity Model® Integration (CMMI)
Level 3 rating for Software and Systems Engineering.
Moreover, because ManTech is not a major system developer, we provide systems engineering advisory services to our
government customers without concerns about potential conflicts of interest. In fact, ManTech was one of the first companies to
have sought and received certification as a “non-conflicted” services provider from the National Reconnaissance Office.
Test and Evaluation
ManTech is a leading provider of test and evaluation services to a wide range of defense, intelligence, homeland security
and space customers. Our test and evaluation services are tightly linked with our systems engineering capabilities and include
specific competencies in test engineering, preparation and planning; modeling and simulation; test range operations and
management; systems and cyber vulnerability; and Independent Validation & Verification (IV&V). Employing a technical staff
with a wide range of practical experience and education, we provide our clients with the right skill sets to support and perform
operational and developmental tests.
We test complex and mission-critical hardware and software systems used by the Army, Navy, Marine Corps and NASA,
with many of these customer relationships spanning more than three decades. We have played key roles in improving the
performance, reliability, maintainability, supportability and weapons effectiveness of all Navy in-service rotary and fixed wing
platforms and their associated systems and ordnance. Likewise, we maintain a facility to support Marine Corps intelligence
systems research and development providing the associated test and evaluation required to ensure these systems meet specified
requirements for Marines in the field.
We perform independent tests to certify that new or upgraded systems operate in accordance with design requirements
and interoperate with legacy systems. For example, for the past 24 years ManTech has installed, operated and maintained a large
and complex joint test environment for the Joint Interoperability Test Command within DISA. Recently, we built a systems
integration lab (SIL) for a DoD customer that enables engineers to test new hardware and software on a virtual copy of the enterprise
architecture. Once per quarter, virtual snapshots are taken of the servers and placed in the SIL to create an accurate facsimile of
the production environment. We have also performed certification services for aircraft weapon systems in support of U.S. Naval
Air Systems Command programs.
Additionally, we are the prime contractor supporting the U.S. Army's Electronic Proving Ground at Fort Huachuca, AZ.
ManTech provides support testing for command, control, communications, computers and intelligence, navigation and sensor
systems for reliability, availability and maintainability, electromagnetic interference/electromagnetic compatibility and security.
We provide a full spectrum of services including scientific, engineering, technical, administrative, maintenance and logistics.
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Other services include instrumentation and hardware/software-related development, as well as laboratory/test bed operations and
special studies in Aberdeen Proving Ground, MD; Fort Huachuca; Yuma Proving Ground, AZ; Fort Hood and Fort Bliss, TX; Fort
Lewis, WA; and White Sands Missile Range, NM.
Environmental, Range and Sustainability Services
ManTech is a leader in the fields of range, environmental and sustainability planning, regulatory compliance, biological
resources and policy development. In an increasingly interconnected world with growing demands for limited resources, we
provide trusted solutions that meet today's most pressing challenges while securing the future. Our multidisciplinary staff of
planners, scientists, analysts and managers brings the education, experience and expertise to develop and execute comprehensive
sustainability strategies and environmental compliance programs in support of government and industry. We work with our
customer to manage and comply with the nation's most important environmental laws, including the National Environmental
Policy Act, the Endangered Species Act, and the Marine Mammal Protection Act. We also provide ocean and coastal environmental
planning, coastal zone management planning, biological surveys and monitoring, bioacoustics and noise analysis, habitat
restoration, invasive species management and solid-waste compliance support.
For example, naval training and test ranges can require large areas and are often questioned for their potential impact on
sensitive environments. In order to retain the ability to train personnel and test equipment, the Navy has developed an integrated
program to assess the impact of its ranges and minimize impact on the environment, populated areas, shipping and navigation.
Tactical Training Theater Assessment Program (TAP) is the Navy's comprehensive program focused on environmental planning
and sustainability of training and test ranges worldwide. ManTech delivers critical planning solutions to complex environmental
and regulatory challenges in order to preserve and enhance the capabilities of Navy and Marine Corps ranges.
Also, ManTech has supported Vandenberg Air Force Base to execute its environmental planning programs for nearly 25
years. ManTech has a diverse background in all aspects of launch-support operations and environmental planning for the 30th
Civil Engineering Squadron Environmental Flight. We understand both the unique operational conditions and mission requirements
of this installation and its tenant commands and the demands of sustaining and conserving the natural and cultural resources that
are found at Vandenberg Air Force Base. Our support includes a team of highly experienced biologists, ecologists and National
Environmental Policy Act (NEPA) specialists. ManTech's support under this program includes sensitive species management
plans, threatened and endangered species surveys, marine mammal monitoring, invasive species control, construction monitoring,
habitat restoration plans and implementation, predator control, biological and environmental assessments, mitigation monitoring,
erosion control, storm water monitoring and solid waste environmental compliance.
Healthcare Analytics and IT
As a focused healthcare systems integrator with particular strength in federal healthcare systems, ManTech supports a
wide range of programs that enable clinical intelligence, quality, patient and family centric care, chronic disease management, and
comparative effectiveness research. We deliver domain-specific capabilities, including solutions that encompass health information
sharing and clinical analytic solutions. Our technology solutions empower patients and providers with better, richer, and more
timely data, care coordination solutions, and imaging management capabilities-all built on interoperable platforms to new national
standards. For imaging, informatics, interoperability and integration challenges, our team provides a powerful ally in the
transformation of health IT.
One area of particular emphasis is the creation of a seamless medical record across the DoD and the Department of
Veterans Affairs (VA). The Bidirectional Health Information Exchange (BHIE) has been the primary interoperability platform
between the DoD and the VA for many years. Used daily by thousands of providers, it is one of the world's most comprehensive
and highest volume Health Information Exchanges (HIEs). The legacy BHIE system was so successful that demands placed on
the system outgrew its original design. ManTech helped migrate the system toward modern health IT standards by adopting the
Nationwide Health Information Network and associated standards wherever possible. The Virtual Lifetime Electronic Record
(VLER) effort, which is being carried out in conjunction with the BHIE upgrade project, enables sharing not only between DoD
and VA, but also between the government and civilian provider networks and local HIEs. VLER relies on the Nationwide Health
Information Network as the mechanism through which to share standards-based health data between DoD, VA and private sector
partners. ManTech has developed VLER-Health on behalf of the DoD in conjunction with its work to upgrade the BHIE. Functional
domain content for BHIE and VLER-Health overlaps significantly; ManTech is integrating these two projects to share data-access
methods and use DoD's Nationwide Health Information Network gateway.
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Our Customers
Our primary customers are U.S. federal government intelligence, military, space and civilian agencies. In addition, we
support some state and local governments and commercial customers. We derive most of our revenues from national security and
homeland defense customers. We have successful, long-standing relationships with our customers, having supported many of
them for over 40 years.
Fiscal Year
2012
2011
2010
Percentage of Revenues
from Federal Government
Customers
Percentage of Revenues
from National Security and
Homeland Defense
Customers
99.2%
99.2%
98.7%
95.4%
96.6%
95.8%
Our customers include the departments of Defense, State, Homeland Security, Energy and Justice, including the FBI; the
healthcare and space communities and other U.S. federal government customers.
To provide deep understanding of our customers' missions, we target candidates for employment who have served in the
military or as civilian experts in the intelligence community and DoD, as well as those who are leading specialists in their technology
disciplines. Since 2006, we have annually been ranked in the Top 10 in the nation on the G.I. Jobs Magazine Military-Friendly
Employers list.
Our federal government customers typically exercise independent contracting authority, and even offices or divisions
within an agency or department may directly, or through a prime contractor, use 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 contract
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. The U.S. Army Tank-Automotive Armament Command (TACOM) contract
accounted for 22.2%, 17.0% and 12.2% of our revenues for the years ended December 31, 2012, 2011 and 2010, respectively. In
addition, there were no sales to any customers within a single country (except for the United States) where such sales accounted
for 10% or more of our total revenues.
Foreign Operations
We treat sales to U.S. government customers as sales within the United States, regardless of where services are performed.
North Atlantic Treaty Organization is the Company's largest international customer. The percentages of total revenues by geographic
customer for the last three years were as follows:
United States
International
Total
Backlog
Year Ended December 31,
2012
2011
2010
99.8%
0.2%
100.0%
99.7%
0.3%
100.0%
99.2%
0.8%
100.0%
At December 31, 2012, our backlog was $6.5 billion, of which $1.8 billion was funded backlog. At December 31, 2011,
our backlog was $4.7 billion, of which $1.3 billion was funded backlog. Backlog represents estimates that we calculate on the
basis described below. We expect that approximately 37% of our total backlog will be recognized as revenues prior to December
31, 2013.
We define backlog as our estimate of the remaining future revenues from existing signed contracts, assuming the exercise
of all options relating to such contracts and including executed task orders issued under indefinite delivery/indefinite quantity (ID/
IQ) contracts. We also include an estimate of revenues for solutions that we believe we will be asked to provide in the future
under the terms of ID/IQ contracts for which we have an established pattern of revenues.
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We define funded backlog to be the portion of backlog for which funding currently is appropriated and allocated to the
contract by the purchasing agency or otherwise authorized for payment by the customer upon completion of a specified portion
of work. Our funded backlog does not include the full value of our contracts, because Congress often appropriates funds for a
particular program or contract on a yearly or quarterly basis, even though the contract may call for performance that is expected
to take a number of years.
Changes in the amount of our backlog and funded backlog result from potential future revenues following the execution
of new contracts or the extension of existing contracts, reductions from contracts that end or are not renewed, reductions from the
early termination of contracts and adjustments to estimates for previously included contracts. Changes in the amount of our funded
backlog also are affected by the funding cycles of the government. Our estimates of future revenues are inexact and the receipt
and timing of any of these revenues is subject to various contingencies, many of which are beyond our control. The actual accrual
of revenues on programs included in backlog and funded backlog may never occur or may change because a program schedule
could change, a program could be canceled, a contract could be modified or canceled, an option that we have assumed would be
exercised is not exercised or initial estimates regarding the amount of services that we may provide could prove to be wrong. For
the same reason, we believe that period-to-period comparisons of backlog and funded backlog are not necessarily indicative of
future revenues that we may receive.
Significant wins for the year ended December 31, 2012 include contracts from:
• The National Institute of Health (NIH) Chief Information Officer-Solutions and Partners (CIOSP-3) multiple
award ID/IQ contract, to provide information technology services and solutions for the NIH Health
Information Technology Acquisition and Assessment Center (NITAAC).
• The U.S. Army Communications-Electronics Command Life Cycle Management Command (CECOM)
Software and Systems Engineering Services multiple award ID/IQ contract, to provide comprehensive
software and systems engineering services to CECOM LCMC's Software Engineering Center.
• The U.S. Army's Tank-Automotive and Armaments Command (TACOM) to continue providing logistics
sustainment and support for the U.S. Military's Mine Resistant Ambush Protected (MRAP) Family of
Vehicles.
• The U.S. Department of the Air Force Consultants Advisory and Technical Services (CATS) multiple award
ID/IQ contract, to provide management and professional support services for Air Force Medical Services
(AFMS).
• The Defense Information Systems Agency (DISA) Joint Interoperability Test Command (JITC) Support
Services multiple award ID/IQ, to provide testing, scientific, engineering, logistics, administrative and
ancillary support to DISA test and evaluation missions.
• The Defense Information Systems Agency (DISA) United States Government Omnibus Network Enterprise
(USG ONE) multiple award ID/IQ contract, to provide information and communications support to various
federal agencies.
• The Space and Naval Warfare Systems Center Atlantic (SPAWAR SSC-ATL), to perform systems
engineering, analysis, development, acquisition, integration, installation, software development and
maintenance, testing and integrated logistical support for anti-terrorism/force protection systems for high-
value Navy and other government activities in the National Capital Region.
• The U.S. Army Communications-Electronic Command Life Cycle Management Command's Field Support
Division, Software Engineering Center, to continue providing information technology support for C4ISR
systems, including communications, networks, database, strategic and tactical video-teleconferencing systems,
secure network sustainment support and web-based applications used by warfighters and supporting
organizations, as well as provide direct unit operations support for all applicable software and systems.
• The Defense Advanced Research Project Agency (DARPA) Tactical Technology Office (TTO) Integrated
Systems Engineering Support Services multiple award ID/IQ contract, to continue to provide integrated systems
engineering, technical analysis and program management solutions to equip future warfighters with tactical,
mobile and responsive technologies for advanced weapon systems, platforms and space systems.
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Patents, Trademarks, Trade Secrets and Licenses
We own a limited number of patents. We also maintain a number of trademarks and service marks to identify and
distinguish the goods and services we offer. While we believe protecting our patents, marks, trade secrets and vital confidential
information is important, we do not consider our business to be dependent on the existence or protection of such intellectual
property.
Seasonality
Our business is not seasonal. However, it is not uncommon for federal government agencies to award extra tasks or
complete other contract actions in the weeks before the end of the federal government's fiscal year (which is September 30) in
order to avoid the loss of unexpended fiscal year funds. Additionally, our quarterly results are impacted by the number of working
days in a given quarter. There are generally fewer working days for our employees to generate revenues in the first and fourth
quarters of our fiscal year.
Competition
Our key competitors currently include divisions of large defense contractors, as well as a number of mid-size U.S.
government contractors with specialized capabilities. Because of the diverse requirements of U.S. government customers and the
highly competitive nature of large procurements, we frequently collaborate with these and other companies to compete for large
contracts and bid against these team members in other situations. Major differentiators for ManTech in our markets include our
distinctive technical competencies, extensive experience supporting mission-critical national security programs, successful past
contract performance, reputation for quality at a competitive price and key management with domain expertise.
Company Information Available on the Internet
Our Internet address is www.mantech.com. Through a link to the Investor Relations section of our website, we make
available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).
Item 1A.
Risk Factors
Forward-Looking and Cautionary Statements
Set forth below are the risks that we believe are material to investors who purchase our common stock. You should
carefully consider the following risks together with the other information contained in or incorporated by reference into this
Annual Report on Form 10-K, including our consolidated financial statements and notes thereto. The risks described below are
not the only risks facing us. Additional risks and uncertainties not currently known to us, or those we currently deem to be
immaterial, may also materially and adversely affect our business, financial condition or results of operations. This section
contains forward-looking statements. You should refer to the explanation of the qualification and limitations of forward-looking
statements set forth at the beginning of this Annual Report.
Risks Related to Our Business
We depend on contracts with the U.S. federal government for substantially all of our revenues. If our relationships with the
federal government were harmed, our business, future revenues and growth prospects could be adversely affected.
We derive the vast majority of our revenues from our federal government customers. We expect that federal
government contracts will continue to be the primary source of our revenues for the foreseeable future. Our business,
prospects, financial condition or operating results could be materially harmed if:
• We are suspended or debarred from contracting with the federal government or a significant government agency;
• Our reputation or relationship with government agencies is impaired; or
• The government ceases to do business with us, or significantly decreases the amount of business it does with
us.
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Among the key factors in maintaining our relationships with federal government agencies are our performance on
individual contracts and task orders, the strength of our professional reputation and the relationships of our senior management
with our customers.
Federal government spending levels for programs we support may change or be delayed in a manner that adversely affects our
future results and limits our growth prospects.
Our business depends upon continued federal government expenditures on intelligence, defense and other programs that
we support. These expenditures have not remained constant over time. Today, in the face of growing national debt, and long-
term fiscal challenges facing the nation, spending levels for federal government programs generally, and in particular the U.S.
defense budget, have come under pressure. We expect that the focus on minimizing costs will continue for the foreseeable future.
This focus may affect future levels or timing of expenditures, place pressure on operating margins in our industry, and shift
authorizations to programs in areas where we do not currently provide services, thereby adversely impacting our future results of
operations. The possibility that automatic spending reductions mandated by the American Tax Payer Relief Act of 2012 may still
be triggered and uncertainty about how these automatic reductions may be applied, heightens the risk that spending levels for
programs we support will change in a manner that is adverse to us. A reduction in the amount of services that we are contracted
to provide, or incorporation of less favorable terms in existing or future contracts, could cause an adverse impact on our business
and future results of operations.
The failure by Congress to approve budgets on a timely basis for the federal agencies we support could delay procurement of
our services and solutions and cause us to lose future revenues.
On an annual basis, Congress must approve budgets that govern spending by the federal agencies that we support. In
years when Congress is not able to complete its budget process before the end of the federal government's fiscal year on September
30, Congress typically funds government operations pursuant to a continuing resolution. A continuing resolution allows federal
government agencies to operate at spending levels approved in the previous budget cycle. When the U.S. government operates
under a continuing resolution, it may delay funding we expect to receive from customers on work we are already performing and
will likely result in new initiatives being delayed or in some cases canceled. The federal government's failure to complete its
budget process, or to fund government operations pursuant to a continuing resolution, may result in a federal government shutdown,
such as that which occurred during the 1996 fiscal year.
The competitive bidding process can impose substantial constraints and costs upon us and we may lose revenues, or our earnings
and profitability may be adversely impacted, if we fail to compete effectively, if we are required to minimize our price in order
to compete effectively, or if there are delays caused by protests or challenges of contract awards.
We derive significant revenues from federal government contracts that are awarded through a competitive bidding process.
We expect that a significant portion of our future business will also be awarded through competitive bidding. Competitive bidding
presents a number of risks, including:
•
Incurring expense and delays due to competitor's protest or challenge of contract awards made to us, including
the risk that any such protest or challenge could result in the resubmission of bids on modified specifications,
or in the termination, reduction or modification of the awarded contract, which may result in reduced profitability;
• Bidding on programs in advance of the completion of their design, this may result in unforeseen difficulties in
execution, cost overruns, or, in the case of unsuccessful competition, the loss of committed costs;
•
•
Spending substantial cost and managerial time and effort to prepare bids and proposals for contracts that may
not be awarded to us, which may result in reduced profitability;
Failing to accurately estimate the resources and cost structure that will be required to service any contract we
are awarded;
• Changes to customer bidding practices or government reform of its procurement practices, which may alter the
prescribed contract requirements relating to contract vehicles, contract types and consolidations; and
• Changes in policy and goals by the government providing set-aside funds to small business, disadvantaged
businesses and other socio-economic requirements in the allocation of contracts.
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Additionally, the current federal government budget environment has led an increasing number of our customers to focus
on cost as a key component of the procurement evaluation process. This focus has increased competitive pricing pressures and
resulted in a reduction to the profits we expect to earn on our federal government contracts. Continuation of the constrained
budgetary environment for our customers may lead to additional pricing pressures, which may require us to further minimize our
price in order for us to successfully bid for contracts, thereby adversely affecting our earnings and profitability.
If we are unable to win particular contracts that are awarded through the competitive bidding process, in addition to the
risk that our operating results may be adversely affected, we may be unable to operate in the market for services that are provided
under those contracts for a number of years. Even if we win a particular contract through competitive bidding, our profit margins
may be depressed as a result of the costs incurred through the procurement process. Additionally, the competitive bidding process,
and increased use by the federal government of a lowest price/technically acceptable standard for contract awards, may require
us to decrease the margin by which we expect our bid price to exceed our costs.
Our earnings and profitability may vary based on the mix of type of contracts we perform and may be adversely affected if we
do not accurately estimate the expenses, time and resources necessary to satisfy some of our contractual obligations.
We enter into three types of federal government contracts for our services: cost-reimbursable, time-and-materials and
fixed-price. Recently, our customers have increasingly procured our services under cost-reimbursable contracts, which tend to
offer lower margin opportunities than other contract types. For our last three fiscal years, we derived revenues from such contracts
as follows:
Cost-reimbursable
Time-and-materials
Fixed-price
Total Revenues
Year Ended December 31,
2012
2011
2010
51.0%
32.8%
16.2%
100.0%
33.6%
50.5%
15.9%
100.0%
20.9%
63.7%
15.4%
100.0%
Each of these types of contracts, to varying degrees, involves some risk that we could underestimate our cost of fulfilling
the contract, which may reduce the profit we earn or lead to a financial loss on the contract.
• Under cost-reimbursable contracts, we are reimbursed for allowable costs and paid a fee, which may be fixed
or performance-based. To the extent that the actual costs incurred in performing a cost-reimbursable contract
are within the contract ceiling and allowable under the terms of the contract and applicable regulations, we are
entitled to reimbursement of our costs, plus a profit. However, if our costs exceed the ceiling or are not allowable
under the terms of the contract or applicable regulations, we may not be able to recover those costs. In particular,
there is increasing focus by the federal government on the extent to which contractors are able to receive
reimbursement for employee compensation.
• Under time-and-material contracts, we are reimbursed for labor at negotiated hourly billing rates and for certain
expenses. We assume financial risk on time-and-material contracts because we assume the risk of performing
those contracts at negotiated hourly rates.
• Under fixed-price contracts, we perform specific tasks for a fixed price. Compared to cost-plus contracts, fixed-
price contracts generally offer higher margin opportunities, but involve greater financial risk because we bear
the impact of cost overruns, which could result in increased costs and expenses. Because we assume such risk,
an increase in the percentage of fixed-price contracts in our contract mix, whether caused by a shift by the federal
government toward a preference for fixed-price contracts or otherwise, could increase the risk that we suffer
losses if we underestimate the level of effort required to perform the contractual obligations.
Our profits could be adversely affected if our costs under any of these contracts exceed the assumptions we used in
bidding for the contract.
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Many of our federal government customers execute their procurement budgets through multiple award contracts under which
we are required to compete for post-award orders, or for which we may not be eligible to compete, potentially limiting our
ability to win new contracts and increase revenues.
Budgetary pressures and reforms in the procurement process have caused many U.S. federal government customers to
purchase goods and services through multiple award ID/IQ contracts and other multiple award and/or government wide acquisition
contract vehicles. These contract vehicles require that we make sustained post-award efforts to obtain task orders under the relevant
contract. There can be no assurance that we will obtain revenues or otherwise sell successfully under these contract vehicles. Our
failure to compete effectively in this procurement environment could harm our operating results.
Federal government contracts contain provisions giving government customers a variety of rights that are unfavorable to us,
including the ability to terminate a contract at any time for convenience.
Federal government contracts contain provisions and are subject to laws and regulations that give the government rights
and remedies not typically found in commercial contracts. These provisions may allow the government to:
• Terminate existing contracts for convenience, as well as for default;
• Reduce orders under, or otherwise modify contracts or subcontracts;
• Cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become
unavailable;
• Decline to exercise an option to renew multi-year contracts or issue task orders in connection with multiple
award contracts;
•
•
•
Suspend or debar us from doing business with the federal government or with a government agency;
Prohibit future procurement awards with a particular agency as a result of a finding of an organizational conflict
of interest based upon prior related work performed for the agency that would give a contractor an unfair
advantage over competing contractors;
Subject the award of contracts to protest by competitors, which may require the contracting federal agency or
department to suspend our performance pending the outcome of the protest and may also result in a requirement
to resubmit offers for the contract or in the termination, reduction or modification of the awarded contract;
• Terminate our facility security clearances and thereby prevent us from receiving classified contracts;
• Claim rights in products and systems produced by us; and
• Control or prohibit the export of our products and services.
If the government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement
expenses and profit on work completed prior to the termination. If the government terminates a contract for default, we may not
even recover those amounts and instead may be liable for excess costs incurred by the government in procuring undelivered items
and services from another source. If one of our government customers were to unexpectedly terminate, cancel or decline to exercise
an option to renew one or more of our significant contracts or programs, our revenues and operating results would be materially
harmed.
We may not receive the full amount authorized under our contracts and we may not accurately estimate our backlog, which
could adversely affect our future revenues and growth prospects.
As of December 31, 2012, our estimated contract backlog totaled approximately $6.5 billion, of which approximately
$1.8 billion was funded. Backlog is our estimate of the remaining future revenues from existing signed contracts, assuming the
exercise of all options relating to such contracts and including executed task orders issued under ID/IQ contracts. Backlog also
includes estimates of revenues for solutions that we believe we will be asked to provide in the future under the terms of ID/IQ
contracts for which we have an established pattern of revenues. Our estimates are based on our experience using such vehicles
and similar contracts; however, we cannot assure that all, or any, of such estimated contract revenues will be recognized as revenues.
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We historically have not realized all of the revenue included in our total backlog, and we may not realize all of the revenue
included in our total backlog in the future. There is a somewhat higher degree of risk in this regard with respect to unfunded
backlog, since it contains management's estimate of amounts expected to be realized on unfunded contract work that may never
be realized as revenues. In addition, there can be no assurance that our backlog will result in actual revenue in any particular
period, or at all, because the actual receipt, timing, and amount of revenue under contracts included in backlog are subject to
numerous uncertainties, including congressional appropriations, many of which are beyond our control. In particular, delays in
the completion of the U.S. government's budgeting process and the use of continuing resolutions could adversely affect our ability
to timely recognize revenue under our contracts included in backlog. Furthermore, the actual receipt of revenue from contracts
included in backlog may never occur or may be delayed because: a program schedule could change or the program could be
canceled; a contract's funding or scope could be reduced, modified, delayed, or terminated early, including as a result of a lack of
appropriated funds or as a result of cost cutting initiatives and other efforts to reduce federal government spending. If we fail to
realize as revenues those amounts included in our backlog, our future revenues and growth prospects may be adversely affected.
We face aggressive competition that can impact our ability to obtain contracts and therefore affect our future revenues and
growth prospects.
We operate in highly competitive markets and generally encounter intense competition to win contracts. We compete
with larger companies that have greater name recognition, financial resources and larger technical staffs. We also compete with
smaller, more specialized companies that are able to concentrate their resources on particular areas. To remain competitive, we
must provide superior service and performance on a cost-effective basis to our customers. Our competitors may be able to provide
our customers with different or greater capabilities or better contract terms than we can provide, including technical qualifications,
past contract experience, geographic presence, price and the availability of qualified professional personnel. In particular, increased
efforts by our competitors to meet federal government requirements for efficiency and cost reduction may necessitate that we
become more competitive with respect to price, and thereby potentially reduce our profit margins, in order to win or maintain
contracts. In addition, our competitors may consolidate or establish teaming or other relationships among themselves or with third
parties to increase their ability to address customers' needs.
Failure to maintain strong relationships with other contractors could result in a decline in our revenues.
For the years ended December 31, 2012 and 2011, we derived 10.1% and 14.4% of our revenues, respectively, from
contracts in which we acted as a subcontractor to other contractors. Additionally, where we are named as a prime contractor, we
may sometimes enlist other companies to perform some services under the contract as subcontractors. We expect to continue to
depend on such relationships with other contractors for a portion of our revenues for the foreseeable future. Our business, prospects,
financial condition or operating results could be harmed if other contractors eliminate or reduce their contracts or joint venture
relationships with us because they choose to establish relationships with our competitors; they choose to directly offer services
that compete with our business; we choose to directly compete with them for services; the government terminates or reduces these
other contractors' programs; or the government does not award them new contracts.
Acquisitions could result in operating difficulties, dilution or other adverse consequences to our business.
One of our key operating strategies is to selectively pursue acquisitions. We have made a number of acquisitions in the
past and we expect that a portion of our future revenues will continue to come from such transactions. We evaluate potential
acquisitions on an ongoing basis. Our acquisitions strategy poses many risks, including:
• We may not be able to identify suitable acquisition candidates at prices we consider attractive;
• We may not be able to compete successfully for identified acquisition candidates, complete future acquisitions
or accurately estimate the financial effect of acquisitions on our business;
•
Future acquisitions may require us to issue common stock or spend significant cash, resulting in dilution of
ownership or additional leverage;
• We may have difficulty retaining an acquired company's key employees or customers;
• We may have difficulty integrating acquired businesses, resulting in unforeseen difficulties, such as incompatible
accounting, information management or other control systems;
• Acquisitions may disrupt our business or distract our management from other responsibilities; and
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• As a result of an acquisition, we may need to record write-downs from future impairments of intangible assets,
which could reduce our future reported earnings.
In connection with any acquisition that we make, there may be liabilities that we fail to discover or that we inadequately
assess. Acquired entities may not operate profitably or result in improved operating performance. Additionally, we may not realize
anticipated synergies. If our acquisitions perform poorly, our business and financial results could be adversely affected.
We have substantial investments in recorded goodwill and changes in future business conditions could cause these investments
to become impaired, requiring substantial write-downs that would reduce our operating income and impact our financial
position.
As of December 31, 2012, our goodwill was $861.9 million. The amount of our recorded goodwill may substantially
increase in the future as a result of any acquisitions that we make. We evaluate the recoverability of recorded goodwill amounts
annually, or when evidence of potential impairment exists. During the second quarter, we completed our annual goodwill
impairment test and no impairment losses were identified. However, impairment analysis is based on several factors requiring
judgment and the use of estimates, which are inherently uncertain and based on assumptions that may prove to be inaccurate.
Additionally, events outside of our control, such as deteriorating market conditions for companies in our industry, may indicate a
potential impairment. If there is an impairment, we would be required to write down the recorded amount of goodwill, which
would be reflected as a charge against operating income.
If we fail to comply with complex procurement laws and regulations, we could lose business and be liable for various penalties
or sanctions.
We must comply with laws and regulations relating to the formation, administration and performance of federal
government contracts. These laws and regulations affect how we conduct business with our federal government customers. In
complying with these laws and regulations, we may incur additional costs. Non-compliance could result in the imposition of fines
and penalties, including contractual damages. Among the more significant laws and regulations affecting our business are the
following:
• The Federal Acquisition Regulation, which comprehensively regulates the formation, administration and
performance of federal government contracts;
• The Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection
with contract negotiations;
• The Cost Accounting Standards and Cost Principles, which impose accounting requirements that govern our
right to reimbursement under certain cost-based federal government contracts;
• Laws, regulations and executive orders restricting the use and dissemination of information classified for national
security purposes and the export of certain products, services and technical data;
• U.S. export controls, which apply when we engage in international work; and
• The Foreign Corrupt Practices Act.
Failure to comply with these laws and regulations can lead to severe penalties, both civil and criminal, and can include debarment
from contracting with the U.S. government.
Our contracting agency customers periodically review our compliance with procurement laws and regulations, as well
as our performance under the terms of our federal government contracts. If a government review or investigation uncovers improper
or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including:
• Termination of contracts;
•
Forfeiture of profits;
• Cost associated with triggering of price reduction clauses;
•
Suspension of payments;
17
•
•
Fines; and
Suspension or debarment from doing business with federal government agencies.
Additionally, the civil False Claims Act provides for potentially substantial civil penalties where, for example, a contractor
presents a false or fraudulent claim to the government for payment or approval. Actions under the civil False Claims Act may be
brought by the government or by other persons on behalf of the government (who may then share a portion of any recovery).
If we fail to comply with these laws and regulations, we may also suffer harm to our reputation, which could impair our
ability to win awards of contracts in the future or receive renewals of existing contracts. If we are subject to civil and criminal
penalties and administrative sanctions or suffer harm to our reputation, our current business, future prospects, financial condition
or operating results could be materially harmed.
The federal government may change its procurement or other practices in a manner adverse to us.
The federal government may change its procurement practices or adopt new contracting laws, rules or regulations, such
as cost accounting standards. For example, it could change its preference for procurement methods and/or contract type in a
manner that is unfavorable to contractors in our industry generally. Any such change could potentially place greater pressure on
our profit margins, and could materially harm our operating results. Additionally, aspects of the federal government's procurement
system, such as the number of acquisition personnel available to support the workload imposed by an increasing number of protests,
could exacerbate delays in the procurement decision making process, thus delaying our ability to generate revenues from proposals
and awards. The federal government could also adopt new socio-economic requirements, which could reduce our revenues
opportunities. Any new contracting methods could be costly or administratively difficult for us to satisfy and, as a result, could
cause actual results to differ materially and adversely from those anticipated.
Unfavorable federal government audits or results of other investigations could subject us to penalties or sanctions, adversely
affect our profitability, harm our reputation and relationships with our customers or impair our ability to win new contracts.
The Defense Contract Audit Agency (DCAA) and other government agencies routinely audit and investigate government
contracts and contractor systems. These agencies review a contractor's performance on its contract, cost structure and compliance
with applicable laws, regulations and standards. The DCAA also reviews the adequacy of, and a contractor's compliance with,
its internal control systems and policies, including the contractor's accounting, purchasing, estimating, compensation and
management information systems. Allegations of impropriety or deficient controls could harm our reputation or influence the
award of new contracts. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs
already reimbursed must be refunded. Recently, U.S. government contractors, including our Company, have seen a trend of
increased scrutiny by the DCAA and other U.S. government agencies. For example, among other matters, the DCAA has begun
to focus on the strict adherence by technology support contractors to labor qualification requirements contained in the terms of
federal government contracts that we support. The DCAA has also generally increased its examination of U.S. government
contractors that, like our Company, perform services outside the United States, particularly in Southwest Asia. If any of our
internal control systems or policies is found non-compliant or inadequate, payments may be withheld or suspended under our
contracts or we may be subjected to increased government scrutiny and approval requirements that could delay or adversely affect
our ability to invoice and receive timely payment on our contracts, perform contracts or compete for contracts with the U.S.
government. As a result, a DCAA audit could materially affect our competitive position and result in a substantial adjustment to
our revenues. DCAA has completed our incurred cost audits through 2002 and the majority of the audits for 2003, 2004 and 2005,
with no material adjustments. While we believe that the vast majority of incurred costs will be approved upon final audit, we do
not know the outcome of any future audits and adjustments and, if any future audit adjustments exceed our estimates, our profitability
could be adversely affected.
U.S. government contractors are subject to a greater risk of investigation, criminal prosecution, civil fraud, whistleblower
lawsuits and other legal actions and liabilities than companies with solely commercial customers. In addition to increased
investigation by the DCAA, contractors that provide support services to U.S. forces in Southwest Asia have also come under
increasing scrutiny by agency inspectors general, other government auditors and congressional committees. If a government audit
or other investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative
sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment
from doing business with federal government agencies. More generally, increased scrutiny and investigation into business practices
and into major programs supported by contractors may lead to increased legal costs and may harm our reputation and profitability
if we are among the targeted companies, regardless of the underlying merit of the allegations being investigated.
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Covenants in the instruments governing our indebtedness may restrict our financial and operating flexibility.
We maintain a credit agreement with a syndicate of lenders led by Bank of America, N.A., as administrative agent. The
credit agreement provides for a $500.0 million revolving credit facility. The maturity date for the credit agreement is October 12,
2016. The terms of the credit agreement permit prepayment and termination at any time, subject to certain conditions. The credit
agreement requires the Company to comply with specified financial covenants, including the maintenance of certain consolidated
total leverage ratios and a certain fixed charge coverage ratio. The credit agreement also contains various covenants, including
affirmative covenants with respect to certain reporting requirements and maintaining certain business activities, and negative
covenants that, among other things, may limit or impose restriction on ability to incur liens, incur additional indebtedness, make
investments, make acquisitions and undertake certain other actions.
We have $200.0 million in aggregate principal amount of 7.25% senior unsecured notes due April 15, 2018. These 7.25%
senior unsecured notes were issued at 100% of the aggregate principal amount and are effectively subordinate to the Company's
existing and future senior secured debt (to the extent of the value of the assets securing such debt), including any debt outstanding
under our revolving credit facility. The indenture governing these notes contains customary events of default, as well as restrictive
covenants, which, subject to important exceptions and qualifications specified in the indenture, will, among other things, limit our
ability and the ability of our subsidiaries that guarantee the 7.25% senior unsecured notes to: pay dividends and distributions;
repurchase equity; prepay subordinated debt or make certain investments; incur additional debt or issue certain disqualified stock
and preferred stock; incur liens on assets; merge or consolidate with another company or sell all or substantially all assets; and
allow to exist certain control provisions.
As a result of such covenants and restrictions in the instruments governing our indebtedness, we will be limited in how
we conduct our business and we may be unable to raise additional debt or equity financing to take advantage of new business
opportunities. In addition, our ability to satisfy the financial ratios required by our instruments of indebtedness can be affected
by events beyond our control and we cannot assure you that we will meet these ratios. We cannot assure you that we will be able
to maintain compliance with these covenants in the future and, if we fail to do so, we may be in default under our revolving credit
facility or the indenture, and we may be prohibited from undertaking actions that are necessary or desirable to maintain and expand
our business.
Default under our revolving credit facility could allow the lenders to declare all amounts outstanding to be immediately
due and payable. We have pledged substantially all of our assets to secure the debt under our revolving credit facility. If the
lenders declare amounts outstanding under the revolving credit facility to be due, the lenders could proceed against those assets.
Any event of default, therefore, could have a material adverse effect on our business if the creditors determine to exercise their
rights.
Default under the indenture governing our 7.25% senior unsecured notes will allow either the trustee or the holders of at
least 25% in principal amount of the then outstanding 7.25% senior unsecured notes to accelerate, or in certain cases, will
automatically cause the acceleration of, the amounts due under the 7.25% senior unsecured notes. Any event of default, therefore,
could have a material adverse effect on our business if the amounts due are accelerated.
Our level of indebtedness could materially adversely affect our ability to generate sufficient cash to fulfill our obligations
under our outstanding indebtedness, our ability to react to changes in our business and our ability to incur additional
indebtedness to fund future needs.
Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due,
the principal of, interest on or other amounts due in respect of our indebtedness. Our indebtedness, combined with our other
financial obligations and contractual commitments, could:
• make it more difficult for us to satisfy our obligations with respect to our indebtedness, including our 7.25%
senior unsecured notes and indebtedness under our credit agreement, and any failure to comply with the
obligations under any of our debt instruments, including restrictive covenants, could result in an event of
default under the indenture governing the notes, our revolving credit facility or any agreements governing
other indebtedness;
•
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
thereby reducing funds available for working capital, capital expenditures, acquisitions, research and
development and other corporate purposes;
19
•
•
•
•
•
increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive
disadvantage compared to competitors that have relatively less indebtedness;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
limit the rights of the holders of our 7.25% senior unsecured notes to receive payments under the notes if
secured creditors have not been paid;
limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working
capital, capital expenditures, acquisitions, research and development and other corporate purposes; and
prevent us from raising the funds necessary to repurchase all of our 7.25% senior unsecured notes tendered to
us upon the occurrence of certain changes of control, which would constitute a default under the indenture
governing the notes.
Subject to the restrictions in our revolving credit facility and the indenture governing our senior notes, we may incur
significant additional indebtedness. If we incur a substantial amount of additional indebtedness, the related risks that we face
could become more significant. Additionally, the terms of any future debt that we may incur may impose requirements or restrictions
that further affect our financial and operating flexibility or subject us to other events of default.
If we fail to recruit and retain skilled employees or employees with the necessary skill sets or security clearances, we might not
be able to perform under our contracts or win new business and our growth may be limited.
To be competitive, we must have employees who have advanced information technology and technical services skills
and who work well with our customers in a government or defense-related environment. Often, these employees must have some
of the highest security clearances in the United States. These employees are in great demand and are likely to remain a limited
resource in the foreseeable future. Recruiting, training and retention costs can place significant demands on our resources. If we
are unable to recruit and retain a sufficient number of these employees, our ability to maintain and grow our business could be
negatively impacted. If we are required to engage larger numbers of contracted personnel, our profit margins could be adversely
affected. In addition, some of our contracts contain provisions requiring us to commit to staff a program with certain personnel
the customer considers key to our successful performance under the contract. In the event we are unable to provide these key
personnel or acceptable substitutions, the customer may terminate the contract and we may not be able to recover certain incurred
costs.
Security breaches in customer systems could adversely affect our business.
Many of the programs we support and systems we develop, install and maintain involve managing and protecting
information involved in intelligence, national security and other classified or sensitive customer functions. While we have programs
designed to comply with relevant security laws, regulations and restrictions, a security breach in one of these systems could cause
serious harm to our business, damage our reputation and prevent us from being eligible for further work on critical systems for
our current customers or for other federal government customers generally. Losses that we could incur from such a security breach
could exceed the policy limits that we have for errors and omissions and product liability insurance coverage. Damage to our
reputation or limitations on our eligibility for additional work resulting from a security breach in one of the systems we develop,
install and maintain could materially reduce our revenues.
Internal system or service failures, including those resulting from cyber or other security threats, could disrupt our business
and impair our ability to effectively provide our services to our customers, which could damage our reputation and have a
material adverse effect on our business and results of operations.
We create, implement and maintain information technology and engineering systems, and provide services that are often
critical to our customers' operations, some of which involve classified or other sensitive information in intelligence, national
security and other classified or sensitive customer functions. As a result, we are subject to systems or service failures, not only
resulting from our own failures or the failures of third-party service providers, natural disasters, power shortages or terrorist attacks,
but also from continuous exposure to cyber and other security threats, including computer viruses, attacks by computer hackers
or physical break-ins. In particular, as a U.S. government contractor, we face a heightened risk of a security breach or disruption
with respect to classified or other sensitive information resulting from an attack by computer hackers, foreign governments or
cyber terrorists. Many government contractors have been the target of these types of attacks in the past and future attacks are
likely to occur. If successful, these types of attacks on our network or other systems or service failures could have a material
20
adverse effect on our business and results of operations, due to, among other things, the loss of customer or proprietary data,
interruptions or delays in our customers' businesses, and damage to our reputation. In addition, the failure or disruption of our
systems, communications or utilities could cause us to interrupt or suspend our operations, which could have a material adverse
effect on our business and results of operations.
If our systems, services or other applications have significant defects or errors, are successfully attacked by cyber and
other security threats, suffer delivery delays or otherwise fail to meet our customers' expectations, we may:
•
•
•
•
•
•
•
•
lose revenue due to adverse customer reaction;
be required to provide additional services to a customer at no charge;
incur additional costs related to monitoring and increasing our cyber security;
lose revenue due to the deployment of internal staff for remediation efforts instead of customer assignments;
receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain
customers;
be unable to successfully market services that are reliant on the creation and maintenance of secure information
technology systems to U.S. government, international and commercial customers;
suffer claims for substantial damages, particularly as a result of any successful network or systems breach and
exfiltration of customer information; or
incur significant costs complying with applicable federal or state law, including laws governing protection of
personal information.
In addition to any costs resulting from contract performance or required corrective action, these failures may result in
increased costs or loss of revenues if they result in customers postponing subsequently scheduled work or canceling or failing to
renew contracts.
Our errors and omissions insurance coverage may not continue to be available on reasonable terms or in sufficient amounts
to cover one or more large claims or the insurer may disclaim coverage as to some types of future claims. The successful assertion
of any large claim against us could seriously harm our business. Even if not successful, these claims could result in significant
legal and other costs, may be a distraction to our management and may harm our customer relationships.
If our subcontractors or joint venture partners fail to perform their contractual obligations, our performance and reputation
as a prime contractor and our ability to obtain future business could suffer.
As a prime contractor, we often rely significantly upon other companies as subcontractors to perform work we are obligated
to perform for our customers. If one or more of our subcontractors fail to perform satisfactorily the agreed-upon services on a
timely basis, or violate government contracting policies, laws or regulations, our ability to perform our obligations or meet our
customers' expectations as a prime contractor may be compromised. In some cases, we have limited involvement in the work
performed by the subcontractors but are nevertheless responsible for such work. In extreme cases, performance or other deficiencies
on the part of our subcontractors could result in a customer terminating our contract for default. A termination for default could
expose us to a liability for the agency's costs of reprocurement, damage our reputation and hurt our ability to compete for future
contracts and task orders.
Additionally, we often enter into joint ventures so that we can jointly bid and perform on a particular project. The success
of these and other joint ventures depends, in large part, on the satisfactory performance of the contractual obligations by our joint
venture partners. If our partners do not meet their obligations, the joint ventures may be unable to adequately perform and deliver
their contracted services. Under these circumstances, we may be required to make additional investments and provide additional
services to ensure the adequate performance and delivery of the contracted services. These additional obligations could result in
reduced profits or, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputation
in the industries we serve.
21
Our overall profit margins on our contracts may decrease and our results of operations could be adversely affected if materials
and subcontract revenues grow at a faster rate than labor-related revenues.
Our revenues are generated both from the efforts of our employees (labor-related revenues) and from the receipt of
payments for the cost of materials and subcontracts we use in connection with performing our services (materials and subcontract
revenues). Generally, our materials and subcontract revenues have lower profit margins than our labor-related revenues. If our
materials and subcontract revenues grow at a faster rate than labor-related revenues, our overall profit margins may decrease and
our profitability could be adversely affected.
Our business operations involve considerable risks and hazards. An accident or incident involving our employees or third
parties could harm our reputation, affect our ability to compete for business, and if not adequately insured or indemnified,
could adversely affect our results of operations and financial condition.
Our business involves providing services that require some of our employees to operate in countries that may be
experiencing political unrest, war or terrorism. As a result, during the course of such deployments we are exposed to liabilities
arising from accidents or incidents involving our employees or third parties. Any of these types of accidents or incidents could
involve significant potential injury or other claims by employees and/or third parties. It is also possible that we will encounter
unexpected costs in connection with additional risks inherent in sending our employees to dangerous locations, such as increased
insurance costs, as well as the repatriation of our employees or executives for reasons beyond our control.
We maintain insurance policies that mitigate risk and potential liabilities related to our operations. Our insurance coverage
may not be adequate to cover those claims or liabilities, and we may be forced to bear substantial costs from an accident or incident.
Substantial claims in excess of our related insurance coverage could adversely affect our operating performance and may result
in additional expenses and possible loss of revenues.
Furthermore, any accident or incident for which we are liable, even if fully insured, may result in negative publicity that
could adversely affect our reputation among our customers and the public, which could result in us losing existing and future
contracts or make it more difficult to compete effectively for future contracts. This could adversely affect our operating performance
and may result in additional expenses and possible loss of revenues.
Our employees or subcontractors may engage in misconduct or other improper activities, which could cause us to lose customers
or affect our ability to contract with the federal government.
Because we are a government contractor, should an employee or subcontractor commit fraud or should other misconduct
occur, such occurrences could have an adverse impact on our business and reputation. Misconduct by employees, subcontractors
or joint venture partners could involve intentional failures to comply with federal laws including: federal government procurement
regulations; requirements for handling of sensitive or classified information; the terms of our contracts; or proper time-keeping
practices. These actions could lead to civil, criminal and/or administrative penalties (including fines, imprisonment, suspension
and/or debarment from performing federal government contracts) and harm our reputation. The precautions we take to prevent
and detect such activity may not be effective in controlling unknown or unmanaged risks or losses.
Our business depends upon obtaining and maintaining required security clearances.
Many of our federal government contracts require our employees to maintain various levels of security clearances and
we are required to maintain certain facility security clearances complying with the Department of Defense and intelligence
community requirements. Obtaining and maintaining security clearances for employees involves a lengthy process and it is difficult
to identify, recruit and retain employees who already hold security clearances. If our employees are unable to obtain or retain
security clearances or if our employees who hold security clearances terminate employment with us, the customer whose work
requires cleared employees could terminate the contract or decide not to renew it upon its expiration. In addition, we expect that
many of the contracts on which we will bid will require us to demonstrate our ability to obtain facility security clearances and
perform work with employees who hold specified types of security clearances. To the extent we are not able to obtain facility
security clearances or engage employees with the required security clearances for a particular contract, we may not be able to bid
on or win new contracts, or effectively re-bid on expiring contracts.
22
We face risks associated with our international business.
Our business operations are subject to a variety of risks associated with conducting business internationally, including:
• Changes in or interpretations of foreign laws or policies that may adversely affect the performance of our services;
•
•
Political instability in foreign countries;
Imposition of inconsistent laws or regulations;
• Conducting business in places where laws, business practices and customs are unfamiliar or unknown;
•
Imposition of limitations on or increase of withholding and other taxes on payments by foreign subsidiaries or
joint ventures; and
• Compliance with a variety of U.S. laws, including the Foreign Corrupt Practices Act and U.S. export control
regulations, by us or subcontractors.
Although such risks have not significantly impacted our business to date, we do not know the impact that these regulatory,
geopolitical and other factors could have on our business in the future.
Risks Related to Our Stock
Our quarterly operating results may fluctuate.
Our quarterly revenues and operating results may fluctuate as a result of a number of factors, many of which are outside
of our control. For these reasons, comparing our operating results on a period-to-period basis may be of limited significance in
some cases, and as such, you should not rely on our past results as an indication of our future performance. While our financial
results may be negatively affected by any of the risk factors identified in this section of our Form 10-K, a number of factors could
cause our revenues, cash flows and operating results to vary from quarter-to-quarter, including:
• Timing of award or performance incentive fee notices;
•
Fluctuations in revenues earned on fixed-price contracts and contracts with a performance-based fee structure;
• Commencement, completion or termination of contracts during any particular quarter;
• Reallocation of funds to customers due to priority;
• Timing of significant bid and proposal costs;
• Variable purchasing patterns under government contracts, blanket purchase agreements and ID/IQ contracts;
•
•
Seasonal or quarterly fluctuations in our workdays and staff utilization rates;
Strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs and joint ventures;
• Changes in Presidential administrations and senior federal government officials that affect the timing of
technology procurement;
• Changes in federal government policy or budgetary measures that adversely affect government contracts in
general; and
• Changes in the volume of purchase requests from customers for equipment and materials.
Because a relatively large amount of our expenses are fixed, cash flows from our operations may vary significantly as a
result of changes in the volume of services provided under existing contracts and the number of contracts that are commenced,
completed or terminated during any quarter. We incur significant operating expenses during the start-up and early stages of large
23
contracts and typically we do not receive corresponding payments in that same quarter. We may also incur significant or
unanticipated expenses when a contract expires, terminates or is not renewed.
We may change our dividend policy in the future.
The Company has maintained a regular cash dividend program since 2011, and we anticipate paying quarterly dividends
for 2013 pursuant to such program. However, any future payment of dividends, including the timing and amount of any such
dividends, will be at the discretion of our Board of Directors and will depend upon our earnings, liquidity, financial condition and
such other factors as our Board of Directors considers relevant. A change in our dividend policy could have an adverse effect on
the market price of our common stock.
Mr. Pedersen, our Chairman and Chief Executive Officer, effectively controls our Company, and his interests may not be
aligned with those of other stockholders.
As of December 31, 2012, Mr. Pedersen owned approximately 36% of our total outstanding shares of common stock.
Holders of our Class B common stock are entitled to ten votes per share, while holders of our Class A common stock are entitled
to only one vote per share. Mr. Pedersen beneficially owned 13,192,845 shares of Class B common stock as of December 31,
2012, thus he controlled approximately 85% of the combined voting power of our stock as of December 31, 2012. Accordingly,
Mr. Pedersen controls the vote on all matters submitted to a vote of our stockholders. As long as Mr. Pedersen beneficially owns
a majority of the combined voting power of our common stock, he will have the ability, without the consent of our public
stockholders, to elect all members of our Board of Directors and to control our management and affairs.
Mr. Pedersen's voting control may have the effect of preventing or discouraging transactions involving an actual or a
potential change of control of the Company, regardless of whether a premium is offered over then-current market prices.
Mr. Pedersen will be able to cause a change of control of the Company. Mr. Pedersen's voting control could adversely affect the
trading price of our common stock if investors perceive disadvantages in owning stock in a company with such concentrated
ownership.
Mr. Pedersen could also cause a registration statement to be filed and to become effective under the Securities Act of
1933, thereby permitting him to freely sell or transfer the shares of common stock that he owns, which could have an impact on
the trading price of our stock.
Provisions in our charter documents and Delaware law may inhibit potential acquisition bids that you and other stockholders
may consider favorable, and the market price of our Class A common stock may be lower as a result.
There are provisions in our certificate of incorporation and bylaws that make it more difficult for a third party to acquire,
or attempt to acquire, control of our Company, even if a change of control were considered favorable by you and other stockholders.
Among the provisions that could have an anti-takeover effect, are provisions relating to the following:
• The high vote nature of our Class B common stock;
• The ability of the Board of Directors to issue preferred stock;
• The inability of stockholders to take action by written consent; and
• The advance notice requirements for director nominations or other proposals submitted by our stockholders.
Item 1B.
Unresolved SEC Staff Comments
We have not received any written comments from the SEC staff regarding our periodic or current reports under the
Exchange Act that remain unresolved.
Item 2.
Properties
We lease our facilities, including offices, warehouses and labs, and we do not own any facilities or real estate materially
important to our operations. Our facilities are leased in close proximity to our customers. As of December 31, 2012, we leased
25 facilities throughout the metropolitan Washington, D.C. area and 47 facilities in other parts of the United States, for approximately
1,476,000 square feet. We also have employees working at customer sites throughout the United States and in other countries.
Our leases expire between 2013 through 2024.
24
We believe our current facilities are adequate to meet our current needs. We do not anticipate any significant difficulty
in renewing our leases or finding alternative space to lease upon the expiration of our leases and to support our future growth.
Item 3.
Legal Proceedings
We are subject to certain legal proceedings, government audits, investigations, claims and disputes that arise in the ordinary
course of our business. Like most large government defense contractors, our contract costs are audited and reviewed on a continual
basis by an in-house staff of auditors from the DCAA. In addition to these routine audits, we are subject from time-to-time to
audits and investigations by other agencies of the federal government. These audits and investigations are conducted to determine
if our performance and administration of our government contracts are compliant with contractual requirements and applicable
federal statutes and regulations. An audit or investigation may result in a finding that our performance, systems and administration
is compliant or, alternatively, may result in the government initiating proceedings against us or our employees, including
administrative proceedings seeking repayment of monies, suspension and/or debarment from doing business with the federal
government or a particular agency or civil or criminal proceedings seeking penalties and/or fines. Audits and investigations
conducted by the federal government frequently span several years.
Although we cannot predict the outcome of these and other legal proceedings, investigations, claims and disputes, based
on the information now available to us, we do not believe 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 4.
Mine Safety Disclosures
Not applicable.
25
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Class A common stock has been quoted on the Nasdaq Stock Market under the symbol “MANT” since our initial
public offering on February 7, 2002. The following table sets forth, for the periods indicated, the high and low prices of our shares
of common stock, as reported on the Nasdaq Stock Market.
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$37.16
$34.76
$24.75
$26.87
High
$44.57
$45.53
$46.26
$38.19
Low
$31.56
$21.12
$19.74
$21.58
Low
$38.76
$41.45
$29.33
$29.79
There is no established public market for our Class B common stock.
As of February 20, 2013, there were 59 holders of record of our Class A common stock and 3 holders of record of our
Class B common stock. The number of holders of record of our Class A common stock is not representative of the number of
beneficial holders because many of the shares are held by depositories, brokers or nominees.
Dividend Policy
During fiscal year 2012, we declared and paid quarterly dividends, each in the amount of $0.21 per share, on all issued
and outstanding shares of common stock. During the year ended December 31, 2011, we declared and paid semi-annual dividends,
each in the amount of $0.42 per share on all issued and outstanding shares of common stock. For 2013, we anticipate paying
quarterly dividends, each in the amount of $0.21 per share. While we expect to continue the regular cash dividend program, any
future dividends declared will be at the discretion of our Board of Directors and will depend, among other factors, upon our results
of operations, financial condition and cash requirements, as well as such other factors our Board or Directors deems relevant.
Recent Sales of Unregistered Securities
We did not issue or sell any securities in fiscal year 2012 that were not registered under the Securities Act of 1933. The
issuance of shares to the Employee Stock Ownership Plan did not constitute sales within the meaning of the Securities Act.
Equity Compensation Plan Information
Information regarding our equity compensation plans and the securities authorized for issuance thereunder is incorporated
by reference in Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Purchase of Equity Securities
The Company did not purchase equity securities during the year ended December 31, 2012.
26
Performance Graph
The stock performance graph compares the cumulative total shareholder return of ManTech common stock to the Nasdaq
Stock Market (U.S.) Index, Standard & Poor's MidCap 400 Index, the Russell 2000 Index and our Peer Group Index. Our Peer
Group Index consists of CACI International Inc.; Dynamics Research Corporation; NCI, Inc.; and SAIC, Inc. The period measured
is December 31, 2007 to December 31, 2012. The graph assumes an investment of $100 in ManTech common stock and each of
the indices with reinvestment of all dividends.
27
Item 6.
Selected Financial Data
The selected financial data presented for each of the five years ended December 31, 2012 is derived from our audited
consolidated financial statements. The selected financial data presented should be read in conjunction with our consolidated
financial statements, the notes to our consolidated financial statements and Item 7 “Management's Discussion and Analysis of
Financial Condition and Results of Operations.”
Statement of Income Data:
Revenues
Operating income
Net income
Basic earnings per share - Class A and B
$
$
$
$
Diluted earnings per share - Class A and B $
Dividend per share
Balance Sheet Data:
Working capital
Goodwill (2)
Total assets
Long-term debt (3)
$
$
$
$
$
2012
2,582,295
170,988
95,019
2.57
2.57
0.84
357,909
861,912
1,841,909
200,000
Year Ended December 31,
2010 (1)
2011
2009
(in thousands, except per share amounts)
2008
$
$
$
$
$
$
$
$
$
$
2,869,982
227,354
133,306
3.64
3.63
0.84
300,366
808,455
1,760,206
200,000
$
$
$
$
$
$
$
$
$
$
2,604,038
215,140
125,096
3.45
3.43
$
$
$
$
$
2,020,334
$ 1,870,879
179,079
111,764
3.13
3.11
$
$
$
$
153,358
90,292
2.58
2.55
—
— $
— $
282,496
729,558
1,590,477
200,000
$
$
$
$
276,087
488,217
$
$
140,744
479,516
1,100,747
$ 1,021,712
— $
—
(1) On January 15, 2010, we acquired Sensor Technologies Inc. (STI) for $241.4 million. STI added $518.0 million in
revenues to our 2010 results. For further information on this acquisition see Note 3 to our consolidated financial statements in
Item 8.
(2) Including STI, we completed eight acquisitions between fiscal years ending December 31, 2008 and December 31, 2012.
In aggregate, these acquisitions have added $382.3 million in goodwill. For additional information on our recent acquisitions,
see Note 3 to our consolidated financial statements in Item 8.
(3) Effective April 13, 2010, we issued $200.0 million of 7.25% senior unsecured notes due 2018.
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with the consolidated
financial statements and the notes to those statements included in Item 8 “Financial Statements and Supplemental Data.” This
discussion contains forward-looking statements that involve risks and uncertainties. For a description of these forward-looking
statements, refer to Part I “Forward-Looking Statements.” A description of factors that could cause actual results to differ materially
from the results we anticipate include, but are not limited to, those discussed in Item 1A “Risk Factors,” as well as discussed
elsewhere in this Annual Report.
Overview
ManTech is a leading provider of innovative technologies and solutions for mission-critical national security programs
for the intelligence community; departments of Defense, State, Homeland Security, Energy and Justice, including the Federal
Bureau of Investigation (FBI); healthcare and space communities; and other U.S. federal government customers. We provide
support to critical national security programs for approximately 50 federal agencies through approximately 1,000 contracts. Our
services include the following solution sets that are aligned with the long-term needs of our customers: command, control,
communications, computers, intelligence, surveillance and reconnaissance (C4ISR) solutions and services; cyber security; global
logistics support; IT modernization and sustainment; intelligence/counter-intelligence solutions and support; systems engineering;
test and evaluation; environmental, range and sustainability services; and healthcare analytics and IT. ManTech supports major
national missions, such as military readiness and wellness, terrorist threat detection, information security and border protection.
Our employees operate primarily in the United States, as well as numerous locations internationally.
28
We derive revenues primarily from contracts with U.S. government agencies that are focused on national security and as
a result, funding for our programs is generally linked to trends in U.S. government spending in the areas of defense, intelligence
and homeland security. While we believe that spending for national security and other programs we support will continue to be
a priority, federal spending levels generally have come under pressure given mounting levels of debt. The uncertainty about
funding levels has led certain of our customers to delay awards and spending and led the government to policies adverse to our
industry. For example, during 2012 federal government service providers experienced an impact on profit margins as a result of
pricing pressures from government customers. We expect that our customers will continue to be motivated by minimizing cost,
which we expect to lower margins across the whole industry.
While budgetary pressures and limitations have created a challenging environment for companies in our industry, we
believe that this situation may provide opportunities for price competitive providers such as ManTech and that the federal
government's spending will remain robust in key areas for which ManTech is well positioned. For example, changing mission
priorities following the end of the Iraq war and the planned withdrawal from Afghanistan have and will continue to result in
reduced spending in support of overseas contingency operations generally. This change will impact the outlook for our industry
overall, however we believe that ManTech is positioned to continue benefiting in the near term from our delivery of C4ISR and
logistics services around the world, as evidenced by recent significant contract awards in these areas.
Revenues
Substantially all of our revenues are derived from services and solutions provided to the federal government or to prime
contractors supporting the federal government, including services provided by our employees, our subcontractors and through
solutions that include third-party hardware and software that we purchase and integrate as a part of our overall solutions. These
requirements may vary from period-to-period depending on specific contract and customer requirements. The following table
shows revenues from each type of customer as a percentage of total revenues for the periods presented.
Department of Defense and intelligence agencies
Federal civilian agencies
State agencies, international agencies and commercial entities
Total Revenues
Year Ended December 31,
2011
2010
2012
95.4%
3.8%
0.8%
100.0%
96.6%
2.6%
0.8%
100.0%
95.8%
2.9%
1.3%
100.0%
Several years ago, management decided to pursue a prime position on contracts by bidding as a prime and through the
acquisition of companies holding a prime position on desired contract vehicles. As a result, our prime contract revenues as a
percentage of our total revenues have increased each year since 2008. The following table shows our revenues as prime
contractor and as subcontractor as a percentage of our total revenues for the following periods:
Prime contract revenues
Subcontract revenues
Total Revenues
Year Ended December 31,
2011
2010
2012
89.9%
10.1%
100.0%
85.6%
14.4%
100.0%
75.9%
24.1%
100.0%
We provide our services and solutions under three types of contracts: cost-reimbursable; time-and-materials; and fixed-
price.
Cost-reimbursable contracts-Under cost-reimbursable contracts, we are reimbursed for costs that are determined to be
reasonable, allowable and allocable to the contract and paid a fee representing the profit margin negotiated between us and the
contracting agency, which may be fixed or performance based. Under cost-reimbursable contracts we recognize revenues and an
estimate of applicable fees earned as costs are incurred. We consider fixed fees under cost-reimbursable contracts to be earned
in proportion to the allowable costs incurred in performance of the contract. For performance based fees under cost-reimbursable
contracts, we recognize the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably
estimated, based on factors such as our prior award experience and communications with the customer regarding performance.
29
For cost-reimbursable contracts with performance-based fee incentives that are subject to the provisions of Securities and Exchange
Commission (SEC) Topic 13, Revenue Recognition, we recognize the relevant portion of the fee upon customer approval.
Time-and-materials contracts-Under time-and-materials contracts, we are reimbursed for labor at fixed hourly rates and
generally reimbursed separately for allowable materials, costs and expenses at cost. We recognize revenues under time-and-
materials contracts by multiplying the number of direct labor hours expended by the contract billing rates and adding the effect
of other billable direct costs.
Fixed-price contracts-Under fixed-price contracts, we perform specific tasks for a fixed price. Fixed-price contracts may
include either a product delivery or specific service performance over a defined period. Revenues on fixed-price contracts that
provide for the Company to render services throughout a period is recognized as earned according to contract terms as the service
is provided on a proportionate performance basis. For fixed-price contracts that provide for the delivery of a specific product with
related customer acceptance provisions, revenues are recognized as those products are delivered and accepted.
Our contract mix varies from year-to-year due to numerous factors, including our business strategies and federal
government procurement objectives. The following table shows revenues from each of these types of contracts as a percentage
of total revenues for the periods presented.
Cost-reimbursable
Time-and-materials
Fixed-price
Total Revenues
Year Ended December 31,
2011
2010
2012
51.0%
32.8%
16.2%
100.0%
33.6%
50.5%
15.9%
100.0%
20.9%
63.7%
15.4%
100.0%
The amount of risk and potential reward varies under each type of contract. Under cost-reimbursable contracts, there is
limited financial risk, because we are reimbursed for all allowable direct and indirect costs. However, profit margins on this type
of contract tend to be lower than on time-and-materials and fixed-price contracts. Under time-and-material contracts, we assume
financial risk because our labor costs may exceed the negotiated billing rates. Profit margins on well-managed time-and material
contracts tend to be higher than profit margins on cost-reimbursable contracts as long as we are able to staff those contracts with
people who have an appropriate skill set. Fixed-price contracts generally offer higher profit margins opportunities, but generally
involve greater financial risk because we bear the impact of any cost overruns. Our earnings and profitability may vary depending
on changes in our contract mix. Over the past several years, our customers have increasingly procured our services under cost-
reimbursable contracts.
Cost of Services
Cost of services primarily includes direct costs incurred to provide our services and solutions to customers. The most
significant portion of these costs are direct labor costs, including salaries and wages, plus associated fringe benefits of our employees
directly serving customers, in addition to the related management, facilities and infrastructure costs. Cost of services also includes
other direct costs, such as the costs of subcontractors and outside consultants and third-party materials, including hardware or
software that we purchase and provide to the customer as part of an integrated solution.
Changes in the mix of services and equipment provided under our contracts can result in variability in our contract
margins. Since we earn higher profits on our own labor services, we expect the ratio of cost of services as a percent of revenues
to decline when our labor services mix increases relative to subcontracted labor or third-party materials. Conversely, as
subcontracted labor or third-party material purchases for customers increase relative to our own labor services, we expect the ratio
of cost of services as a percent of revenues to increase.
The proportion that costs of services bears to revenues varies in part based on our mix of revenues by contract type. In
general, cost-reimbursable contracts are the least profitable of our government contracts but offer the lowest risk of loss. Under
time-and-materials contracts, to the extent that our actual labor costs are higher or lower than the billing rates under the contract,
our profit under the contract may either be greater or less than we anticipated or we may suffer a loss under the contract. In general,
we realize a higher profit margin on work performed under time-material contracts than cost-reimbursable contracts. Fixed-price
contracts generally offer higher profit margins opportunities but involve great financial risk because we bear impact of cost overruns
in return for the full benefit of any cost savings.
30
General and Administrative Expenses
General and administrative expenses include the salaries and wages, plus associated fringe benefits of our employees not
performing work directly for customers, and associated facilities costs. Among the functions covered by these costs are corporate
business development, bid and proposal, contracts administration, finance and accounting, legal, corporate governance and
executive and senior management. In addition, we included stock-based compensation, as well as depreciation and amortization
expense related to the general and administrative function. Depreciation and amortization expenses include the depreciation of
computers, furniture and other equipment, the amortization of third party software we use internally, leasehold improvements and
intangible assets. Intangible assets include customer relationships and contract backlogs acquired in business combinations, and
are amortized over their estimated useful lives.
Interest Expense
Interest expense is primarily related to interest expense incurred or accrued under our outstanding borrowings, our 7.25%
senior secured notes and deferred financing charges.
Interest Income
Interest income is primarily from cash on hand and notes receivable.
Results of Operations
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Consolidated Statements of Income
The following table sets forth certain items from our consolidated statements of income and the relative percentages that
certain items of expense and earnings bear to revenues as well as the year-over-year change from December 31, 2011 to
December 31, 2012.
Year Ended December 31,
2012
2011
2012
2011
Dollars
Percentages
(dollars in thousands)
Year-to-Year Change
2011 to 2012
Dollars
Percent
REVENUES
Cost of services
$ 2,582,295
$ 2,869,982
2,213,894
2,453,679
100.0%
85.7%
100.0% $
85.5%
General and administrative expenses
OPERATING INCOME
Interest expense
Interest income
Other income (expense), net
INCOME FROM OPERATIONS
BEFORE INCOME TAXES
Provision for income taxes
NET INCOME
197,413
170,988
(16,304)
344
(74)
154,954
(59,935)
$
95,019
$
188,949
227,354
(15,791)
332
3,607
215,502
(82,196)
133,306
7.7%
6.6%
0.6%
—%
—%
6.0%
2.3%
3.7%
6.6%
7.9%
0.5%
—%
0.1%
7.5%
2.9%
4.6% $
(287,687)
(239,785)
8,464
(56,366)
(513)
12
(3,681)
(60,548)
22,261
(38,287)
(10.0)%
(9.8)%
4.5 %
(24.8)%
3.2 %
3.6 %
(102.1)%
(28.1)%
(27.1)%
(28.7)%
Revenues
The primary driver of our decrease in revenues relates to reductions on our C4ISR support contracts and contracts that
have ended. These reductions were partially offset by revenues provided from new contract awards in the intelligence area. The
reduction in C4ISR work is primarily due to reduced demand for field service support and delays in enhancements to existing ISR
systems.
31
While there is significant budgetary uncertainty, we expect to perform strongly in 2013 as we take advantage of market
share expansion opportunities through our competitive positioning in today's highly cost sensitive environment and use our strong
balance sheet to pursue acquisitions targets in strategically important markets.
Cost of services
The decrease in cost of services was primarily due to the decrease in revenues. As a percentage of revenues, direct labor
costs increased to 36.1% for the year ended December 31, 2012, as compared to 34.2% for the same period in 2011 as a result of
an increase in our percentage of work as a prime contractor. As a percentage of revenues, other direct costs, which include
subcontractors and third party equipment and materials used in the performance of our contracts, decreased from 51.3% for the
year ended December 31, 2011 to 49.6% for the same period in 2012 due to a reduction in other direct costs on the C4ISR support
contracts.
General and administrative expenses
The increase in general and administrative expense was primarily due to our acquisitions and facility related costs from
newly leased office space. We expect general and administrative expenses as a percentage of revenues in 2013 to decline slightly
compared to 2012 as we have instituted numerous cost reduction initiatives.
Other income (expense), net
The decrease in other income (expense), net was due to the sale of our investment in NetWitness in April 2011, which
resulted in a gain of $3.7 million for the year ended December 31, 2011.
Provision for income taxes
Our effective income tax rates were 38.7% and 38.1% for the years ended December 31, 2012 and 2011, respectively.
Our tax rate is affected by recurring items, such as tax rates and the relative amount of income we earn in jurisdictions, which we
expect to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year, but are not
consistent from year to year. The difference between our statutory U.S. federal income tax rate of 35.0% and our effective tax
rate is state income taxes and non-deductible compensation.
Net income
The decrease was due to lower revenues, increased general and administrative expenses and margin pressure on our new
contracts, both from the shift in contract type to cost-reimbursable and increased competitive market place. We expect additional
pressure on future levels of net income as a percentage of revenues as the trend towards cost-reimbursable contract awards,
increased competition and pricing pressures continue to impact our operating margin.
32
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Consolidated Statements of Income
The following table sets forth certain items from our consolidated statements of income and the relative percentages that
certain items of expense and earnings bear to revenues as well as the year-over-year change from December 31, 2010 to
December 31, 2011.
Year Ended December 31,
2011
2010
2011
2010
Dollars
Percentages
Year-to-Year Change
2010 to 2011
Dollars
Percent
(dollars in thousands)
REVENUES
Cost of services
$ 2,869,982
$ 2,604,038
2,453,679
2,208,631
100.0%
85.5%
100.0% $
265,944
84.8%
245,048
General and administrative expenses
OPERATING INCOME
Interest expense
Interest income
Other income (expense), net
INCOME FROM OPERATIONS
BEFORE INCOME TAXES
Provision for income taxes
NET INCOME
Revenues
188,949
227,354
(15,791)
332
3,607
215,502
(82,196)
$
133,306
$
180,267
215,140
(12,567)
361
(483)
202,451
(77,355)
125,096
6.6%
7.9%
0.5%
—%
0.1%
7.5%
2.9%
4.6%
6.9%
8.3%
0.5%
—%
—%
7.8%
3.0%
4.8% $
8,682
12,214
(3,224)
(29)
4,090
13,051
(4,841)
8,210
10.2 %
11.1 %
4.8 %
5.7 %
25.7 %
(8.0)%
846.8 %
6.4 %
6.3 %
6.6 %
Revenue growth of $176.8 million came from organic growth due to contract awards and expansion on prime positions
in our C4ISR support business, including the S3 contract vehicle. Our acquisitions of S&IS, MTCSC, TranTech and WINS
contributed revenue growth of $128.8 million. These increases were partially offset by a decrease in our global logistic services
contracts.
Cost of services
The increase in cost of services was primarily due to our acquisitions and continued organic growth. Direct labor costs,
which include applicable fringe benefits and overhead, increased 8.2% for the year ended December 31, 2011 over the same period
in 2010, primarily due to our acquisitions. As a percentage of revenues, direct labor costs decreased to 34.2% for the year ended
December 31, 2011, as compared to 34.8% for the same period in 2010. Other direct costs, which include subcontractors and
third party equipment and materials used in the performance of our contracts, increased by 13.1% for the year ended December 31,
2011 over the same period in 2010. As a percentage of revenues, other direct costs increased from 50.0% for the year ended
December 31, 2010 to 51.3% for the same period in 2011. The increase of other direct costs as a percentage of revenues was
primarily due to increasing subcontractor costs related to our increasing position as a prime on contracts.
General and administrative expenses
The increase in general and administrative expense was primarily due our acquisitions, higher bid and proposal expenses
driven by a few large proposals, higher expenses for non-recurring legal services related to a case in which the Company is the
plaintiff and stock-based compensation expenses increased due to higher forfeitures in 2010 resulting from the resignation of the
Company's former Chief Operating Officer. As a percentage of revenues, general and administrative expenses decreased due to
the leveraging of our general and administrative expense over a larger base.
Interest expense
The increase in interest expense was primarily related to our 7.25% senior unsecured notes being outstanding for all of
2011 as compared to nine months of 2010. We incurred $15.0 million of interest expense for the year ended December 31, 2011
related to our 7.25% senior unsecured notes issued in April 2010.
33
Other income (expense), net
The increase in other income (expense), net was due to the sale of our investment in NetWitness, which resulted in a gain
of $3.7 million for the year ended December 31, 2011.
Provision for income taxes
Our effective income tax rates were 38.1% and 38.2% for the years ended December 31, 2011 and 2010, respectively.
Net income
The increase in net income was due to higher revenues as well as a gain we recorded due to the sale of an investment.
Backlog
For the years ended December 31, 2012, 2011 and 2010 our backlog was $6.5 billion, $4.7 billion and $4.9 billion,
respectively, of which $1.8 billion, $1.3 billion and $1.6 billion, respectively, was funded backlog. Backlog represents estimates
that we calculate on a consistent basis. For additional information on how we compute backlog, see “Backlog” in Item 1 “Business.”
Liquidity and Capital Resources
Historically, our primary liquidity needs have been the financing of acquisitions, working capital, payment under our
cash dividend program and capital expenditures. Our primary sources of liquidity are cash provided by operations and our revolving
credit facility.
On December 31, 2012, the Company's cash and cash equivalents balance was $134.9 million. At December 31, 2012,
there was no outstanding balance under our revolving credit facility. At December 31, 2012, we were contingently liable under
letters of credit totaling $0.2 million, which reduces our ability to borrow under our revolving credit facility by that amount. The
maximum available borrowings under our revolving credit facility at December 31, 2012 was $499.8 million. At December 31,
2012, we had $200.0 million outstanding of our 7.25% senior unsecured notes.
Generally, cash provided by operating activities is adequate to fund our operations, including payments under our regular
cash dividend program. Due to fluctuations in our cash flows and level of operations, it is necessary from time-to-time to increase
borrowings under our revolving credit facility to meet cash demands.
Net cash flows from operating activities
2012
Year Ended December 31,
2011
(in thousands)
2010
Net cash flow from operating activities
$
126,258
$
221,355
$
171,445
Our operating cash flow is primarily affected by our ability to invoice and collect from our customers in a timely manner,
our ability to manage our vendor payments and the overall profitability of our contracts. We bill most of our customers monthly
after services are rendered. Cash flow from operations decreased during the year ended December 31, 2012 compared to the same
period in 2011 due to decreased billings in excess, lower net income, increased contractual inventory, timing of salaries payable
and an increase in our days sales outstanding (DSO), which were partially offset by timing of vendor payables and deferred income
taxes. Contractual inventory relates to equipment on one of our intelligence contracts that was delivered in 2013. Our accounts
receivable DSO ratio, based on fourth quarter sales, was 79 and 71 at December 31, 2012 and 2011, respectively. Increased cash
flow from operations during the year ended December 31, 2011 compared to the same period in 2010 was due to increased
receivables, depreciation expense and billings in excess of revenue earned primarily related to a contract to provide mobile
telecommunication services in Afghanistan, and net income, partially offset by the timing of vendor payables and decreased
deferred income taxes.
34
Net cash flows from investing activities
2012
Year Ended December 31,
2011
(in thousands)
2010
Net cash flow from investing activities
$
(76,009) $
(165,475) $
(382,161)
Our cash flow from investing activities consists primarily of business acquisitions and expenditures related to equipment,
leasehold improvements and software. Cash outflows for the year ended December 31, 2012 were due to the acquisition of the
business of HBGary, Inc. for $23.8 million and Evolvent Technologies, Inc. for $38.9 million net of cash acquired and capital
expenditures of $14.9 million. Cash outflows in 2011 were due to the purchase of property and equipment of $54.5 million primarily
related to a mobile telecommunication network built for use on one of our contracts in Afghanistan and the acquisition of WINS
for $87.1 million and TranTech for $20.2 million. Cash outflows in 2010 were primarily due to the acquisitions of STI, S&IS and
MTCSC as well as capital expenditures for $13.3 million.
Net cash flows from financing activities
2012
Year Ended December 31,
2011
(in thousands)
2010
Net cash flow from financing activities
$
(29,836) $
(26,226) $
209,355
Cash outflow from financing activities during 2012 resulted primarily from the dividends paid of $31.0 million, offset
by the proceeds from the exercise of stock options for $1.1 million. Cash outflow from financing during 2011 resulted primarily
from the dividends paid of $30.8 million and debt issuance costs of $3.9 million for our revolving credit facility, offset by the
proceeds from the exercise of stock options for $8.2 million. Cash flow from financing during 2010 resulted primarily from the
issuance of 7.25% senior unsecured notes for $200.0 million and the proceeds from the exercise of stock options for $13.8 million,
offset by debt issuance costs of $5.0 million.
Revolving Credit Facility
We maintain a credit agreement with a syndicate of lenders led by Bank of America, N.A., as administrative agent. The
credit agreement provides for a $500.0 million revolving credit facility, with a $25.0 million letter of credit sublimit and a $30.0
million swing line loan sublimit. The credit agreement also contains an accordion feature that permits the Company to arrange
with the lenders for the provision of up to $250.0 million in additional commitments. The maturity date for this agreement is
October 12, 2016.
Borrowings under our credit agreement are collateralized by substantially all the assets of ManTech and its Material
Subsidiaries (as defined in the credit agreement) and bear interest at one of the following variable rates as selected by the Company
at the time of borrowing: a London Interbank Offer Rate (LIBOR) based rate plus market-rate spreads (1.25% to 2.25% based on
the Company's consolidated total leverage ratio) or Bank of America's base rate plus market spreads (0.25% to 1.25% based on
the Company's consolidated total leverage ratio).
The terms of the credit agreement permit prepayment and termination of the loan commitments at any time, subject to
certain conditions. The credit agreement requires the Company to comply with specified financial covenants, including the
maintenance of a certain leverage ratios and a certain fixed charge coverage ratio. The credit agreement also contains various
covenants, including affirmative covenants with respect to certain reporting requirements and maintaining certain business
activities, and negative covenants that, among other things, may limit or impose restrictions on our ability to incur liens, incur
additional indebtedness, make investments, make acquisitions and undertake certain additional actions. As of, and during,
December 31, 2012 and 2011, we were in compliance with our financial covenants under the credit agreement.
There was no outstanding balance on our revolving credit facility at December 31, 2012 and 2011.
35
7.25% Senior Unsecured Notes
We have $200.0 million in aggregate principal amount of 7.25% senior unsecured notes that are registered under the
Securities Act of 1933, as amended. The 7.25% senior unsecured notes were issued April 13, 2010.
The indenture governing the 7.25% senior unsecured notes contains customary events of default, as well as restrictive
covenants, which, subject to important exceptions and qualifications specified in such indenture, will, among other things, limit
our ability and the ability of our subsidiaries that guarantee the 7.25% senior unsecured notes to: pay dividends or distributions,
repurchase equity, prepay subordinated debt or make certain investments; incur additional debt or issue certain disqualified stock
and preferred stock; incur liens on assets; merge or consolidate with another company or sell all or substantially all assets; and
allow to exist certain control provisions. As of December 31, 2012 and 2011, the Company was in compliance with all covenants
required by the indenture.
Capital Resources
We believe the capital resources available to us from cash on hand of $134.9 million at December 31, 2012, our $500.0
million capacity under our revolving credit facility and cash from our operations are adequate to fund our anticipated cash
requirements for at least the next year, including payments under our regular cash dividend program. 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; use of our revolving credit facility; additional senior unsecured notes; and additional borrowing or issuance of equity.
Short-Term Borrowings
From time to time, we borrow funds against our revolving credit facility for working capital requirements and funding
of operations, as well as acquisitions. Borrowings under our revolving credit facility bear interest at one of the following variable
rate as selected by the Company at the time of the borrowing: a LIBOR based rate plus market spreads (1.25% to 2.25% based
on the Company's consolidated total leverage ratio) or the Bank of America's base rate plus market spreads (0.25% to 1.25% based
on the Company's consolidated total leverage ratio). In April of 2010, we used the proceeds from the issuance of the 7.25% senior
unsecured notes to repay all outstanding borrowings under our revolving credit facility. In the next year we may use, as needed,
our revolving credit facility or additional sources of borrowings in order to fund anticipated cash requirements.
The following table summarizes the activity under our revolving credit facility for the years ended December 31,
2012, 2011 and 2010:
2012
Year Ended December 31,
2011
(in thousands)
2010
Borrowings under revolving credit facility
Repayment of borrowings under revolving credit facility
$
$
9,000
$
(9,000) $
— $
— $
287,700
(287,700)
Cash Management
To the extent possible, we invest our available cash in short-term, investment grade securities in accordance with our
investment policy. Under our investment policy, we manage our investments, in accordance with the priorities of maintaining the
safety of our principal, maintaining the liquidity of our investments, maximizing the yield on our investments and investing our
cash to the fullest extent possible. Our investment policy provides that no investment security can have a final maturity that exceeds
six months and that the weighted average maturity of the portfolio cannot exceed 60 days. Cash and cash equivalents include
cash on hand, amounts due from banks and short-term investments with maturity dates of three months or less at the date of
purchase.
Dividend
During the year ended December 31, 2012, we declared and paid quarterly dividends, each in the amount of $0.21 per
share on all issued and outstanding shares of common stock. During the year ended December 31, 2011, we declared and paid
semi-annual dividends, each in the amount of $0.42 per share on all issued and outstanding shares of common stock. While we
expect to continue the regular cash dividend program, any future dividends declared will be at the discretion of our Board of
Directors and will depend, among other factors, upon our results of operations, financial condition and cash requirements, as well
36
as such other factors our Board or Directors deems relevant.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
Our contractual obligations as of December 31, 2012 are as follows (in thousands):
Contractual Obligations
Debt obligations (1)
Interest on fixed rate debt (1)
Operating lease obligations (2)
Other long-term liabilities (3)
Accrued defined benefit obligations (4)
Total
$
Payments Due By Period
Total
Less than 1
Year
1-3 Years
3-5 Years
More than 5
Years
$
200,000
$
— $
— $
— $
200,000
79,750
210,807
10,754
1,400
502,711
$
14,500
31,350
1,632
139
47,621
$
29,000
50,120
2,673
269
82,062
$
29,000
40,730
1,289
253
71,272
$
7,250
88,607
5,160
739
301,756
(1) See Note 8 to our consolidated financial statements in Item 8 for additional information regarding debt and related matters.
(2) Excludes approximately $9.3 million of deferred rent liabilities. See Note 9 to our consolidated financial statements in Item
8 for additional information regarding operating leases.
(3)
(4)
Includes approximately $9.3 million of deferred rent liabilities as well as gross unrecognized tax benefits of $1.4 million.
See Note 9 to our consolidated financial statements in Item 8 for additional information regarding deferred rent liabilities.
See Note 12 to our consolidated financial statements in Item 8 for additional information regarding gross unrecognized tax
benefits.
Includes approximately $1.4 million of unfunded pension obligations related to nonqualified supplemental defined benefit
pension plans for certain retired employees of an acquired company, which is included in the accrued retirement amount on
our consolidated balance sheets. Excludes liabilities related to one non-qualified deferred compensation plan for certain
highly compensated employees, which are included in the accrued retirement amount on our consolidated balance sheets.
The funds deferred by the employees are invested and maintained in rabbi trusts, which are reflected in the employee
supplemental savings plan assets on our consolidated balance sheets. These liabilities will be satisfied by assets held in
rabbi trusts. See Note 11 to our consolidated financial statements in Item 8 for additional information regarding retirement
plans.
Critical Accounting Estimates and Policies
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and
potentially result in materially different results under different assumptions and conditions. Application of these policies is
particularly important to the portrayal of our financial condition and results of operations. The discussion and analysis of our
financial condition and results of operations are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated
financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities,
revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. Our significant
accounting policies, including the critical policies listed below, are more fully described in the notes to our consolidated financial
statements included in this report.
Revenue Recognition and Cost Estimation
We recognize revenues when persuasive evidence of an arrangement exists, services have been rendered, the contract
price is fixed or determinable and collectability is reasonably assured. We have a standard internal process that we use to determine
whether all required criteria for revenue recognition have been met.
37
Our revenues consist primarily of services provided by our employees and 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.
We derive the majority of our revenues from cost-plus-fixed-fee, cost-plus-award-fee, firm-fixed-price or time-and-
materials contracts. Revenues for cost-reimbursable contracts are recorded as reimbursable costs are incurred, including an
estimated share of the applicable contractual fees earned. For performance-based fees under cost-reimbursable contracts, that are
subject to the provisions of ASC 605-35, Construction-Type and Certain Production-Type Contracts, we recognize the relevant
portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such
as our prior award experience and communications with the customer regarding performance. For cost-reimbursable contracts
with performance-based fee incentives that are subject to the provisions of SEC Topic 13, Revenue Recognition, we recognize the
relevant portion of the fee upon customer approval. For time-and-materials contracts, revenues are recognized to the extent of
billable rates times hours delivered plus materials and other reimbursable costs incurred. For long-term fixed-price production
contracts, revenues are recognized at a rate per unit as the units are delivered or by other methods to measure services provided.
Revenues from other long-term fixed-price contracts are 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, specifically described in the scope section of ASC 605-35, 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 using the cumulative catch-up method of accounting. The impact on revenues 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. Both the individual changes in contract estimates
and aggregate net changes in contract estimates recognized using the cumulative catch-up method of accounting were not material
to the consolidated statement of operations for all periods presented. Estimated losses on contracts at completion are recognized
when identified. In certain circumstances, revenues are recognized when contract amendments have not been finalized.
Accounting for Business Combinations and Goodwill and Other Intangible Assets
The purchase price of an acquired business is allocated to the tangible assets, financial assets and separately recognized
intangible assets acquired less liabilities assumed based upon their respective fair values, with the excess recorded as goodwill.
Such fair value assessments require judgments and estimates that can be affected by contract performance and other factors over
time, which may cause final amounts to differ materially from original estimates.
We review goodwill at least annually for impairment, or whenever events or circumstances indicate that the carrying
value of long-lived assets may not be fully recoverable. We perform this review at the reporting unit level, which is one level
below our one reportable segment. The goodwill impairment test is a two-step process performed at the reporting unit level. The
first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying amount (including goodwill).
If the first step of the impairment test does not indicate an impairment, performance of the second step is not required.
The fair values of the reporting units are determined based on a weighting of the income approach, market approach and
the market transaction approach. The income approach is a valuation technique in which fair value is derived from forecasted
future cash flow discounted at the appropriate rate of return commensurate with the risk as well as current rates of return for equity
and debt capital as of the valuation date. The forecast used in our estimation of fair value is developed by management based on
a contract basis, incorporating adjustments to reflect known contract and market considerations (such as reductions and uncertainty
in government spending, pricing pressure and opportunities). The discount rate utilizes a risk adjusted weighted average cost of
capital. The market approach is a valuation technique in which the fair value is calculated based on market prices realized in an
actual arm's length transaction. The technique consists of undertaking a detailed market analysis of publicly traded companies
that provides a reasonable basis for comparison to the company. Valuation ratios, which relate market prices to selected financial
statistics derived from comparable companies, are selected and applied to the company after consideration of adjustments for
financial position, growth, market, profitability and other factors. The market transaction approach is a valuation technique in
which the fair value is calculated based on market prices realized in actual arm's length transactions. The technique consists of
undertaking a detailed market analysis of merged and acquired companies that provided a reasonable basis for comparison to the
company. Valuation ratios, which relate market prices to selected financial statistics derived from comparable companies, are
selected and applied to the company after consideration of adjustments for financial position, growth, market, profitability and
38
other factors. To assess the reasonableness of the calculated reporting unit fair values, we compare the sum of the reporting units'
fair values to the Company's market capitalization (per share stock price times the number of shares outstanding) and calculate
an implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization). We compare
our implied control premium to the control premiums in comparable transactions to assess the reasonableness of our calculations.
We have elected to perform our annual review during the second quarter of each calendar year. In addition, management
monitors events and circumstances that could result in an impairment. A significant amount of judgment is involved in determining
if an indicator of impairment has occurred between annual testing dates. Events or circumstances that could cause the fair value
of our long-lived assets to decrease include changes in our business environment or market conditions. For example, the U.S.
government is currently under pressure to decrease its spending, and reductions across our industry may be mandated in connection
with sequestration. The impact of reduced government spending on our programs and industry could materially affect our financial
outlook. A significant adverse impact to our financial outlook could result in impairments to our long-term assets, such as goodwill
and other intangible assets. Additionally, deteriorating market conditions for comparable public companies in our industry, or a
material decline in the market price for the Company's stock, could result in a reduction in the fair value of our assets. If any
impairment were indicated as a result of a review, we would recognize a loss based on the amount by which the carrying amount
exceeds the estimated fair value.
Due to the many variables inherent in the estimation of a reporting unit's fair value and the relative size of the Company's
recorded goodwill, differences in assumptions may have a material effect on the results of the Company's impairment analysis.
Accounting Standards Updates
In July 2012, Accounting Standard Update No. 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-
Lived Intangible Assets for Impairment, was issued. The amendments in this Update apply to all entities, both public and nonpublic,
that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. In accordance with the
amendments in this Update, an entity has the option first to assess qualitative factors to determine whether the existence of events
and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing
the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible
asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required
to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the
fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative
assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment
test. An entity will be able to resume performing the qualitative assessment in any subsequent period. In conducting a qualitative
assessment, an entity should consider the extent to which relevant events and circumstances, both individually and in the aggregate,
could have affected the significant inputs used to determine the fair value of the indefinite-lived intangible asset since the last
assessment. An entity also should consider whether there have been changes to the carrying amount of the indefinite-lived intangible
asset when evaluating whether it is more likely than not that the indefinite-lived intangible asset is impaired. An entity should
consider positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not
that the indefinite-lived intangible asset is impaired. An entity should refer to the examples in paragraph 350-30-35-18B(a) through
(f) for guidance about the types of events and circumstances that it should consider in evaluating whether it is more likely than
not that an indefinite-lived intangible asset is impaired. If an entity has made a recent fair value calculation that indicated a
difference between the fair value and the then carrying amount of an indefinite-lived intangible asset, that difference also should
be included as a factor in considering whether it is more likely than not that the indefinite-lived intangible asset is impaired. The
amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.
Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a
public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities,
have not yet been made available for issuance. The adoption of Accounting Standard Update No. 2012-02 is not expected to have
an impact on the Company's results of operations or financial position.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our exposure to market risk relates to changes in interest rates for borrowings under our revolving credit facility. At
December 31, 2012, we had no outstanding balance on our revolving credit facility. Borrowings under our revolving credit facility
bear interest at variable rates. A hypothetical 10% increase in interest rates would have no effect on our annual interest expense
for the year ended December 31, 2012.
We do not use derivative financial instruments for speculative or trading purposes. When we have excess cash, we invest
in short-term, investment grade, interest-bearing securities. Our investments are made in accordance with an investment policy.
39
Under this policy, no investment security can have a maturity exceeding six months and the weighted average maturity of the
portfolio cannot exceed 60 days.
40
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2012, 2011 and
2010
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
Page(s)
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43
44
45
46
47
48
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
ManTech International Corporation
Fairfax, Virginia
We have audited the accompanying consolidated balance sheets of ManTech International Corporation and subsidiaries (the
"Company") as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income,
changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits
also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements
and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ManTech
International Corporation and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth
therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company's internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 22, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
McLean, Virginia
February 22, 2013
42
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Receivables—net
Contractual inventory
Prepaid expenses and other
Total Current Assets
Property and equipment—net
Goodwill
Other intangibles—net
Employee supplemental savings plan assets
Other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses
Accrued salaries and related expenses
Billings in excess of revenue earned
Deferred income taxes—current
Total Current Liabilities
Long-term debt
Accrued retirement
Other long-term liabilities
Deferred income taxes—non-current
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
December 31,
2012
2011
$
134,896
$
548,309
34,762
27,185
745,152
28,588
861,912
167,910
27,352
10,995
114,483
540,468
—
33,115
688,066
47,435
808,455
177,764
25,026
13,460
$
1,841,909
$
1,760,206
$
315,582
$
280,277
52,364
15,031
4,266
387,243
200,000
29,390
9,403
50,645
676,681
72,467
34,956
—
387,700
200,000
26,155
7,871
49,223
670,949
Common stock, Class A—$0.01 par value; 150,000,000 shares authorized; 24,093,832
and 23,882,331 shares issued at December 31, 2012 and 2011; 23,849,719 and
23,638,218 shares outstanding at December 31, 2012 and 2011
Common stock, Class B—$0.01 par value; 50,000,000 shares authorized; 13,192,845 and
13,192,845 shares issued and outstanding at December 31, 2012 and 2011
Additional paid-in capital
Treasury stock, 244,113 and 244,113 shares at cost at December 31, 2012 and 2011
Retained earnings
Accumulated other comprehensive loss
TOTAL STOCKHOLDERS' EQUITY
241
132
417,917
(9,158)
756,241
(145)
1,165,228
239
132
406,083
(9,158)
692,272
(311)
1,089,257
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
1,841,909
$
1,760,206
See notes to consolidated financial statements.
43
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
REVENUES
Cost of services
General and administrative expenses
OPERATING INCOME
Interest expense
Interest income
Other income (expense), net
INCOME FROM OPERATIONS BEFORE INCOME TAXES
Provision for income taxes
NET INCOME
BASIC EARNINGS PER SHARE:
Class A basic earnings per share
Weighted average common shares outstanding
Class B basic earnings per share
Weighted average common shares outstanding
DILUTED EARNINGS PER SHARE:
Class A diluted earnings per share
Weighted average common shares outstanding
Class B diluted earnings per share
Year Ended
December 31,
2012
2011
2010
$
2,582,295
$
2,869,982
$
2,604,038
2,213,894
2,453,679
2,208,631
197,413
170,988
(16,304)
344
(74)
154,954
(59,935)
95,019
$
188,949
227,354
(15,791)
332
3,607
215,502
(82,196)
133,306
$
180,267
215,140
(12,567)
361
(483)
202,451
(77,355)
125,096
2.57
$
3.64
$
3.45
23,727
23,415
22,847
2.57
$
3.64
$
3.45
13,193
13,233
13,367
2.57
$
3.63
$
3.43
23,768
23,530
23,054
2.57
$
3.63
$
3.43
$
$
$
$
$
Weighted average common shares outstanding
13,193
13,233
13,367
See notes to consolidated financial statements.
44
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
NET INCOME
Year Ended December 31,
2012
2011
2010
$
95,019
$
133,306
$
125,096
OTHER COMPREHENSIVE INCOME (LOSS):
Translation adjustments, net of tax
Actuarial gain (loss) on defined benefit pension plans, net of tax
Total other comprehensive income (loss)
134
32
166
COMPREHENSIVE INCOME
$
95,185
$
(80)
(76)
(156)
133,150
(70)
87
17
$
125,113
See notes to consolidated financial statements.
45
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
Common Stock, Class A
At beginning of year
Stock option exercises
Conversion Class B to Class A common stock
Contribution of Class A common stock to Employee Stock Ownership
Plan
At end of year
Common Stock, Class B
At beginning of year
Conversion Class B to Class A common stock
At end of year
Additional Paid-In Capital
At beginning of year
Stock compensation expense
Stock option exercises
Contribution of Class A common stock to Employee Stock Ownership
Plan
Tax benefit (deficiency) from the exercise of stock options
At end of year
Treasury Stock, at cost
At beginning of year
Treasury stock acquired
At end of year
Retained Earnings
At beginning of year
Net income
Dividends
At end of year
Accumulated Other Comprehensive Income (Loss)
At beginning of year
Translation adjustments, net of tax
Actuarial gain (loss) on defined benefit pension plans, net of tax
At end of year
Unearned Employee Stock Ownership Plan Shares
At beginning of year
(Increase) decrease
At end of year
Total Stockholders' Equity
2012
December 31,
2011
2010
$
239
$
234
$
226
—
—
2
241
132
—
132
3
1
1
239
133
(1)
132
406,083
385,407
8,142
1,147
3,906
(1,361)
417,917
(9,158)
—
(9,158)
692,272
95,019
(31,050)
756,241
(311)
134
32
(145)
—
—
9,170
8,183
3,559
(236)
406,083
(9,114)
(44)
(9,158)
589,838
133,306
(30,872)
692,272
(155)
(80)
(76)
(311)
—
—
—
1,165,228
$
—
1,089,257
$
$
4
3
1
234
136
(3)
133
362,730
7,443
13,803
1,796
(365)
385,407
(9,114)
—
(9,114)
464,742
125,096
—
589,838
(172)
(70)
87
(155)
(1,083)
1,083
—
966,343
See notes to consolidated financial statements
46
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended December 31,
2011
2010
2012
$
95,019
$
133,306
$
125,096
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Stock-based compensation
Excess tax benefits from the exercise of stock options
Deferred income taxes
Depreciation and amortization
Gain on sale of investments
Change in assets and liabilities—net of effects from acquired
businesses:
Receivables-net
Contractual inventory
Prepaid expenses and other
Accounts payable and accrued expenses
Accrued salaries and related expenses
Billings in excess of revenue earned
Accrued retirement
Other
Net cash flow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired
Purchases of property and equipment
Investment in capitalized software for internal use
Proceeds from disposition of a business
Proceeds from sale of investment
Net cash flow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid
Proceeds from exercise of stock options
Excess tax benefits from the exercise of stock options
Debt issuance costs
Treasury stock acquired
Issuance of senior unsecured notes
Net cash flow from financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest
Noncash investing and financing activities:
Employee Stock Ownership Plan Contributions
$
$
$
8,142
(46)
17,539
52,742
—
(1,081)
(34,762)
(4,416)
28,187
(22,053)
(20,456)
3,235
4,208
126,258
(63,093)
(11,718)
(3,182)
1,799
185
(76,009)
(31,029)
1,147
46
—
—
—
(29,836)
20,413
114,483
134,896
15,429
3,868
$
$
$
9,170
(351)
(3,259)
55,189
(3,745)
6,131
—
(5,179)
(1,907)
5,261
23,846
366
2,527
221,355
(109,043)
(54,460)
(5,227)
—
3,255
(165,475)
(30,846)
8,186
351
(3,873)
(44)
—
(26,226)
29,654
84,829
114,483
15,357
4,103
$
$
$
7,443
(545)
4,688
28,878
—
(36,226)
—
(4,770)
39,643
2,029
3,381
1,550
278
171,445
(368,853)
(10,257)
(3,051)
—
—
(382,161)
—
13,807
545
(4,997)
—
200,000
209,355
(1,361)
86,190
84,829
8,908
1,923
See notes to consolidated financial statements.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2012, 2011 and 2010
1. Description of the Business
ManTech International Corporation (depending on the circumstances, “ManTech” “Company” “we” “our” “ours” or
“us”) is a leading provider of innovative technologies and solutions for mission-critical national security programs for the
intelligence community; departments of Defense, State, Homeland Security, Energy and Justice, including the Federal Bureau of
Investigation (FBI); healthcare and space communities; and other U.S. federal government customers. We provide support to
critical national security programs for approximately 50 federal agencies through approximately 1,000 current contracts. Our
services include the following solution sets that are aligned with the long-term needs of our customers: command, control,
communications, computers, intelligence, surveillance and reconnaissance (C4ISR) solutions and services; cyber security; global
logistics support; information technology (IT) modernization and sustainment; intelligence/counter-intelligence solutions and
support; systems engineering; test and evaluation; environmental, range and sustainability services; and healthcare analytics and
IT. We support major national missions, such as military readiness and wellness, terrorist threat detection, information security
and border protection. Our employees operate primarily in the United States, as well as numerous locations internationally.
2. Summary of Significant Accounting Policies
Principles of Consolidation-Our consolidated financial statements include the accounts of ManTech International
Corporation, wholly-owned subsidiaries and other entities, which we control. Our share of affiliates' earnings (losses) that we do
not control is included in our consolidated statements of income using the equity method. All inter-company accounts and
transactions have been eliminated.
We determine whether we have a controlling financial interest in a Variable Interest Entity (VIE). The reporting entity
with a variable interest or interest that provides the reporting entity with a controlling financial interest in a VIE will have both
(a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation
to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could
potentially be significant to the VIE.
We have one entity that has been consolidated as a VIE. The purpose of the entity is to perform on certain U.S. Navy
contracts. The maximum amount of loss we are exposed to as of December 31, 2012 was not material to our consolidated financial
statements.
Use of Accounting Estimates-We prepare our consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America, which require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. These estimates involve judgments with respect to,
among other things, various future economic factors that are difficult to predict and are beyond the control of the Company.
Therefore, actual amounts could differ from these estimates.
Revenue Recognition-We derive the majority of our revenues from cost-plus-fixed-fee, cost-plus-award-fee, firm-fixed-
price or time-and-materials contracts. Revenues for cost-reimbursable contracts are recorded as reimbursable costs are incurred,
including an estimated share of the applicable contractual fees earned. For performance-based fees under cost-reimbursable
contracts, that are subject to the provisions of ASC 605-35, Construction-Type and Certain Production-Type Contracts, we
recognize the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated,
based on factors such as our prior award experience and communications with the customer regarding performance. For cost-
reimbursable contracts with performance-based fee incentives that are subject to the provisions of SEC Topic 13, Revenue
Recognition, we recognize the relevant portion of the fee upon customer approval. For time-and-materials contracts, revenues
are recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred. For long-
term fixed-price production contracts, revenues are recognized at a rate per unit as the units are delivered or by other methods to
measure services provided. Revenues from other long-term fixed-price contracts are 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, specifically described in the scope section of ASC 605-35, 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 using the cumulative catch-up method of
48
accounting. The impact on revenues 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. Both the
individual changes in contract estimates and aggregate net changes in contract estimates recognized using the cumulative catch-
up method of accounting were not material to the consolidated statement of operations for all periods presented. Estimated losses
on contracts at completion are recognized when identified. In certain circumstances, revenues are recognized when contract
amendments have not been finalized.
Cost of Services-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.
Cash and Cash Equivalents-For the purpose of reporting cash flows, cash and cash equivalents include cash on hand,
amounts due from banks and short-term investments with maturity dates of three months or less at the date of purchase. Due to
the short maturity of cash equivalents, the carrying value on our consolidated balance sheets approximates fair value.
Property and Equipment-Property and equipment are recorded at original cost. Upon sale or retirement, the costs and
related accumulated depreciation or amortization are eliminated from the respective accounts and any resulting gain or loss is
included in income. Maintenance and repairs are charged to expense as incurred.
Depreciation and Amortization-Furniture and office equipment are depreciated using the straight-line method with
estimated useful lives ranging from one to seven years. Leasehold improvements are amortized using the straight-line method
over the term of the lease.
Contractual Inventory-Inventory consists of finished goods purchased for a specific contract.
Goodwill and Other Intangibles-net-Goodwill represents the excess of cost over the fair value of net tangible and
identifiable intangible assets of acquired companies. Contract rights and other intangibles are amortized primarily using the pattern
of benefits method over periods ranging from one to twenty-five years.
We accounted for the cost of computer software developed or obtained for internal use in accordance with ASC 350-985,
Software. These capitalized software costs are included in other intangibles, net.
Software Development Costs-We account for software development costs related to software products for sale, lease or
otherwise marketed in accordance with ASC 985-20, Costs of Software to be Sold, Leased, or Marketed. For projects fully funded
by us, development costs are capitalized from the point of demonstrated technological feasibility until the point in time that the
product is available for general release to customers. Once the product is available for general release, capitalized costs are
amortized based on units sold or on a straight-line basis over a five-year period or other such shorter period as may be required.
We recorded $0, $0 and $0.2 million per year of amortization expense on capitalized software cost for sale for the years ended
December 31, 2012, 2011 and 2010, respectively. There were no capitalized software costs for sale included in other intangibles,
net at December 31, 2012 and 2011.
Impairment of Long-Lived Assets-Whenever events or changes in circumstances indicate that the carrying amount of
long-lived assets may not be fully recoverable, we evaluate the probability that future undiscounted net cash flows, without interest
charges, will be less than the carrying amount of the assets. If any impairment were indicated as a result of this review, we would
recognize a loss based on the amount by which the carrying amount exceeds the estimated fair value.
We review goodwill at least annually for impairment, or whenever events or circumstances indicate that the carrying
value of long-lived assets may not be fully recoverable. We have elected to perform our annual review during the second quarter
of each calendar year. If any impairment was indicated as a result of a review, we would recognize a loss based on the amount
by which the carrying amount exceeds the estimated fair value. No adjustments were necessary as a result of our annual review
during the quarter ended June 30, 2012.
Employee Supplemental Savings Plan Assets-We maintain several non-qualified defined contribution supplemental
retirement plans for certain key employees that are accounted for in accordance with ASC 710-10-05, Deferred Compensation -
Rabbi Trusts, as the underlying assets are held in rabbi trusts with investments directed by the respective employee. A rabbi trust
is a grantor trust generally set up to fund compensation for a select group of management and the assets of this trust are available
to satisfy the claims of general creditors in the event of bankruptcy of the Company. The assets held by the rabbi trusts are recorded
49
at cash surrender value in our consolidated financial statements as Employee Supplemental Savings Plan assets with a related
liability to employees recorded as a deferred compensation liability in accrued retirement.
Billings In Excess of Revenue Earned-We receive advances and milestone payments from customers that exceed the
revenues earned to date. We classify such items as current liabilities.
Stock-based Compensation-We account for stock-based compensation in accordance with ASC 718, Compensation -
Stock Compensation. ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. We have
elected to use the Black-Scholes-Merton pricing model to determine fair value on the dates of grant. The fair value is included
in operating expenses or capitalized, as appropriate, straight-line over the period in which service is provided in exchange for the
award. See Note 10 for further discussion regarding stock-based compensation.
Income Taxes-We account for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferred
income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases
of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes
to the assets or liabilities from year-to-year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in
which we operate, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results
or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may
be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria.
We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would
“more likely than not” sustain the position following an audit. For tax positions meeting the “more likely than not” threshold, the
amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized
upon ultimate settlement with the relevant tax authority.
Foreign-Currency Translation-All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at fiscal
year-end exchange rates. Income and expense items are translated at average monthly exchange rates prevailing during the fiscal
year. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss).
Comprehensive Income-Comprehensive income is presented in our consolidated statements of changes in stockholders'
equity. Comprehensive income consists of net income; translation adjustments, net of tax; and actuarial gain (loss) on defined
benefit pension plan, net of tax.
Fair Value of Financial Instruments-The carrying value of our cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate their fair values.
Accounting Standards Updates
In July 2012, Accounting Standard Update No. 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-
Lived Intangible Assets for Impairment, was issued. The amendments in this Update apply to all entities, both public and nonpublic,
that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. In accordance with the
amendments in this Update, an entity has the option first to assess qualitative factors to determine whether the existence of events
and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing
the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible
asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required
to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the
fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative
assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment
test. An entity will be able to resume performing the qualitative assessment in any subsequent period. In conducting a qualitative
assessment, an entity should consider the extent to which relevant events and circumstances, both individually and in the aggregate,
could have affected the significant inputs used to determine the fair value of the indefinite-lived intangible asset since the last
assessment. An entity also should consider whether there have been changes to the carrying amount of the indefinite-lived intangible
asset when evaluating whether it is more likely than not that the indefinite-lived intangible asset is impaired. An entity should
consider positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not
that the indefinite-lived intangible asset is impaired. An entity should refer to the examples in paragraph 350-30-35-18B(a) through
(f) for guidance about the types of events and circumstances that it should consider in evaluating whether it is more likely than
not that an indefinite-lived intangible asset is impaired. If an entity has made a recent fair value calculation that indicated a
difference between the fair value and the then carrying amount of an indefinite-lived intangible asset, that difference also should
be included as a factor in considering whether it is more likely than not that the indefinite-lived intangible asset is impaired. The
50
amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.
Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a
public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities,
have not yet been made available for issuance. The adoption of Accounting Standard Update No. 2012-02 is not expected to have
an impact on the Company's results of operations or financial position.
3. Acquisitions
Our acquisitions have been accounted for using the acquisition method of accounting under ASC 805, Business
Combinations.
HBGary, Inc.-On April 2, 2012, we completed the acquisition of certain assets of HBGary, Inc. (HBGary). The results of
HBGary's operations have been included in our consolidated financial statements since that date. The acquisition was completed
through an asset purchase agreement dated February 27, 2012, by and among a subsidiary of ManTech International Corporation,
HBGary and the shareholders of HBGary. HBGary provides a comprehensive suite of software products to detect, analyze and
diagnose Advance Persistent Threats and targeted malware. The company has customers in the financial services, energy, critical
infrastructure and technology sectors. This acquisition broadened our cyber security solution capability for customers. ManTech
funded the acquisition with cash on hand. The preliminary purchase price was $23.8 million and may increase or decrease
depending on the finalization of the post-closing working capital adjustment. The asset purchase agreement did not contain
provisions for contingent consideration.
Revenues were $3.2 million and net loss was $3.2 million for the period from April 2, 2012 to December 31, 2012. For the
year ended December 31, 2012, ManTech incurred approximately $0.8 million of acquisition costs related to the HBGary
transaction, which are included in the general and administrative expense in our consolidated statement of income.
The preliminary purchase price of $23.8 million was allocated to the underlying assets and liabilities based on their fair value
at the date of acquisition. Total assets were $24.6 million, including goodwill and intangible assets recognized in connection with
the acquisition, and total liabilities were $0.8 million. Included in total assets were $3.1 million in acquisition related intangibles
assets. We recorded goodwill of $20.1 million, which will be deductible for tax purposes over 15 years, assuming adequate levels
of taxable income. Recognition of goodwill is largely attributed to the value paid for HBGary's capabilities in providing cyber
service and product solutions to both federal and commercial customers.
The components of other intangible assets associated with the acquisition were developed technology, customer relationships
and trademark valued at $2.0 million, $0.9 million and $0.2 million, respectively. Developed technology represents the software
developed by HBGary to detect, analyze and diagnose Advanced Persistent Threats and targeted malware. Customer relationship
represent the underlying relationship with HBGary customers in the financial services, energy, critical infrastructure and technology
sectors. Trademark represents the HBGary trade name that is recognized in the industry. Developed technology, customer
relationships and trademark are amortized straight-line over their estimate useful lives of approximately 3 years, 2 years and 2
years, respectively. The weighted-average amortization period for the intangible assets is 2.5 years.
Evolvent Technologies, Inc.-On January 6, 2012, we completed the acquisition of Evolvent Technologies, Inc. (Evolvent).
The results of Evolvent's operations have been included in our consolidated financial statements since that date. The acquisition
was completed through an equity purchase agreement dated January 6, 2012, by and among ManTech, shareholders and
warrantholders of the parent of Evolvent, Evolvent and Prudent Management, LLC in its capacity as the sellers' representative.
Evolvent provides services in clinical IT, clinical business intelligence, imaging cyber security, behavioral health, tele-health,
software development and systems integration. Its systems and processes enable better decision-making at the point of care and
full integration of medical information across different platforms. This acquisition has enabled ManTech to expand its customer
relationships and deliver IT solutions through Evolvent's existing relationships with the Department of Defense health
organizations, the Veterans Administration and the Department of Health and Human Services. ManTech funded the acquisition
with cash on hand. The equity purchase agreement did not contain provisions for contingent consideration.
Revenues were $27.9 million and net income was $0.3 million for the period from January 6, 2012 to December 31, 2012.
For the year ended December 31, 2012, the Company incurred $0.2 million of acquisition costs associated with the Evolvent
transaction, which are included in general and administrative expense in our consolidated statement of income.
The purchase price of $39.9 million was allocated to the underlying assets and liabilities based on their fair value at the date
of acquisition. Total assets were $46.9 million, including goodwill and intangible assets recognized in connection with the
acquisition, and total liabilities were $7.0 million. Included in total assets were $3.7 million in acquisition related intangible assets.
We recorded goodwill of $33.2 million, which is not deductible for tax purposes. Recognition of goodwill is largely attributed to
51
the highly skilled employees and the value paid for Evolvent's capabilities in providing IT services and solutions to the federal
government healthcare sector.
In allocating the purchase price, we considered among other factors, analyses of historical performance and estimates of future
performance of Evolvent's contracts. The components of other intangible assets associated with the acquisition were customer
relationships and backlog valued at $3.4 million and $0.3 million, respectively. Customer contracts and related relationships
represent the underlying relationships and agreements with Evolvent's existing customers. Customer relationships and backlog
are amortized over their estimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits method. The
weighted-average amortization period for the intangible assets is 18.5 years.
Worldwide Information Network Systems, Inc.-On November 15, 2011, we completed the acquisition of Worldwide
Information Network Systems, Inc. (WINS). The results of WINS' operations have been included in our consolidated financial
statements since that date. The acquisition was completed through a stock purchase agreement dated October 26, 2011, by and
among a subsidiary of ManTech International Corporation, WINS and its sole shareholder. WINS provides IT solutions with
network engineering and cyber security technical expertise to the Department of Defense, Department of State and other agencies.
WINS' largest customer is the Defense Intelligence Agency (DIA) through its prime position on the Solutions for the Information
Technology Enterprise (SITE) Indefinite Delivery/Indefinite Quantity contract vehicle. This acquisition broadened our footprint
in the high-end defense and intelligence market. The addition of WINS' IT capabilities, its prime position on the DIA SITE
contract, support of the Department of State and other contracts will enhance our positioning with important customers and further
our growth prospects. ManTech funded the acquisition with cash on hand. The stock purchase agreement did not contain provisions
for contingent consideration.
The Company incurred in fiscal year 2011 approximately $0.6 million of acquisition costs related to the WINS transaction,
which are included in general and administrative expense in our consolidated statement of income for the year ended December
31, 2011.
The purchase price of $90.4 million was allocated to the underlying assets and liabilities based on their fair values at the
date of acquisition. Total assets were $100.5 million, including goodwill and intangible assets recognized in connection with the
acquisition, and total liabilities were $10.1 million. Included in total assets were $18.7 million in acquired intangible assets. We
recorded goodwill of $62.5 million, which will be deductible for tax purposes over 15 years, assuming adequate levels of taxable
income. Recognition of goodwill is largely attributed to the highly skilled employees and the value paid for WINS' capabilities
in supporting high-end defense, intelligence and homeland security markets.
In allocating the purchase price, we consider among other factors, analyses of historical financial performance and
estimates of future performance of WINS' contracts. The components of other intangible assets associated with the acquisition
were customer relationships and backlog valued at $18.0 million and $0.7 million, respectively. Customer contracts and related
relationships represent the underlying relationships and agreements with WINS' existing customers. Customer relationships and
backlog are amortized over their estimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits method.
The weighted-average amortization period for the intangible assets is 19.3 years.
TranTech, Inc.-On February 11, 2011, we completed the acquisition of TranTech, Inc. (TranTech). The results of
TranTech's operations have been included in our consolidated financial statements since that date. The acquisition was completed
through a stock purchase agreement dated February 11, 2011, by and among ManTech International Corporation, TranTech and
its sole shareholder. TranTech provides information technology, networking and cyber security services to the federal government.
This acquisition allows us to continue extending our presence in the defense, security and intelligence communities, and to offer
comprehensive solutions through a prime position on the Defense Information Systems Agency ENCORE II contract. ManTech
funded the acquisition with cash on hand. The stock purchase agreement did not contain provisions for contingent consideration.
The Company incurred in fiscal year 2011 approximately $0.3 million of acquisition costs related to the TranTech
transaction, which are included in general and administrative expense in our consolidated statement of income for the year ended
December 31, 2011.
The purchase price of $21.5 million was allocated to the underlying assets and liabilities based on their fair value at the
date of acquisition. Total assets were $23.8 million, including goodwill and intangible assets recognized in connection with the
acquisition, and total liabilities were $2.3 million. Included in total assets were $5.0 million in acquired intangible assets. We
recorded goodwill of $14.6 million, which will be deductible for tax purposes over 15 years, assuming adequate levels of taxable
income. Recognition of goodwill is largely attributed to the value paid for TranTech's capabilities in supporting high-end defense,
intelligence and homeland security markets.
52
In allocating the purchase price, we consider among other factors, analyses of historical financial performance and
estimates of future performance of TranTech's contracts. The components of other intangible assets associated with the acquisition
were customer relationships and backlog valued at $4.6 million and $0.4 million, respectively. Customer contracts and related
relationships represent the underlying relationships and agreements with TranTech's existing customers. Customer relationships
and backlog are amortized over their estimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits
method. The weighted-average amortization period for the intangibles assets is 18.5 years.
MTCSC, Inc.-On December 23, 2010, we completed the acquisition of MTCSC, Inc. (MTCSC). The results of MTCSC's
operations have been included in our consolidated financial statements since that date. The acquisition was consummated pursuant
to a stock purchase agreement dated November 19, 2010, by and among ManTech International Corporation and MTCSC, Inc
and its shareholders. MTCSC provides C4ISR systems, integration, cyber security and network engineering solutions to U.S.
government customers. The acquisition allows us to expand our work and direct support to the United States Marine Corp.
ManTech funded the acquisition with cash on hand. The stock purchase agreement did not contain provisions for contingent
consideration.
The Company incurred in fiscal year 2010 approximately $0.7 million of acquisition costs related to the MTCSC
transaction, which are included in general and administrative expense in our consolidated statement of income for the year ended
December 31, 2010.
The purchase price of $76.7 million was allocated to the underlying assets and liabilities based on their fair values at the
date of acquisition. Total assets were $94.7 million, including goodwill and intangible assets recognized in connection with the
acquisition, and total liabilities were $18.0 million. Included in total assets were $8.7 million in acquired intangible assets. We
have recorded goodwill of $60.1 million, which will not be deductible for tax purposes. Recognition of goodwill is largely attributed
to the highly skilled employees and the value paid for MTCSC's capabilities in supporting high-end defense, intelligence and
homeland security markets.
In allocating the purchase price, we considered among other factors, analysis of historical financial performance and
estimates of future performance of MTCSC's contracts. The components of other intangible assets associated with the acquisition
were customer relationships and backlog valued at $8.1 million and $0.6 million, respectively. Customer contracts and related
relationships represent the underlying relationships and agreements with MTCSC's existing customers. Customer relationships
and backlog are amortized over their estimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits
method. The weighted-average amortization period for the intangible assets is 18.7 years.
QinetiQ North America's Security and Intelligence Solutions Business-On October 8, 2010, we completed the
acquisition of certain assets of QinetiQ North America, Inc. (QNA) Security and Intelligence Solutions (S&IS) business unit. The
results of S&IS's operations have been included in our consolidated financial statements since that date. The acquisition was
completed through an asset purchase agreement dated September 29, 2010, by and among a subsidiary of ManTech International
Corporation; QNA, Inc.; and certain subsidiaries of QNA. S&IS provides integrated security solutions to the Department of
Defense and the intelligence community. The acquisition is consistent with ManTech's long-term strategy to extend our presence
in the defense and intelligence market, allowing us to offer comprehensive solutions for the full range of security threats from
physical through cyber. ManTech funded the acquisition with cash on hand. The asset purchase agreement did not contain
provisions for contingent consideration.
In fiscal years 2011 and 2010, the Company incurred approximately $0.1 million and $0.7 million, respectively, of
acquisition costs related to the S&IS transaction, which are included in general and administrative expense in our consolidated
statement of income for the years ended December 31, 2011 and 2010.
The purchase price of $60.0 million was allocated to the underlying assets and liabilities based on their fair values at the
date of acquisition. Total assets were $62.0 million, including goodwill and intangible assets recognized in connection with the
acquisition, and total liabilities were $2.0 million. Included in total assets were $13.0 million in acquired intangible assets. We
have recorded goodwill of $40.3 million, which will be deductible for tax purposes over 15 years, assuming adequate levels of
taxable income. Recognition of goodwill is largely attributed to the highly skilled employees and the value paid for S&IS's
capability in supporting high-end defense, intelligence and homeland security markets.
In allocating the purchase price, we consider among other factors, analysis of historical financial performance and estimates
of future performance of S&IS's contracts. The components of other intangible assets associated with the acquisition were customer
relationships and backlog valued at $11.5 million and $1.5 million, respectively. Customer contracts and related relationships
represent the underlying relationships and agreements with S&IS's existing customers. Customer relationships and backlog are
53
amortized over their estimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits method. The weighted-
average amortization period for the intangible assets is 17.9 years.
Sensor Technologies Inc.-On January 15, 2010, we completed the acquisition of all outstanding equity interests of Sensor
Technologies Inc. (STI), a privately-held company. The results of STI's operations have been included in our consolidated financial
statements since that date. The acquisition was consummated pursuant to a stock purchase agreement, dated December 18, 2009,
by and among ManTech, STI, certain shareholders of STI and certain persons acting as a representative for the shareholders of
STI. STI provides mission-critical systems engineering and C4ISR services and solutions to the Department of Defense. STI's
largest customer was the U.S. Army through its prime position on the S3 Indefinite Delivery/Indefinite Quantity contract. The
acquisition of STI is consistent with our long-term strategy to broaden our footprint in the high-end defense and intelligence
market, allowing us to expand our work with the Department of Defense and our direct support of the U.S. Army as it continues
its overseas operations. ManTech funded the acquisition through a combination of cash on hand and borrowings under our revolving
credit facility. The stock purchase agreement did not contain provisions for contingent consideration.
In fiscal year 2010, the Company incurred $0.2 million of acquisition costs related to STI transaction, which are included
in general and administrative expense in our consolidated statement of income for the year ended December 31, 2010.
The purchase price of $241.4 million was allocated to underlying assets and liabilities based on their estimated fair values
at the date of acquisition. The purchase price allocation included goodwill and other intangible assets. Recognition of goodwill
was largely attributed to the highly skilled employees of STI, their presence in the high-end defense and intelligence market place.
Assuming adequate levels of taxable income, the goodwill is deductible for tax purposes over 15 years. The following table
represents the purchase price allocation (in thousands):
Cash and cash equivalents
Receivables
Prepaid expenses and other
Property and equipment
Other intangibles
Other assets
Goodwill
Accounts payable and accrued expenses
Accrued salaries and related expenses
Other long-term liabilities
Purchase price
$
$
5,310
69,870
1,033
357
93,289
65
143,772
(69,185)
(3,087)
(62)
241,362
Pursuant to the stock purchase agreement, the seller has agreed to indemnify the buyer for tax liabilities arising in
connection with the operation of STI's business on or before January 15, 2010 or owing by any person for which STI may be liable
as a result of the transactions or circumstances occurring or existing on or before January 15, 2010. As of January 15, 2010, STI's
tax liabilities were approximately $0.8 million, resulting in related indemnification assets of $0.8 million.
In allocating the purchase price, we considered among other factors, analysis of historical financial performance and
estimates of future performance of STI's contracts. The components of other intangible assets associated with the acquisition were
customer relationships, backlog and non-compete agreements valued at $85.2 million, $7.8 million and $0.3 million, respectively.
Customer contracts and related relationships represent the underlying relationships and agreements with STI's existing customers.
Non-compete agreements represent the estimated value of the seller not competing with the Company for 4 years. Customer
relationships, backlog and non-compete agreements are amortized over their estimated useful lives of 20 years, 1 year and 4 years,
respectively, using the pattern of benefits method. The weighted-average amortization period for the intangible assets is 18.4
years.
Pro Forma Financial Information-We calculated the following unaudited pro forma amounts as if our acquisitions had
occurred on January 1, 2011. Our consolidated pro forma revenue would have been $2,584.5 million and $2,980.3 million and
our consolidated pro forma net income would have been $95.9 million and $130.5 million for the years ended December 31, 2012
and 2011, respectively.
54
4. Earnings per Share
Under ASC 260, Earnings per Share, the two-class method is an earnings allocation formula that determines earnings
per share for each class of common stock according to dividends declared (or accumulated) and participation rights in undistributed
earnings. Under that method, basic and diluted earnings per share data are presented for each class of common stock.
In applying the two-class method, we determined that undistributed earnings should be allocated equally on a per share
basis between Class A and Class B common stock. Under the Company's Certificate of Incorporation, the holders of the common
stock are entitled to participate ratably, on a share-for-share basis as if all shares of common stock were of a single class, in such
dividends, as may be declared by the Board of Directors. During 2012, we declared and paid quarterly dividends, each in the
amount of $0.21 per share on both classes of common stock. During 2011, we declared and paid semi-annual dividends, each in
the amount of $0.42 per share on both classes of common stock.
Basic earnings per share has been computed by dividing net income available to common stockholders by the weighted
average number of shares of common stock outstanding during each period. Shares issued during the period and shares reacquired
during the period are weighted for the portion of the period in which the shares were outstanding. Diluted earnings per share has
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 calculation of numerator and denominator in earnings per share is computed as follows (in thousands):
Numerator for net income per Class A and Class B common stock:
Distributed earnings
Undistributed earnings
Net income
Numerator for basic net income Class A common stock
Numerator for basic net income Class B common stock
Numerator for diluted net income Class A common stock
Numerator for diluted net income Class B common stock
Basic weighted average common shares outstanding
Class A common stock
Class B common stock
Effect of potential exercise of stock options
Class A common stock
Class B common stock
$
$
$
$
$
$
$
Year Ended December 31,
2011
2010
2012
$
$
$
$
$
$
$
31,050
63,969
95,019
61,065
33,954
61,103
33,916
23,727
13,193
41
—
$
$
$
$
$
$
$
30,872
102,434
133,306
85,172
48,134
85,323
47,983
23,415
13,233
115
—
—
125,096
125,096
78,921
46,175
79,183
45,913
22,847
13,367
207
—
Diluted weighted average common shares outstanding - Class A
23,768
23,530
23,054
Diluted weighted average common shares outstanding - Class B
13,193
13,233
13,367
For the years ended December 31, 2012, 2011 and 2010, options to purchase 2.9 million, 2.2 million and 1.8 million
shares, respectively, were outstanding but not included in the computation of diluted earnings per share because the options' effect
would have been anti-dilutive. For the years ended December 31, 2012, 2011 and 2010, shares issued from the exercise of stock
options were 38,542; 271,165; and 391,176, respectively.
55
5. Revenues and Receivables
We deliver 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 99.2%, 99.2% and 98.7% for the years ended
December 31, 2012, 2011 and 2010, respectively. The components of contract receivables are as follows (in thousands):
Billed receivables
Unbilled receivables:
Amounts billable
Revenues recorded in excess of funding
Retainage
Allowance for doubtful accounts
Receivables, net
December 31,
2012
2011
$
420,598
$
422,954
119,893
11,148
6,119
(9,449)
548,309
$
101,997
19,982
5,264
(9,729)
540,468
$
Amounts billable consist principally of amounts to be billed within the next month. Revenues recorded in excess of
funding are billable upon receipt of contractual amendments or other modifications. Revenues recorded in excess of milestone
billings on fixed price contracts consist of amounts not expected to be billed within the next month. The retainage is billable upon
completion of the contract performance and approval of final indirect expense rates by the government. Accounts receivable at
December 31, 2012 are expected to be substantially collected in 2013 except for approximately $1.5 million, of which 91.3% is
related to receivables from sales to the U.S. government. The remainder is related to receivables from contracts in which we acted
as a subcontractor to other contractors.
The Company does not believe it has significant exposure to credit risk as accounts receivable and the related unbilled
amounts are primarily due from the U.S. government. The allowance for doubtful accounts represents the Company's estimate
for exposure to compliance, contractual issues and bad debts related to prime contractors.
6. Property and Equipment
Major classes of property and equipment are summarized as follows (in thousands):
Furniture and equipment
Leasehold improvements
Less: Accumulated depreciation and amortization
Total property and equipment, net
December 31,
2012
2011
$
$
94,934
$
28,932
123,866
(95,278)
28,588
$
88,623
23,345
111,968
(64,533)
47,435
Depreciation and amortization expense related to property and equipment for the years ended December 31, 2012, 2011
and 2010 was $30.9 million, $33.7 million and $5.0 million, respectively.
7. Goodwill and Other Intangibles
Under ASC 350, Intangibles - Goodwill and Other, goodwill is to be reviewed at least annually for impairment and
whenever events or circumstances indicate that the carrying value of goodwill may not be fully recoverable. We have elected to
perform this review during the second quarter of each calendar year. The goodwill impairment test is a two-step process performed
at the reporting unit level. If the first step of the impairment test does not indicate an impairment, performance of the second step
is not required. The first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying amount
(including goodwill). The fair values of the reporting units are determined based on a weighting of the income approach, market
approach and market transaction approach.
56
The income approach is a valuation technique in which fair value is based from forecasted future cash flow discounted
at the appropriate rate of return commensurate with the risk as well as current rates of return for equity and debt capital as of the
valuation date. The forecast used in our estimation of fair value was developed by management based on a contract basis,
incorporating adjustments to reflect known contract and market considerations (such as reductions and uncertainty in government
spending, pricing pressure and opportunities). The discount rate utilizes a risk adjusted weighted average cost of capital.
The market approach is a valuation technique in which the fair value is calculated based on market prices realized in an
actual arm's length transaction. The technique consists of undertaking a detailed market analysis of publicly traded companies
that provides a reasonable basis for comparison to the company. Valuation ratios, which relate market prices to selected financial
statistics derived from comparable companies, are selected and applied to the company after consideration of adjustments for
financial position, growth, market, profitability and other factors.
The market transaction approach is a valuation technique in which the fair value is calculated based on market prices
realized in actual arm's length transactions. The technique consists of undertaking a detailed market analysis of merged and
acquired companies that provided a reasonable basis for comparison to the company. Valuation ratios, which relate market prices
to selected financial statistics derived from comparable companies, are selected and applied to the company after consideration
of adjustments for financial position, growth, market, profitability and other factors.
To assess the reasonableness of the calculated reporting unit fair values, we compare the sum of the reporting units' fair
values to the Company's market capitalization (per share stock price times the number of shares outstanding) and calculate an
implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization). We compared
our implied control premium to the control premiums in comparable transactions to assess the reasonableness of our calculations.
Based on this comparison the implied control premium appeared reasonable.
During the second quarter, we completed our annual goodwill impairment test. The results of step one of this test showed
the fair value of all reporting units were substantially in excess of their carrying value, therefore, no impairment losses were
identified and performance of step two was not required. We continue to monitor events that could impact our financial outlook
and our assets including potential significant reductions in government spending that could adversely impact our financial results
and changes in market conditions that could result in a reduction in the fair value of our assets.
The changes in the carrying amounts of goodwill during fiscal years 2012 and 2011 were as follows (in thousands):
Goodwill
Balance
$
729,558
148
2,694
14,601
62,242
(788)
808,455
212
33,175
20,070
$
$
861,912
Net amount at December 31, 2010
Additional consideration for the acquisition of S&IS
Additional consideration for the acquisition of MTCSC
Acquisition-TranTech
Acquisition-WINS
Other
Net amount at December 31, 2011
Additional consideration for the acquisition of WINS
Acquisition-Evolvent
Acquisition-HBGary
Net amount at December 31, 2012
57
Other intangible assets consisted of the following (in thousands):
Other intangible assets:
Contract and program
intangibles
Capitalized software cost for
internal use
Capitalized software cost for
sale
Other
Total other intangibles, net
December 31, 2012
December 31, 2011
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$ 249,882
$
92,400
$ 157,482
$
243,082
$
75,351
$
167,731
30,985
20,637
10,348
27,231
17,230
10,001
—
115
$ 280,982
$
—
35
113,072
—
80
$ 167,910
3,729
58
274,100
$
$
3,729
26
96,336
$
—
32
177,764
Amortization expense relating to intangible assets for the years ended December 31, 2012, 2011 and 2010 was $20.5
million, $20.4 million and $23.3 million, respectively. Amortization expense for the year ended December 31, 2010 included a
write down of internally developed software of $0.1 million. The write down was based on a change in the estimated net realizable
value of the asset. We estimate that we will have the following amortization expense for the future periods indicated below (in
thousands):
Years ending:
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
8. Long-term Debt
Long-term debt consisted of the following (in thousands):
Revolving credit facility
7.25% senior unsecured notes
Long-term debt
$
$
$
$
$
20,028
17,837
15,235
13,234
11,516
December 31,
2012
2011
$
$
— $
200,000
200,000
$
—
200,000
200,000
Revolving Credit Facility-We maintain a credit agreement with a syndicate of lenders led by Bank of America, N.A., as
administrative agent. The credit agreement provides for a $500.0 million revolving credit facility, with a $25.0 million letter of
credit sublimit and a $30.0 million swing line loan sublimit. The credit agreement also contains an accordion feature that permits
the Company to arrange with the lenders for the provision of up to $250.0 million in additional commitments. During 2011, we
incurred $3.9 million in debt issuance costs related to the credit agreement, which have been deferred and amortized over the term
of the agreement. The maturity date for this agreement is October 12, 2016.
Borrowings under our credit agreement are collateralized by substantially all the assets of ManTech and its Material
Subsidiaries (as defined in the credit agreement) and bear interest at one of the following variable rates as selected by the Company
at the time of borrowing: a London Interbank Offer Rate (LIBOR) based rate plus market-rate spreads (1.25% to 2.25% based on
the Company's consolidated total leverage ratio) or Bank of America's base rate plus market spreads (0.25% to 1.25% based on
the Company's consolidated total leverage ratio). The aggregate annual weighted average interest rates were 0.05% and 0.00%
for the years ended December 31, 2012 and 2011, respectively.
58
The terms of the credit agreement permit prepayment and termination of the loan commitments at any time, subject to
certain conditions. The credit agreement requires the Company to comply with specified financial covenants, including the
maintenance of a certain consolidated leverage ratios and a certain fixed charge coverage ratio. The credit agreement also contains
various covenants, including affirmative covenants with respect to certain reporting requirements and maintaining certain business
activities, and negative covenants that, among other things, may limit or impose restrictions on our ability to incur liens, incur
additional indebtedness, make investments, make acquisitions and undertake certain additional actions. As of, and during,
December 31, 2012 and 2011, we were in compliance with our financial covenants under the credit agreement.
On October 12, 2011, we terminated the commitments under our prior credit agreement, dated April 30, 2007.
There was no outstanding balance on our revolving credit facility at December 31, 2012 and 2011. The weighted average
borrowings under the revolving portion of the facility during the years ended December 31, 2012 and 2011 were $38 thousand
and $0, respectively. The maximum available borrowing under the revolving credit facility at December 31, 2012 was $499.8
million. At December 31, 2012 and 2011, we were contingently liable under letters of credit totaling $0.2 million and $1.2 million,
respectively, which reduces our availability to borrow under our revolving credit facility.
The following table summarizes the activity under our revolving credit facility for the years ended December 31, 2012,
2011 and 2010:
2012
Year Ended December 31,
2011
(in thousands)
2010
Borrowings under revolving credit facility
Repayment of borrowings under revolving credit facility
$
$
$
9,000
(9,000) $
— $
— $
287,700
(287,700)
7.25% Senior Unsecured Notes-We have $200.0 million in aggregate principal amount of 7.25% senior unsecured notes
that are registered under the Securities Act of 1933, as amended. The 7.25% senior unsecured notes were issued April 13, 2010.
The 7.25% senior unsecured notes mature on April 15, 2018 with interest payable semi-annually in April and October.
The 7.25% senior unsecured notes were issued at 100% of the aggregate principal amount and are effectively subordinate to the
Company's existing and future senior secured debt (to the extent of the value of the assets securing such debt), including debt
outstanding under our revolving credit facility. The 7.25% senior unsecured notes may be redeemed, in whole or in part, at any
time, at the option of the Company, subject to certain conditions specified in the indenture governing the 7.25% senior unsecured
notes. The 7.25% senior unsecured notes are guaranteed, jointly and severally, on a senior unsecured basis by each of our 100%
owned domestic subsidiaries that also guarantees debt obligations under our prior revolving credit facility or will guarantee debt
obligations under our revolving credit facility.
The fair value of the 7.25% senior unsecured notes as of December 31, 2012 was approximately $211.0 million based
on quoted market prices.
The Company incurred approximately $4.9 million in issuance costs, which are being amortized to interest expense over
the contractual life of the 7.25% senior unsecured notes using the effective interest rate method, resulting in an effective rate of
7.67%.
The indenture governing the 7.25% senior unsecured notes contains customary events of default, as well as restrictive
covenants, which, subject to important exceptions and qualifications specified in such indenture, will, among other things, limit
our ability and the ability of our subsidiaries that guarantee the 7.25% senior unsecured notes to: pay dividends or distributions,
repurchase equity, prepay subordinated debt or make certain investments; incur additional debt or issue certain disqualified stock
and preferred stock; incur liens on assets; merge or consolidate with another company or sell all or substantially all assets; and
allow to exist certain control provisions. An event of default under the indenture will allow either the trustee of the notes or the
holders of at least 25% in principal amount of the then outstanding notes to accelerate, or in certain cases, will automatically cause
the acceleration of, the amounts due under the notes. As of December 31, 2012 and 2011, the Company was in compliance with
all required covenants under the indenture.
59
9. Commitments and Contingencies
Contracts with the U.S. government including subcontracts are subject to extensive legal and regulatory requirements
and, from time to time, agencies of the U.S. government, in the ordinary course of business, investigate whether the Company's
operations are conducted in accordance with these requirements and the terms of the relevant contracts. U.S. government
investigations of the Company, whether related to the Company's U.S. government contracts or conducted for other reasons, could
result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon the Company,
or could lead to suspension or debarment from future U.S. government contracting. Management believes it has adequately reserved
for any losses that may be experienced from any investigation of which it is aware. The Defense Contract Audit Agency (DCAA)
has completed our incurred cost audits through 2002 and the majority of the audits for 2003, 2004 and 2005, with no material
adjustments. The remaining audits for 2003 through 2012 are not expected to have a material effect on our financial position,
results of operations or cash flow and management believes it has adequately reserved for any losses.
In the normal course of business, we are involved in certain governmental and legal proceedings, claims and disputes
and have litigation pending under several suits. We believe that the ultimate resolution of these matters will not have a material
effect on our financial position, results of operations or cash flows.
We lease office space and equipment under long-term operating leases. A number of the leases contain renewal options
and escalation clauses. At December 31, 2012, aggregate future minimum rental commitments under these leases are as follows
(in thousands):
Year ending:
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
Thereafter
Total
Office Space
Equipment
Total
$
31,310
$
1,318
$
27,382
23,799
21,569
20,309
93,706
641
54
—
—
—
32,628
28,023
23,853
21,569
20,309
93,706
$
218,075
$
2,013
$
220,088
Office space and equipment rent expense totaled approximately $52.1 million, $55.2 million and $47.9 million for the
years ended December 31, 2012, 2011 and 2010, respectively.
We had $9.3 million and $7.1 million of deferred rent liabilities resulting from recording rent expense on a straight-line
basis over the life of the respective lease for the years ended December 31, 2012 and 2011, respectively.
10. Stockholders' Equity and Stock Options
Common Stock-We have 150,000,000 shares of authorized Class A common stock, par value $0.01 per share. We have
50,000,000 shares of authorized Class B common stock, par value $0.01 per share. On December 31, 2012, there were 23,849,719
shares of Class A common stock outstanding, 244,113 shares of Class A common stock recorded as treasury stock and 13,192,845
shares of Class B common stock outstanding.
Holders of Class A common stock are entitled to one vote for each share held of record and holders of Class B common
stock are entitled to ten votes for each share held of record, except with respect to any “going private transaction” (generally, a
transaction in which George J. Pedersen (our Chairman of the Board and CEO), his affiliates, his direct and indirect permitted
transferees or a group, generally including Mr. Pedersen, such affiliates and permitted transferees, seek to buy all outstanding
shares), as to which each share of Class A common stock and Class B common stock are entitled to one vote per share. The Class A
common stock and the Class B common stock vote together as a single class on all matters submitted to a vote of stockholders,
including the election of directors, except as required by law. Holders of common stock do not have cumulative voting rights in
the election of directors.
Stockholders are entitled to receive, when and if declared by the Board of Directors from time-to-time, such dividends
and other distributions in cash, stock or property from our assets or funds legally and contractually available for such purposes
subject to any dividend preferences that may be attributable to preferred stock that may be authorized. Each share of Class A
60
common stock and Class B common stock is equal in respect of dividends and other distributions in cash, stock or property, except
that in the case of stock dividends, only shares of Class A common stock will be distributed with respect to the Class A common
stock and only shares of Class B common stock will be distributed with respect to Class B common stock. In no event will either
Class A common stock or Class B common stock be split, divided or combined unless the other class is proportionately split,
divided or combined.
The shares of Class A common stock are not convertible into any other series or class of securities. Each share of Class
B common stock, however, is freely convertible into one share of Class A common stock at the option of the Class B stockholder.
Upon the death or permanent mental incapacity of Mr. Pedersen, all outstanding shares of Class B common stock automatically
convert to Class A common stock.
Preferred Stock-We are authorized to issue an aggregate of 20,000,000 shares of preferred stock, $0.01 par value per
share, the terms and conditions of which are determined by our Board of Directors upon issuance. The rights, preferences and
privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of any shares of
preferred stock that we may designate and issue in the future. At December 31, 2012 and 2011, no shares of preferred stock were
outstanding and the Board of Directors currently has no plans to issue a series of preferred stock.
Accounting for Stock-Based Compensation:
Our stockholders approved our 2011 Management Incentive Plan (the Plan), which was designed to attract, retain and
motivate key employees. Awards granted under the Plan are settled in shares of Class A common stock. At the beginning of each
year, the Plan provides that the number of shares available for issuance automatically increases by an amount equal to 1.5% of
the total number of shares of Class A and Class B common stock outstanding on December 31st of the previous year. On January 2,
2013, there were 555,638 additional shares made available for issuance under the Plan. Through December 31, 2012, the remaining
aggregate number of shares of our common stock authorized for issuance under the Plan was 3,048,209. Through December 31,
2012, there were 4,512,742 shares of our Class A common stock that were issued and remain outstanding as a result of equity
awards granted under the Plan. The Plan expires in May 2021.
The Plan is administered by the compensation committee of our Board of Directors, along with its delegates. Subject to
the express provisions of the Plan, the committee has the Board of Directors' authority to administer and interpret the Plan, including
the discretion to determine the exercise price, vesting schedule, contractual life and the number of shares to be issued.
Stock Compensation Expense-For the years ended December 31, 2012, 2011 and 2010, we recorded $8.1 million, $9.2
million and $7.4 million of stock-based compensation expense, respectively. No compensation expense for employees with stock
awards, including stock-based compensation expense, was capitalized during the periods. For the years ended December 31, 2012,
2011 and 2010, the total recognized tax deficiency from the exercise of stock options, vested cancellations and vesting of restricted
stock were $1.4 million, $0.2 million and $0.4 million, respectively.
Stock Options-We typically issue options that vest over three years in equal installments beginning on the first anniversary
of the date of grant. Under the terms of the Plan, the contractual life of the option grants may not exceed eight years. During the
years ended December 31, 2012 and 2011, we issued options that expire five years from the date of grant.
Fair Value Determination-We have used the Black-Scholes-Merton option pricing model to determine fair value of our
awards on date of grant. We will reconsider the use of the Black-Scholes-Merton model if additional information becomes available
in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that
cannot be reasonably estimated under this model.
The following weighted-average assumptions were used for option grants during the years ended December 31, 2012,
2011 and 2010:
Volatility-The expected volatility of the options granted was estimated based upon historical volatility of the Company's
share price through weekly observations of the Company's trading history.
Expected Term-The expected term of options granted to employees during fiscal years 2012, 2011 and 2010 was determined
from historical exercises of the grantee population. For all grants valued during fiscal years 2012, 2011 and 2010, the options
have graded vesting over three years in equal installments beginning on the first anniversary of the date of the grant and a contractual
term of five years.
61
Risk-free Interest Rate-The yield on zero-coupon U.S. Treasury strips was used to extrapolate a forward-yield curve. This
“term structure” of future interest rates was then input into a numeric model to provide the equivalent risk-free rate to be used in
the Black-Scholes-Merton model based on expected term of the underlying grants.
Dividend Yield-The Black-Scholes-Merton valuation model requires an expected dividend yield as an input. During
fiscal year 2011, we initiated a cash dividend program. We have calculated our expected dividend yield based on an expected
annual cash dividend of $0.84 per share.
The following table summarizes weighted-average assumptions used in our calculations of fair value for the years ended
December 31, 2012, 2011 and 2010:
Volatility
Expected life of options (in years)
Risk-free interest rate
Dividend yield
Year Ended December 31,
2012
2011
2010
31.68%
3.07
0.48%
2.70%
35.08%
2.98
0.81%
0.70%
39.02%
2.95
1.25%
—%
Stock Option Activity-During the year ended December 31, 2012, we granted stock options to purchase 986,650 shares
of class A common stock at a weighted-average exercise price of $29.24 per share, which reflects the fair market value of the
shares on the date of grant. The weighted-average fair value of options granted during the years ended December 31, 2012, 2011
and 2010, as determined under the Black-Scholes-Merton valuation model, was $5.19, $9.14 and $12.87, respectively. These
options vest over three years in equal annual installments beginning on the first anniversary of the date of the grant and have a
contractual term of five years. Option grants that vested during the years ended December 31, 2012, 2011 and 2010 had a combined
fair value of $8.3 million, $7.8 million and $7.7 million, respectively.
The following table includes information with respect to stock option activity and stock options outstanding for the years
ended December 31, 2012, 2011 and 2010, was as follows:
Shares under option, December 31, 2009
Options granted
Options exercised
Options cancelled and expired
Shares under option, December 31, 2010
Options granted
Options exercised
Options cancelled and expired
Shares under option, December 31, 2011
Options granted
Options exercised
Options cancelled and expired
Shares under option, December 31, 2012
Number of
Shares
Weighted
Average
Exercise
Price
Aggregate
Intrinsic Value
(in thousands)
2,718,183
$
944,500
$
(391,176) $
(798,250) $
$
2,473,257
986,000
$
(271,165) $
(301,982) $
$
2,886,110
986,650
$
(38,542) $
(413,022) $
$
3,421,196
41.85
46.50
35.30
49.42
42.22
38.56
27.94
45.07
41.14
29.24
28.93
39.27
38.61
$
$
$
$
$
$
$
17,643
4,224
7,731
3,087
1,096
215
626
62
The following table summarizes non-vested stock options for the year ended December 31, 2012:
Non-vested stock options at December 31, 2011
Options granted
Vested during period
Options cancelled
Non-vested shares under option, December 31, 2012
Number of
Shares
Weighted
Average Fair
Value
1,619,255
$
986,650
$
(734,438) $
(173,475) $
$
1,697,992
10.47
5.19
11.32
8.43
7.37
The following table includes information concerning stock options exercisable and stock options expected to vest at
December 31, 2012:
Stock options exercisable
Stock options expected to vest
Stock options exercisable and expected to vest
Weighted
Average
Remaining
Contractual
Life
(years)
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(in thousands)
1.9
3.9
$
$
42.93
34.64
$
$
584
36
Number of
Shares
1,723,204
1,501,082
3,224,286
Unrecognized compensation expense related to outstanding stock options expected to vest as of December 31, 2012 was
$7.6 million, which is expected to be recognized over a weighted-average period of 1.9 years and will be adjusted for any future
changes in estimated forfeitures.
Restricted Stock-Under the Plan, we have issued restricted stock. A restricted stock award is an issuance of shares that
cannot be sold or transferred by the recipient until the vesting period lapses. Restricted shares issued to employees vest over three
years in equal installments beginning on the first anniversary of the grant date, contingent upon employment with the Company
on the vesting dates. Restricted shares issued to our Board of Directors vest in one year. The related compensation expense is
recognized over the service period and is based on the grant date fair value of the stock and the number of shares expected to vest.
Restricted Stock Activity-The following table summarizes the restricted stock activity during the years ended
December 31, 2011 and 2012:
Non-vested, December 31, 2010
Granted
Vested
Forfeited
Non-vested, December 31, 2011
Granted
Vested
Forfeited
Non-vested, December 31, 2012
63
Number of
Shares
Grant Date Fair
Value
(in thousands)
26,000
24,000
$
(19,333) $
—
30,667
24,000
$
(27,334) $
—
27,333
1,070
862
576
1,237
11. Retirement Plans
As of December 31, 2012, we maintained a qualified defined contribution plan. Our qualified defined contribution plan
covers substantially all employees and complies with Section 401 of the Internal Revenue Code. Under this plan, we stipulated
a basic matching contribution that matches a portion of the participants' contribution based upon a defined schedule. Additionally,
this plan contains a discretionary contribution component where the Company may contribute additional amounts based on a
percentage of eligible employees' compensation. Contributions are invested by an independent investment company. The choice
of investment alternatives is at the election of each participating employee. Our contributions to the plan were approximately
$22.6 million, $23.8 million and $22.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.
We maintained an Employee Stock Ownership Plan (ESOP) as of December 31, 2012. On December 18, 1998, the Board
of Directors approved the establishment of a qualified ESOP, effective January 1, 1999, for the benefit of substantially all of our
U.S. domestic-based employees and some overseas employees. The ESOP is non-leveraged and is funded entirely through
Company contributions based on a percentage of eligible employee compensation, as defined in the plan. Participants must be
employees of the Company or eligible Company subsidiaries and must meet minimum service requirements to be eligible for
annual contributions. The ESOP specifies a five-year vesting schedule over which participants become vested in the Class A
common stock allocated to their participant account. The amount of our annual contribution to the ESOP is at the discretion of
our Board of Directors. For the years ended December 31, 2012, 2011 and 2010, we recorded $3.8 million, $3.6 million and $3.4
million, respectively, as compensation expense related to ESOP contributions. Shares contributed to the ESOP for the years ended
December 31, 2012, 2011 and 2010, were 146,589; 116,087; and 81,730, respectively, of Class A common stock. There were no
unearned ESOP shares at December 31, 2012 and 2011, respectively. As required under ASC 714-40, Employee Stock Ownership
Plans, compensation expense is recorded for shares committed to be released to employees based on the fair market value of those
shares in the period in which they are committed to be released. For the years ended December 31, 2012, 2011 and 2010, new
shares were issued to satisfy this obligation.
As of December 31, 2012, we also maintained an Employee Supplemental Savings Plan (ESSP), a non-qualified deferred
compensation plan, for certain key employees. Under this plan, eligible employees may defer up to 75% of qualified annual base
compensation and 100% of bonus. In the ESSP, participant deferral accounts are credited with a rate of return based on investment
elections as selected by the participant. The assets related to the ESSP are held in a rabbi trust owned by the Company for benefit
of the participating employees. The trust investments are in the form of variable universal life insurance products, which are
owned by the Company. These investments seek to replicate the return of the participant investment elections. Participant
contributions to this plan were approximately $5.1 million, $4.5 million and $4.2 million for the years ended December 31, 2012,
2011 and 2010, respectively.
We maintained nonqualified supplemental defined benefit pension plan for certain retired employees of an acquired
company as of December 31, 2012. These plans were informally and partially funded beginning in 1999 through a rabbi trust.
Assets held in a rabbi trust are not eligible to be included in the calculation of plan status. At both December 31, 2012 and 2011,
100% of the rabbi trust assets were invested in a money market account with a commercial bank. All covered employees retired
prior to 1998. Our benefit obligation at December 31, 2012 and 2011 was $1.4 million and $1.5 million, respectively.
12. Income Taxes
The domestic and foreign components of income before provision for income taxes were as follows (in thousands):
Domestic
Foreign
Year Ended December 31,
2012
2011
2010
$
$
155,381
(427)
154,954
$
$
215,437
65
215,502
$
$
202,522
(71)
202,451
64
The provision for income taxes was comprised of the following components (in thousands):
Current provision (benefit):
Federal
State
Foreign
Deferred provision (benefit):
Federal
State
Year Ended December 31,
2011
2010
2012
$
37,926
$
75,505
$
63,195
5,780
123
43,829
15,241
2,332
17,573
10,601
293
86,399
(3,209)
(97)
(3,306)
(1,306)
(161)
—
(1,467)
59,935
$
(787)
(116)
6
(897)
82,196
$
9,108
348
72,651
3,894
983
4,877
(474)
274
27
(173)
77,355
Non-current provision (benefit) resulting from allocating tax benefits
directly to additional paid in capital and changes in liabilities:
Federal
State
Foreign
Total provision for income taxes
$
For the year ended December 31, 2012, the non-current benefit for income taxes includes $(1.4) million arising from the
cancellation of vested stock options allocated to equity and valuation differences between grant and vesting dates on restricted
stock allocated to equity and $(0.1) million related to liabilities for uncertain tax positions (including $(0.1) million for use of a
state net operating loss). For the year ended December 31, 2011, the non-current benefit for income taxes includes $0.2 million
for amounts arising from the exercise of stock options allocated as equity; $(0.4) million arising from the cancellation of vested
stock options allocated to equity and valuation differences between grant and vesting dates on restricted stock allocated to equity;
and $(0.7) million related to liabilities for uncertain tax positions (including $(0.2) million for use of a state net operating loss).
For the year ended December 31, 2010, the non-current benefit for income taxes includes $0.1 million from amounts arising from
the exercise of stock options allocated as equity; $(0.5) million arising from the cancellation of vested stock options allocated to
equity; and $0.2 million related to liabilities for uncertain tax positions.
The schedule of effective income tax rate reconciliation is as follows:
Year Ended December 31,
2011
2010
2012
Statutory U.S. Federal tax rate
Increase (decrease) in rate resulting from:
State taxes—net of Federal benefit
Other, net
Effective tax rate
35.0%
35.0%
35.0 %
3.3%
0.4%
38.7%
3.1%
—%
38.1%
3.3 %
(0.1)%
38.2 %
The Company paid income taxes, net of refunds, of $43.5 million, $92.9 million and $77.2 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
65
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements. A summary of the tax effect of the significant components of deferred income taxes is as
follows (in thousands):
Gross deferred tax liabilities:
Goodwill and other assets
Unbilled receivables
Total deferred tax liabilities
Gross deferred tax assets:
Retirement and other liabilities
Property and equipment
Allowance for potential contract losses and other contract reserves
Federal and state operating loss carryforwards
Total deferred tax assets
Net deferred tax liabilities
December 31,
2012
2011
$
87,713
$
71,979
14,921
102,634
3,560
75,539
(32,110)
(8,905)
(3,402)
(3,306)
(47,723)
54,911
(28,823)
(2,753)
(3,728)
(86)
(35,390)
40,149
$
$
The net deferred tax liabilities decreased $2.5 million in the year ended December 31, 2012 for adjustments to the purchase
accounting related to the January 6, 2012 acquisition of Evolvent. The net deferred tax liabilities increased $1.3 million in the
year ended December 31, 2011 for adjustments to the purchase accounting related to the acquisitions of MTCSC on December 23,
2010 and WINS on November 15, 2011.
The tax benefits associated with nonqualified stock options and disqualifying dispositions of incentive stock options
reduced the current taxes payable by $0.2 million for the year ended December 31, 2011. These benefits were recorded as an
increase to additional paid-in capital.
At December 31, 2012, we had state net operating losses of approximately $0.4 million that expire beginning 2015 through
2031; and federal net operating losses of $8.2 million that expire in 2031 and 2032.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows
(in thousands):
Gross unrecognized tax benefits at beginning of year
$
1,440
$
2,519
$
1,680
2012
December 31,
2011
2010
Increases in tax positions related to prior years
Decreases in tax positions for prior years
Increases in tax positions for current year
Settlements
Lapse in statute of limitations
Acquisitions - increase in tax position for prior years
18
—
141
—
(223)
—
87
(71)
269
(508)
(961)
105
508
(26)
481
—
(124)
—
Gross unrecognized tax benefits at end of year
$
1,376
$
1,440
$
2,519
The total liability for gross unrecognized tax benefits as of December 31, 2012, 2011 and 2010 includes $1.0 million,
$1.1 million and $2.1 million, respectively, of unrecognized net tax benefits which, if ultimately recognized, would reduce the
Company's annual effective tax rate in a future period.
The Company is subject to income taxes in the U.S., various state and foreign jurisdictions. Tax statutes and regulations
within each jurisdiction are subject to interpretation and require significant judgment to apply. The Company is no longer subject
66
to U.S., state or non-U.S. income tax examinations by tax authorities for the years before 2008. The Company believes it is
reasonably possible that $0.3 million of gross unrecognized tax benefits will be settled within the next year due to expirations of
statute of limitations.
The Company recognizes interest related to unrecognized tax benefits within interest expense and penalties related to
unrecognized tax benefits in general and administrative expenses. At December 31, 2012, 2011 and 2010, interest and penalties
on the net unrecognized tax benefits were $0.2 million, $0.2 million and $0.4 million, respectively.
13. Business Segment and Geographic Area Information
We have one reportable segment. We deliver 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 federal government
customers typically exercise independent contracting authority, and even offices or divisions within an agency or department may
directly, or through a prime contractor, use our services as a separate customer so long as that customer has independent decision-
making and contracting authority within its organization. Revenues from the U.S. government under prime contracts and
subcontracts were approximately 99.2%, 99.2% and 98.7% for the years ended December 31, 2012, 2011 and 2010, respectively.
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 revenues. 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 years ended
December 31, 2012, 2011 and 2010. Revenues by geographic customer and the related percentages of total revenues for the years
ended December 31, 2012, 2011 and 2010, were as follows (dollars in thousands):
United States
International
Total
Year Ended December 31,
2012
2011
2010
$ 2,577,495
99.8% $ 2,861,038
99.7% $ 2,583,600
4,800
0.2%
8,944
0.3%
20,438
$ 2,582,295
$ 2,869,982
$ 2,604,038
99.2%
0.8%
The following table includes contracts that exceeded 10% of our revenues for the years ended December 31, 2012, 2011
and 2010 (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Revenues:
U.S. Army contract A
All other contracts
Total
$
572,389
2,009,906
$ 2,582,295
22.2% $
487,615
17.0% $
318,615
77.8% 2,382,367
83.0% 2,285,423
12.2%
87.8%
$ 2,869,982
$ 2,604,038
The following table includes contracts that exceeded 10% of our operating income for the years ended December 31,
2012, 2011 and 2010 (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Operating income:
U.S. Army contract A
All other contracts
Total
$
$
32,927
138,061
170,988
19.3% $
39,432
17.3% $
22,748
80.7%
187,922
227,354
$
82.7%
192,392
215,140
$
10.6%
89.4%
67
The following table includes contracts that exceeded 10% of our receivables, net at December 31, 2012 and 2011 (dollars
in thousands):
Receivables, net:
U.S. Army contract A
U.S. Army contract B
All other contracts
Total
December 31,
2012
2011
$ 90,752
16.6% $
88,359
62,709
394,848
$ 548,309
11.4%
72.0%
59,309
392,800
$ 540,468
16.3%
11.0%
72.7%
Disclosure items required under ASC 280, Segment Reporting, including interest income, interest expense, depreciation
and amortization expense, costs for stock-based compensation programs, certain unallowable costs as determined under Federal
Acquisition Regulations and expenditures for segment assets are not applicable as we review those items on a consolidated basis.
14. Sale of Investment
ManTech received approximately $3.2 million in proceeds on April 8, 2011 and $0.2 million was received during the
year ended December 31, 2012 for the sale of our investment of less than 5% in NetWitness Corporation (NetWitness). At
December 31, 2012, there was $0.3 million held in escrow, which we expect to collect next year. The transaction was consummated
on April 1, 2011 pursuant to an agreement and plan of merger dated March 12, 2011 by and among EMC Corporation, NetWitness
and certain persons acting as the representative for the shareholders of NetWitness. The sale of our investment resulted in a pre-
tax gain of approximately $3.7 million, which was recorded in other income in our consolidated statement of income for the year
ended December 31, 2011.
68
15. Quarterly Financial Data (Unaudited)
The quarterly financial data reflects, in the opinion of the Company, all normal and recurring adjustments necessary to
present fairly the results of operations for such periods. Results of any one or more quarters are not necessarily indicative of
annual results or continuing trends. The following tables set forth selected unaudited quarterly financial data.
Revenues
Operating income
Income from operations before income taxes
Net income
Class A basic earnings per share
Weighted average common shares outstanding
Class B basic earnings per share
Weighted average common shares outstanding
Class A diluted earnings per share
Weighted average common shares outstanding
Class B diluted earnings per share
Weighted average common shares outstanding
Revenues
Operating income
Income from operations before income taxes
Net income
Class A basic earnings per share
Weighted average common shares outstanding
Class B basic earnings per share
Weighted average common shares outstanding
Class A diluted earnings per share
Weighted average common shares outstanding
Class B diluted earnings per share
Weighted average common shares outstanding
16. Subsequent Event
2012
March 31,
June 30,
September 30, December 31,
(in thousands, except per share data)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
676,509
45,695
41,634
25,642
0.70
23,642
0.70
13,193
0.69
23,716
0.69
13,193
$
$
$
$
$
$
$
$
638,937
44,880
40,835
24,745
0.67
23,697
0.67
13,193
0.67
23,736
0.67
13,193
2011
$
$
$
$
$
$
$
$
645,028
42,759
38,777
24,427
0.66
23,760
0.66
13,193
0.66
23,778
0.66
13,193
621,821
37,654
33,708
20,205
0.55
23,808
0.55
13,193
0.55
23,842
0.55
13,193
March 31,
June 30,
September 30, December 31,
(in thousands, except per share data)
$
$
$
$
$
$
$
$
700,864
55,855
52,045
31,903
0.87
23,206
0.87
13,275
0.87
23,357
0.87
13,275
$
$
$
$
$
$
$
$
752,673
59,168
59,068
36,442
0.99
23,357
0.99
13,271
0.99
23,510
0.99
13,271
$
$
$
$
$
$
$
$
734,607
58,508
54,738
34,486
0.94
23,513
0.94
13,193
0.94
23,607
0.94
13,193
681,838
53,823
49,651
30,475
0.83
23,578
0.83
13,193
0.83
23,643
0.83
13,193
Management has evaluated subsequent events after the balance sheet date through the financial statements issuance date
for appropriate accounting and disclosure.
Acquisition of ALTA Systems, Inc.
On January 8, 2013, we completed the acquisition of ALTA Systems, Inc. (ALTA). ALTA is an information technology
(IT) and professional services company with valuable applications in healthcare systems and capital planning. ALTA provides a
broad range of IT and professional services to government and private industry in three major practice areas: capital planning and
investment control; system design, development and operations; and fraud detection and statistical analysis. The acquisition will
enable ManTech to deliver technology services through ALTA's prime position on the Centers for Medicare and Medicaid Services
(CMS) Enterprise Systems Development (ESD) contract. ManTech funded the acquisition with cash on hand. The preliminary
69
purchase price was $10.2 million and may increase or decrease depending on the finalization of the post-closing working capital
adjustment.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The Company has had no disagreements with its auditors on accounting principles, practices or financial statement
disclosure during and through the date of the financial statements included in this Report.
Item 9A
Controls and Procedures
We performed an assessment as of December 31, 2012 of the effectiveness of the design and operation of our disclosure
controls and procedures and our internal control over financial reporting. This assessment was done under the supervision and
with the participation of management, including our principal executive officer and principal financial officer. Included as Exhibits
31.1 and 31.2 to this Annual Report on Form 10-K are forms of “Certification” of our principal executive officer (our Chairman
of the Board and Chief Executive Officer) and our principal financial officer (our Chief Financial Officer). The forms of Certification
are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section of the Annual Report on Form 10-
K that you are currently reading is the information concerning the assessment referred to in the Section 302 certifications and
required by the rules and regulations of the SEC. You should read this information in conjunction with the Section 302 certifications
for a more complete understanding of the topics presented.
Disclosure Controls and Procedures and Internal Control over Financial Reporting-Management is responsible for
establishing and maintaining adequate disclosure controls and procedures and internal control over financial reporting. Disclosure
controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed
or submitted under the Exchange Act, such as this Annual Report on Form 10-K, is accurately recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed
to provide reasonable assurance that such information is accumulated and communicated to our management, including our
principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal control over financial reporting is a process designed by, or under the supervision of our principal executive
officer and our principal financial officer, and effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with GAAP and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of
management or our Board of Directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material adverse effect on our financial statements.
Limitations on the Effectiveness of Controls-Management, including our principal executive officer and our principal
financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will
prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no assessment of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-
making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management's override of the control. The
design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls
may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.
70
Scope of the Assessments-The assessment by our principal executive officer and our principal financial officer of our
disclosure controls and procedures and the assessment by our management of our internal control over financial reporting included
a review of procedures and documents and discussions with other employees in our organization in order to evaluate the adequacy
of our internal control system design. In the course of the evaluation, we sought to identify exposure to unprevented or undetected
data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements,
were being undertaken. The assessment also included testing of properly designed controls to verify their effective performance.
Our management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework to assess the effectiveness of our internal control over financial reporting.
We assess our disclosure controls and procedures and our internal control over financial reporting on an ongoing basis
so that the conclusions concerning controls effectiveness can be reported in our Quarterly Reports on Form 10-Q and Annual
Reports on Form 10-K. We consider the results of these assessment activities as we monitor our disclosure controls and procedures
and our internal control over financial reporting. Our intent is to ensure that disclosure controls and procedures and internal control
over financial reporting will be maintained and updated as conditions warrant. Among other matters, we sought in our assessment
to determine whether there were any “material weaknesses” in our internal control over financial reporting, or whether we had
identified any acts of fraud involving senior management, management or other personnel who have a significant role in our
internal control over financial reporting. This information was important both for the assessment generally and because the
Section 302 certifications require that our principal executive officer and our principal financial officer disclose that information,
along with any “significant deficiencies,” to the Audit Committee of our Board of Directors, and to our independent auditors and
to report on related matters in this section of the Annual Report on Form 10-K.
Assessment of Effectiveness of Disclosure Controls and Procedures-Based upon the assessments, our principal executive
officer and our principal financial officer have concluded that as of December 31, 2012 our disclosure controls and procedures
were effective at the reasonable assurance level described above.
Management's Report on Internal Control over Financial Reporting-Management is responsible for establishing and
maintaining adequate control over financial reporting. Management used the criteria issued by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated Framework to assess the effectiveness of our internal
control over financial reporting. Based upon the assessments, our management has concluded that as of December 31, 2012 our
internal control over financial reporting was effective. Our independent registered public accounting firm issued an attestation
report concerning our internal control over financial reporting, which appears further in this Annual Report.
Changes in Internal Control over Financial Reporting-During the three months ended December 31, 2012, there were
no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control for financial reporting.
Item 9B.
Other Information
None.
71
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
ManTech International Corporation
Fairfax, Virginia
We have audited the internal control over financial reporting of ManTech International Corporation and subsidiaries (the
"Company") as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2012, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2012 of the Company
and our report dated February 22, 2013 expressed an unqualified opinion on those financial statements and financial statement
schedule.
/s/ DELOITTE & TOUCHE LLP
McLean, Virginia
February 22, 2013
72
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
The information concerning our directors and executive officers required by Item 401 of Regulation S-K is included
under the captions “Election of Directors” and “Executive Officers,” respectively, in our definitive Proxy Statement to be filed
with the Securities and Exchange Commission (SEC) in connection with our 2013 Annual Meeting of Stockholders (the “2013
Proxy Statement”), and that information is incorporated by reference in this Annual Report on Form 10-K.
The information required by Item 405 of Regulation S-K concerning compliance with Section 16(a) of the Exchange Act
is included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2013 Proxy Statement, and that
information is incorporated by reference in this Annual Report on Form 10-K.
Our Standards of Ethics and Business Conduct, which sets forth the policies comprising our code of conduct, satisfies
the SEC's requirements (including Item 406 of Regulation S-K) for a “code of ethics” applicable to our principal executive officer,
principal financial officer, principal accounting officer, controller or persons performing similar functions, as well as Nasdaq's
requirements for a code of conduct applicable to all directors, officers and employees. Among other principles, our Standards of
Ethics and Business Conduct includes guidelines relating to the ethical handling of actual or potential conflicts of interest,
compliance with laws, accurate financial reporting and procedures for promoting compliance with (and reporting violations of)
these standards. A copy of our Standards of Ethics and Business Conduct is available on the investor relations section of our
website: www.mantech.com. We are required to disclose any amendment to, or waiver from, a provision of our code of ethics
that applies to our principal executive officer, principal financial officer, principal accounting officer, controller and persons
performing similar functions. We intend to use our website as a method of disseminating this disclosure as permitted by applicable
SEC rules.
The information required by Item 407(d)(4) of Regulation S-K concerning the Audit Committee is included under the
caption “Committees of the Board of Directors - Audit Committee” in our 2013 Proxy Statement and that information is incorporated
by reference in this Annual Report on Form 10-K.
The information required by Item 407(d)(5) of Regulation S-K concerning the designation of an audit committee financial
expert is included under the caption “Committees of the Board of Directors - Audit Committee” in our 2013 Proxy Statement and
that information is incorporated by reference in this Annual Report on Form 10-K.
Item 11.
Executive Compensation
The information required by this Item 11 is included under the captions “Non-Employee Director Compensation Table,”
“Certain Relationships and Related Person Transactions - Compensation Committee Interlocks and Insider Participation,”
“Compensation Committee Report” and “Compensation Discussion and Analysis” and the related text and tables in our 2013
Proxy Statement and that information is incorporated by reference in this Annual Report on Form 10-K.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 403 of Regulation S-K is included under the caption “Beneficial Ownership of Our
Stock” in our 2013 Proxy Statement, and that information is incorporated by reference in this Annual Report on Form 10-K.
73
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2012 with respect to compensation plans (including
individual compensation arrangements) under which our equity securities are authorized for issuance.
Equity Compensation Plan Information
Number of
securities to
be issued
upon exercise
of
outstanding
options,
warrants and
rights
(a)
Weighted-
average
exercise price
of
outstanding
options,
warrants and
rights
(b)
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
3,421,196
—
3,421,196
$
$
38.61
—
38.61
3,048,209
—
3,048,209
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
1)
The plan contains a formula that automatically increases the number of securities available for issuance. The plan provides
that the number of shares available for issuance under the plan automatically increases on the first trading day of January each
calendar year during the term of the plan by an amount equal to 1.5% of the total number of shares outstanding (including all
outstanding classes of common stock) on the last trading day in December of the immediately preceding calendar year, but provides
that in no event should any such annual increase exceed 1,500,000 shares. On January 2, 2013, there were 555,638 shares added
to the plan under this provision.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is included under the captions “Certain Relationships and Related Person
Transactions” and “Corporate Governance - Director Independence” in our 2013 Proxy Statement and that information is
incorporated by reference in this Annual Report on Form 10-K.
Item 14.
Principal Accounting Fees and Services
The information required by this Item 14 is included under the caption “Ratification of Appointment of Independent
Auditors” in our 2013 Proxy Statement and that information is incorporated by reference in this Annual Report on Form 10-K.
74
Item 15.
Exhibits, Financial Statement Schedule
PART IV
(a) The following documents are filed as a part of this Annual Report on Form 10-K:
(1)
All financial statements:
DESCRIPTION
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
42
43
44
45
46
47
48
(2)
Financial statement schedule:
SCHEDULE
NO.
DESCRIPTION
Schedule II
Valuation and Qualifying Accounts for the years ended December 31, 2012, 2011 and 2010
79
75
(3) Exhibits required by Item 601 of Regulation S-K (each management contract or compensatory plan or arrangement
required to be filed as an exhibit to this annual report pursuant to Item 15(b) of this annual report is identified
in the Exhibit list below):
Exhibit
3.1
3.2
4.1
4.2
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
Description
Second Amended and restated Certificate of Incorporation of the registrant as filed with the Secretary of State of
the State of Delaware on January 30, 2002 (incorporated herein by reference from registrant's Registration Statement
on Form S-1 (File No. 333-73946), as filed with the SEC on November 23, 2002, as amended).
Second Amended and Restated Bylaws of the registrant (incorporated herein by reference from registrant's Annual
Report on Form 10-K for the year ended December 31, 2003, as filed with the SEC on March 15, 2004, as amended).
Form of Common Stock Certificate (incorporated herein by reference from registrant's Registration Statement on
Form S-1 (File No. 333-73946), as filed with the SEC on November 23, 2002, as amended).
Indenture governing 7.25% Senior Notes due 2018, including the form of 7.25% Senior Notes due 2018, dated April
13, 2010, among ManTech International Corporation, the Guarantors named therein, and The Bank of New York
Mellon Trust Company, N.A., as trustee (incorporated herein by reference from the registrant's Current Report on
Form 8-K, as filed with the SEC on April 13, 2010).
Credit Agreement, dated October 12, 2011, by and among the registrant and a syndicate of lenders, including Bank
of America, N.A., acting as administrative agent for the lenders (incorporated herein by reference from the registrant's
Current Report on Form 8-K filed with the SEC on October 13, 2011).
Retention Agreement, effective as of January 1, 2002, between George J. Pedersen and the registrant (incorporated
herein by reference from registrant's Registration Statement on Form S-1 (File No. 333-73946), as filed with the
SEC on November 23, 2001, as amended).
ManTech International Corporation 2012 Executive Compensation Plan, adopted on March 8, 2012 in which our
executive officers and certain key senior executives participate (incorporated herein by reference from registrant's
Current Report on Form 8-K, as filed with the SEC on March 14, 2012).
Management Incentive Plan of ManTech International Corporation 2011 Restatement (incorporated herein by
reference from registrant's Current Report on Form 8-K, as filed with the SEC on May 16, 2011).
Form of Grant of Non-Qualified Stock Options granted under the Management Incentive Plan (incorporated herein
by reference from the registrant's Annual Report on Form 10-K for the year ended December 31, 2011, as filed with
the SEC on February 24, 2012).
Standard Terms and Conditions for Non-Qualified Stock Options granted under the Management Incentive Plan
(incorporated herein by reference from registrant's Annual Report on Form 10-K for the year ended December 31,
2011, as filed with the SEC on February 24, 2012).
Form of Grant of Restricted Stock granted under the Management Incentive Plan (incorporated herein by reference
from registrant's Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC on
February 24, 2012).
Standard Terms and Conditions for Restricted Stock granted under the Management Incentive Plan (incorporated
herein by reference from registrant's Annual Report on Form 10-K for the year ended December 31, 2011, as filed
10.8*
with the SEC on February 24, 2012).
12.1‡ Ratio of Earnings to Fixed Charges.
21.1‡
23.1‡
24.1
Subsidiaries of the Registrant.
Independent Registered Public Accounting Firm Consent.
Power of Attorney (included on signature page).
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended.
The following materials from ManTech International Corporation's Annual Report on Form 10-K for the year ended
December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets
at December 31, 2012 and 2011; (ii) Consolidated Statement of Income for the Years Ended December 31, 2012,
2011 and 2010; (iii) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012,
2011 and 2010; (iv) Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December
31, 2012, 2011 and 2010; (v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011
and 2010; and (vi) Notes to Consolidated Financial Statements.**
31.1‡
31.2‡
32‡
101
* Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this report pursuant to item
15(a)(3).
76
‡ Filed herewith
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a
registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not
filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability
under those sections.
77
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
MANTECH INTERNATIONAL CORPORATION
By:
Name:
Title:
Date:
/s/ GEORGE J. PEDERSEN
George J. Pedersen
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
February 22, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated. Each person whose signature
appears below hereby constitutes and appoints each of George J. Pedersen and Kevin M. Phillips as his attorney-in-fact
and agent, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments
to this Report and to file same, with exhibits thereto and other documents in connection therewith, granting unto such
attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary
in connection with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his
substitutes may do or cause to be done by virtue hereof.
Name and Signature
Title
Date
/s/ GEORGE J. PEDERSEN
Chairman of the Board of Directors
February 22, 2013
George J. Pedersen
and Chief Executive Officer
(Principal Executive Officer)
/s/ KEVIN M. PHILLIPS
Executive VP and Chief Financial Officer
February 22, 2013
Kevin M. Phillips
(Principal Financial Officer)
/s/ JUDITH L. BJORNAAS
Judith L. Bjornaas
Deputy Chief Financial Officer
(Principal Accounting Officer)
/s/ RICHARD L. ARMITAGE
Richard L. Armitage
Director
/s/ MARY K. BUSH
Director
Mary K. Bush
/s/ BARRY G. CAMPBELL
Director
Barry G. Campbell
/s/ WALTER R. FATZINGER, JR.
Walter R. Fatzinger, Jr.
Director
/s/ DAVID E. JEREMIAH
Director
David E. Jeremiah
/s/ RICHARD J. KERR
Director
Richard J. Kerr
/s/ KENNETH A. MINIHAN
Kenneth A. Minihan
/s/ STEPHEN W. PORTER
Stephen W. Porter
Director
Director
78
February 22, 2013
February 22, 2013
February 22, 2013
February 22, 2013
February 22, 2013
February 22, 2013
February 22, 2013
February 22, 2013
February 22, 2013
Valuation and Qualifying Accounts
SCHEDULE II
Activities in the Company's allowance accounts for the years ended December 31, 2012, 2011 and 2010 were as follows
(in thousands):
Doubtful Accounts
Charged to
Costs and
Expenses
Balance at
Beginning of
Period
Deductions
Other*
Balance at
End of
Period
2010
2011
2012
$
$
$
8,120
8,946
9,729
90
5
—
(168)
(5)
—
904
$
783
$
(280) $
8,946
9,729
9,449
* Other represents doubtful account reserves released or recorded as part of net revenues for estimated customer disallowances.
79
EXHIBIT 31.1
I, George J. Pedersen, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of ManTech International Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 22, 2013
By:
Name:
Title:
/s/ George J. Pedersen
George J. Pedersen
Chairman of the Board of Directors
and Chief Executive Officer
EXHIBIT 31.2
I, Kevin M. Phillips, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of ManTech International Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 22, 2013
By:
Name:
Title:
/s/ Kevin M. Phillips
Kevin M. Phillips
Chief Financial Officer
EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the ManTech International Corporation (the “Company”) Annual Report on Form 10-K for the year
ending December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, George
J. Pedersen, Chairman of the Board and Chief Executive Officer of the Company, and Kevin M. Phillips, Chief Financial Officer
of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
By:
Name:
Title:
By:
Name:
Title:
/s/ George J. Pedersen
George J. Pedersen
Chairman of the Board of Directors
and Chief Executive Officer
/s/ Kevin M. Phillips
Kevin M. Phillips
Chief Financial Officer
Date: February 22, 2013
ManTech International Corporation
2012 Annual Report
Corporation inFormation
SharehoLder inFormation
Corporate Headquarters
ManTech International Corporation
12015 Lee Jackson Highway
Suite 800
Fairfax, VA 22033-3300
Main: 703-218-6000
Fax: 703-218-8296
Website
www.mantech.com
Employment
It is ManTech’s policy to recruit, hire,
employ, train and promote persons in all
job classifications without regard to race,
color, religion, sex, age, national origin,
disability or any other characteristics
protected by law.
Transfer Agent
Stockholders may obtain information with respect to share position, transfer
requirements, address changes, lost stock certificates and duplicate mailings by
writing or telephoning:
American Stock Transfer & Trust Co.
6201 15th Avenue, Brooklyn, NY 11219
Attn: Shareholder Services
800-937-5449 or 718-921-8124
www.amstock.com
Annual Meeting
ManTech’s Annual Meeting will be held on Thursday, May 9, 2013, 11:00 am ET,
at the Fair Lakes Hyatt, Fairfax, VA
Class A Common Stock
Stock symbol: MANT
Listed: The NASDAQ Stock Market LLC
Independent Auditors
Deloitte & Touche LLP
McLean, VA
Investor Communications
Investors seeking the Form 10-K and additional information about the
company may call 703-218-6000, write to Investor Relations at our corporate
headquarters, or send an email to investor@mantech.com. ManTech’s earnings
announcements, news releases, SEC filings and other investor information are
available in the Investors section of our website.
Forward-Looking Statement
This summary annual report contains “forward-looking” statements that ManTech believes to be within the definition in the Private Securities Litigation
Reform Act of 1995. Such statements involve substantial risks and uncertainties, many of which are outside of our control. Words such as “may,” “will,” “expect,”
“intend,” “anticipate,” “believe,” or “estimate,” or the negative of these terms or words of similar import are intended to identify forward-looking statements.
Although forward-looking statements in this summary annual report reflect our good-faith judgment, such statements can only be based on facts and
factors currently known by us and are inherently subject to risks and uncertainties. Actual results and outcomes may differ materially from the results
and outcomes we anticipate. Factors that could cause actual results to differ materially from the results we anticipate, include, but are not limited to, the
following: adverse changes or delays in U.S. government spending for programs we support due to cost cutting and efficiency initiatives and other efforts
to reduce federal government spending generally, uncertainty regarding the timing and nature of government action to complete the budget process
and otherwise address budgetary constraints, sequestration, or other factors; failure to compete effectively for new contract awards or to retain existing
U.S. government contracts; failure to obtain option awards, task orders or funding under contracts; delays in the competitive bidding process caused
by competitors’ protests of contract awards received by us; adverse changes in our mix of contract types; renegotiation, modification or termination of
our contracts, or failure to perform in conformity with contract terms or our expectations; failure to realize the full amount of our backlog or adverse
changes in the timing of receipt of revenues under contracts included in backlog; failure to maintain strong relationships with other contractors; failure
to successfully identify and execute future acquisitions; failure to successfully integrate recently acquired companies or businesses into our operations or
to realize any accretive or synergistic effects from such acquisitions; adverse changes in business conditions that may cause our investments in recorded
goodwill to become impaired; non-compliance with, or adverse changes in, complex U.S. government procurement laws and regulations; adverse results
of U.S. government audits or other investigations of our government contracts; adverse changes in our financing arrangements, such as increases in interest
rates and restrictions imposed by our outstanding indebtedness, including the ability to meet financial covenants, or inability to obtain new or additional
financing; and disruption of our business resulting from internal systems or service failures or breaches in customer systems, including as a result of cyber
or other security threats. These and other risk factors are more fully discussed in the section entitled “Risks Factors” in ManTech’s Annual Report on Form 10-K
previously filed with the Securities and Exchange Commission on Feb. 22, 2013, Item 1A of Part II of our Quarterly Reports on Form 10-Q, and, from time to
time, in ManTech’s other filings with the Securities and Exchange Commission.
We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this summary annual report. We
undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or
circumstances, changes in expectations or otherwise.