ManTech International Corporation
George J. Pedersen
Ch
Executive Chairman and Chairman
of the Board
A Message from George J. Pedersen
In 2019, ManTech marked another stellar year, with outstanding performance in supporting government agencies
charged with ensuring national and homeland security and improving the business of government. This success is
a tribute to our company’s total dedication to the mission, carried out by the best people in the business.
I am very proud to serve with this outstanding group of over 9,000 talented individuals. Great people, innovative
technology and a culture of commitment will continue to be the centerpiece of our corporate strategy, dedicated
to keeping America first. Our best-in-class talent and technology ensures success for our customers and the best
return to our shareholders.
Great People, Innovative Technology
ManTech Secured
TO OUR SHAREHOLDERS:
In 2019 ManTech once again delivered outstanding financial performance
with double-digit revenue growth, strong profitability, and exceptional
cash flow.
The principal factors driving our success: great people who share our
collective commitment to the mission, and innovative technologies that
continuously evolve to solve our customers’ most difficult challenges.
Our platform of outstanding talent and best-in-class capabilities elevated
ManTech’s position as a respected brand committed to delivering
differentiated services and solutions across full-spectrum cyber,
data collection and analytics, enterprise IT, systems engineering and
development, raising the bar on mission performance and security.
In the current environment of round-the-clock cyberattacks, security is
a foremost need and requirement of all government agencies, corporate
entities and end users worldwide. Through ManTech Secured, an
enterprise-wide initiative dedicated to setting the industry standard for
security, we are the trusted partner across U.S. Defense, Intelligence
Community and Federal Civilian customers. ManTech today has earned
recognition as an industry-leading government services contractor,
over 9,000-strong, with powerful organic and new business growth.
Great People, Innovative Technology
From left to right:
Judith Bjornaas, EVP & CFO – Kevin M. Phillips, President & CEO – George J. Pedersen, Executive Chairman
Rick Wagner, MCIS President – Matt Tait, MSS President
2019 RESULTS
In 2019, ManTech’s revenue rose 13 percent over
the past year to $2.2 billion, our fourth consecutive
year of strong organic growth. We reported operating
income of $138 million and net income of $114 million.
Diluted earnings per share was $2.83. Operating
cash flow was $221 million, and the company had $9
million in cash and cash equivalents and $37 million in
outstanding borrowings on its $500 million revolving-
credit facility.
Total contract awards reached $2.9 billion, driving a
healthy book-to-bill ratio of 1.3 and demonstrating
strong market demand for ManTech’s expertise across
the full span of our technology solutions. Among the
leading awards in 2019:
• $746 million in awards by the Intelligence
Community for enterprise IT and cyber, systems
engineering, and intelligence lifecycle support.
• $322 million five-year contract to provide mission
IT, systems integration, cyber operations and
analytics of geospatial intelligence for the U.S.
Marine Corps Expeditionary Operating Forces and
the Intelligence Community.
• $279 million seven-year contract by an agency of
the Department of Defense to provide cyber and
enterprise IT services.
• $176 million in contracts with the Navy and
Marine Corps Public Health Center and Defense
Health Agency (DHA) for solutions that accelerate
healthcare delivery for active duty military,
reservists and their families.
To build on this impressive record of success, ManTech
invested in the future. Significant acquisitions
positioned the company for rapid expansion in the
fast-growing markets of healthcare IT and intelligence
support.
ManTech International Corporation
In April we acquired Kforce Government Solutions
(KGS), a seasoned provider of transformation
management, data management and analytics in
support of federal health and defense missions,
notably the Department of Veterans Affairs. In August
we acquired the H2M Group, a respected company
in geospatial analysis, imagery and full motion video
analysis for the Intelligence Community. These
strategic acquisitions expanded our talent pool,
complemented our proven technology capabilities, and
will contribute to continued growth in these sectors in
the years ahead.
LEADERSHIP AND RECOGNITION
ManTech places strong emphasis on leadership that
inspires our people to deliver stellar performance, and
creates new opportunities for them to advance their
careers. We continue to attract the best and brightest
executives to drive strategic objectives.
In May 2019, we welcomed a new member to
our Board of Directors, Peter LaMontagne, an
accomplished private equity executive with more
than 20 years of leadership experience at technology
companies including ManTech that serve the U.S.
government. We also named Daniel E. Payne as Senior
Vice President and Chief Security Officer, in charge of
our ManTech Secured initiative.
ManTech leadership aggressively pursued initiatives
that inspire our people to greatness. Through our
education partner, Purdue University Global, we
launched our bachelor of science degree program in
analytics, the third such curriculum made available
tuition-free to eligible employees, and hailed
graduates from our first two Purdue programs, in
cyber and cloud. We also partnered with Skillsoft
to give all employees free access to thousands of
courses in technology and business management.
These initiatives succeeded in attracting and
retaining the finest talent to advance our strength in
today’s most lucrative fields of technology. In 2019,
Washingtonian Magazine named ManTech one of the
“50 Great Places to Work,” and Military Times ranked
us a “Best for Vets Company.” Such distinctions led to
Great People, Innovative Technology
the type of honor that resonates with customers, as well:
the 2019 American Security Today ‘ASTORS’ Platinum
Homeland Security Award for ACRETM as Best Breach
and Attack Simulation Platform in cybersecurity.
2020 VISION
ManTech has focused on and is positioned at the heart
of core technologies and solutions supporting missions
of national significance. With the GFY20 federal budget
in place and approved GFY21 budget levels, the federal
market remains strong. Our focus on national and
homeland security, as well as the security of critical
systems and data, will position ManTech for continued
growth. We remain committed to investing in the best
talent and enabling technologies needed to respond
to our customers’ need for agility, speed, and security
in the digital age. We aim to harvest the power of
technology to secure the future.
Kevin Phillips
President and CEO
FINANCIAL PERFORMANCE 2019
Cash Returned
to Shareholders
$43M
Revenue
$2.22B
Operating
Margin
6.2%
2019
Diluted
Earnings
per Share
$2.83
Bookings
$2.9B
Operating Cash
Flow
$221M
2019 ANNUAL REPORT
Company Competencies
ManTech takes pride in our reputation as a company that is committed to national and homeland
security and always puts our customers’ missions first. That is why the nation’s most important
customers look to ManTech to solve their most critical challenges.
Our Largest Customers
Certifications
Department of Defense
IS0 9001 IS0 20000
The Intelligence Community
CMMI Dev 1.3, Maturity Level 4
Federal Civilian Agencies
PCI Certified
C5ISR
• Engineering, Development and Integration
• Mission Planning & Execution
• Tactical Edge
• Platform Innovation
Cyber
• Cyber Resilience
• Offensive Cyber
• Cyber Analytics
• Cyber Compliance
• Cyber Range Services
Data Analytics
• Data Collection
• Analytics
• Machine Learning
• Neural Networks
Enterprise IT
• Business Intelligence and Analytics
• Integrated Cybersecurity Services
• Applications Development and Testing
• Cloud and Data Center Infrastructure Transformation
• Business Process Management and
Enterprise Managed Service Delivery
• Enterprise and Cloud Systems Integration
• Digital Workplace Transformation and
Enterprise Mobility Services
Global Support, Logistics and
Supply Chain Management
• Engineering and Sustainment
• Inspection and Quality Assurance
• Supply Support
• Secure Supply Chain
3PAO FedRAMP Certified
ISO 27000
Intelligence Lifecycle Support
• Multi-INT Support
• Document and Media Exploitation (DOCEX)
• Operational Platforms Support
• Multi-Disciplined Intelligence
• Counter-Intelligence
• Mission Management
Management Consulting
• Health IT
• Systems Engineering
• Technology and Transformation
• Environmental Sustainability
Security and Missions Operation
• Mission Assurance
• Program Protection
Software & Systems Development
• Software Development Lifecycle
• DevSecOps
• Cloud Broker Services
• Systems Management
• Operations and Maintenance
Systems Engineering
• Reliability and Maintainability
• Modeling, Simulation and Analysis
• Systems Engineering Lifecycle
• Structure-Based Analysis
• Human Factors Engineering
Training
• Training Support
• Logistics
ManTech International Corporation
Our Board of Directors
George J. Pedersen – Executive Chairman and Chairman of the Board of ManTech International Corporation
Kevin M. Phillips – President and Chief Executive Officer of ManTech International Corporation
Richard L. Armitage – President, Armitage International; Former Deputy Secretary of State; Former Assistant
Secretary of Defense
Mary K. Bush – Founder and President, Bush International, LLC
Barry G. Campbell – Former Chairman and Chief Executive Officer, Tracor Systems Technology, Inc.
gy,
y
,
Richard J. Kerr – Former Deputy Director and Officer, Central Intelligence Agency
Peter B. LaMontagne – Former CEO of Quantum Spatial
Lieutenant General Kenneth A. Minihan – USAF - Ret. - Managing Director at Paladin Capitol Group;
Former Director, National Security Agency
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, 2019
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
ManTech International Corporation
pp
(Exact name of registrant as specified in its charter)
__________________________________________
Delaware
(State or other jurisdiction
of incorporation)
2251 Corporate Park Drive
(Address of principal executive offices)
Herndon
VA
22-1852179
(IRS Employer
Identification No.)
20171
(Zip Code)
(703) 218-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock
Trading Symbol(s)
MANT
Name of each exchange on which registered
Nasdaq
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
uu
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes
No
d
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
Accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
ff
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2019 was $1.75 billion (based on the closing price of
$65.85 per share on June 30, 2019, as reported by the Nasdaq Global Select Market).
There were the following numbers of shares outstanding of each of the registrant's classes of common stock as of February 19, 2020: ManTech International
Corp. Class A Common Stock, $0.01 par value per share, 26,996,478 shares; ManTech International Corp. Class B Common Stock, $0.01 par value per share,
13,187,195 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 2020 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
Item 16. Form 10-K Summary
Signatures
Schedule II
Page
4
7
13
13
13
13
14
16
16
24
25
26
29
30
31
32
33
35
57
57
58
60
60
60
61
61
62
64
65
66
[THIS PAGE INTENTIONALLY LEFT BLANK]
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
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. We have not independently verified any of the market data obtained
from these third-party sources, nor have we validated any assumptions underlying such data.
Cautionary Note Regarding Forward-Looking Statements
All statements and assumptions contained in this Annual Report on Form 10-K that do not relate to historical facts constitute
"forward-looking statements." These statements can be identified by the fact that they do not relate strictly to historical or current
facts. Forward-looking statements often include the use of words such as "may," "will," "expect," "intend," "anticipate," "believe,"
"estimate," "plan" and words and terms of similar substance in connection with discussions of future events, situations or financial
performance. While these statements represent our current expectations, no assurance can be given that the results or events
described in such statements will be achieved.
Forward-looking statements may include, among other things, statements with respect to our financial condition, results of
operations, prospects, business strategies, competitive position, growth opportunities, and plans and objectives of management.
Such statements are subject to numerous assumptions, risks, uncertainties and other factors, many of which are outside of our
control, and include, without limitations, the risks and uncertainties discussed in Item 1A "Risk Factors" in Part I of this Annual
Report on Form 10-K.
Factors or risks that could cause our actual results to differ materially from the results we anticipate include, but are not limited
to, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
failure to maintain our relationship with the U.S. government, or the failure to compete effectively for new contract
awards or to retain existing U.S. government contracts;
inability to recruit and retain a sufficient number of employees with specialized skill sets or necessary security
clearances who are in great demand and limited supply;
adverse changes in U.S. government spending for programs we support, whether due to changing mission priorities,
socio-economic policies or federal budget constraints generally;
failure to compete effectively for awards procured through the competitive bidding process, and the adverse impact
of delays resulting from our competitors' protests of new contracts that are awarded to us;
disruptions to our business or damage to our reputation resulting from cyber attacks and other security threats;
failure to obtain option awards, task orders or funding under our contracts;
the government renegotiating, modifying or terminating our contracts;
failure to comply with, or adverse changes in, complex U.S. government laws and procurement regulations;
adverse results of U.S. government audits or other investigations of our government contracts;
failure to successfully integrate acquired companies or businesses into our operations or to realize any accretive or
synergistic effects from such acquisitions;
failure to successfully integrate acquired companies or businesses into our operations or to realize any accretive or
synergistic effects from such acquisitions;
failure to mitigate risks associated with conducting business internationally; and
adverse changes in business conditions that may cause our investments in recorded goodwill to become impaired.
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 made herein following the date of this Annual
Report, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.
3
Item 1.
Business
Corporate Overview and Background
We provide mission-focused technology solutions and services for U.S. defense, intelligence community and federal civilian
agencies. For over 50 years we have developed and delivered solutions that support national and homeland security missions.
Our principal areas of expertise include full-spectrum cyber, data collection & analytics, enterprise information technology (IT),
systems engineering and software application development. We provide differentiated technical capabilities, intimate knowledge
of our customers' missions, and extensive experience providing diverse sets of solutions and services, that help our customers
meet some of their greatest challenges. We provide services that support missions of national significance, such as military
operations readiness and wellness, terrorist threat detection, information security and border protection.
We were co-founded by George J. Pedersen in 1968 as a New Jersey corporation, starting with a single U.S. Navy contract.
We reincorporated as a Delaware corporation shortly before our initial public offering in February 2002. Since then we have
grown substantially. Our annual revenues have increased from approximately $400 million at the end of 2001 to $2.22 billion in
2019. Additional financial information is provided in this Annual Report under Item 8 “Financial Statements and Supplemental
Data.”
Our Solutions and Services
We combine deep domain understanding and technical capability to deliver comprehensive IT, systems engineering and other
services and solutions, primarily in support of mission-critical programs for the intelligence community, the Department of Defense
(DoD) and federal civilian agencies including the diplomatic, homeland security, healthcare and space communities. We integrate
our broad capabilities into tailored solutions to meet the evolving requirements of our customers' long-term programs. The following
solution sets are aligned with the long-term needs of our customers:
cyber;
enterprise IT;
software, application and systems development;
•
•
•
• multi-disciplined intelligence;
•
command, control, communications, computers, combat systems, intelligence, surveillance and reconnaissance
(C5ISR);
program protection and mission assurance;
systems engineering;
training; and
supply chain management and logistics.
•
•
•
•
Cyber
We provide full-spectrum cyber, encompassing defense, resilience, offense, analytics and compliance. Our cyber solutions
and services include security operations, threat intelligence, incident response and forensics, boundary defense, security systems
engineering, infrastructure security, and computer forensics and exploitation. Our professionals tackle some of the most challenging
problems facing the nation, including preventing, identifying and neutralizing external cyber-attacks, engineering tailored defensive
security solutions and controls, developing robust insider threat detection programs, creating enterprise vulnerability management
programs and supporting offensive and exploitation efforts. Our cyber capabilities include cyber hardening, survivability and
mission assurance. We are focused on delivering mission continuity in a cyber-contested environment utilizing artificial intelligence
(AI) and cognitive methods. Our forensics and incident response capabilities provide our customers with additional insight and
evidence for post-attack assessments, assisting with efforts to strengthen their security posture. Through ACRE®, our Advanced
Cyber Range Environment, we offer customers enhanced training and visibility into their own IT infrastructures (security design
and engineering, vulnerability analysis, software assurance) and arm them with information needed to deny, disrupt and degrade
attempts to compromise their business operations and protect their reputation. We also provide extensive, hands-on training and
cyber workforce development to help our customers align their resources to the 2018 National Cyber Strategy.
Enterprise IT
We develop, implement and sustain enterprise information technology systems on a global scale, leveraging technology to
improve mission performance, increase security and reduce costs for our customers. Solutions typically involve hardware and
software to support their core technology infrastructure, such as data centers, cloud services, e-mail or desktop computing and
managed services. We use our LAUNCHRAMP(R) enterprise cloud broker solution to speed IT transformation and positively
4
impact our customers' missions. Specific applications include IT service management, help desk, data center consolidation,
enterprise architecture, mobile computing and device management, network operations and infrastructure, virtualization/cloud
computing and migration, network and database administration, enterprise systems development and management, infrastructure
as a managed service, data collection and analytics, including predictive and other types of analytics. We evaluate our customers'
enterprise infrastructure with the goal of enhancing security, increasing efficiency, reducing system footprint and lowering total
cost of ownership. We are at the forefront of helping our customers migrate to new, innovative enterprise IT management
methodologies, including fully-outsourced managed services models.
Software, Application and Systems Development
We develop, modify and maintain software solutions and complex systems that link different computing systems and software
applications to act as a coordinated whole. This solution set includes a broad array of full lifecycle services, including requirements
analysis; planning, design, implementation, integration and enhancement; testing, deployment, maintenance and quality assurance;
and documentation and configuration management. Our software and systems development activities support all major software
development lifecycle methodologies including Agile, DevSecOps and other hybrid methodologies. As part of our application
development processes, we use modern techniques, such as microservices architecture to enable continuous deployment of large
and complex applications and enhances our ability to migrate and transform legacy applications into modernized platforms. We
develop software solutions and systems across many domains and mission-specific applications. Our experienced software
engineers and developers design, develop, integrate, operate and sustain mission-critical software applications and systems
worldwide for our defense, intelligence and federal civilian customers.
Multi-Disciplined Intelligence
We provide specialized professional and technical solutions and mission support services in the interest of national security.
Our solutions focus on data collection and analysis including support to strategic and tactical intelligence systems, networks and
facilities; development and integration of collection and analysis systems and techniques; and support to the development and
application of analytical techniques to counterintelligence, homeland security operations, human intelligence operations/training
and counterterrorist operations. We provide signals intelligence collection, analysis and dissemination, intelligence analysis and
linguistics support. We leverage technology advancements in automation and artificial intelligence to support data-centric
approaches to cyber threat intelligence and insider threat support. We develop, integrate and maintain advanced signal processing
systems to support classified programs and facilities that collect and process intelligence. We provide counterterrorism operations
support and counterintelligence analytical expertise.
Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance and Reconnaissance
We are a proven leader in the design, development, analysis, implementation and support of all aspects of C5ISR systems and
technology. Our experience includes land, sea, air, space and cyber domains, to include command-and-control infrastructure,
intelligence, surveillance and reconnaissance platforms and sensors (manned and unmanned), and the communication,
dissemination and analysis of data. Our C5ISR solutions and capabilities span the lifecycle continuum to include modeling and
simulation; test and evaluation; supporting telecommunications systems and terrestrial sensors; developing, testing and
incorporating new technology; and providing training for solutions needed by our customers. We have developed, tested, fielded
and supported systems for the U.S. government across the globe, and have provided C4ISR and subsequent C5ISR operations and
maintenance support for every major military deployment since Operation Desert Storm. We specialize in helping customers
develop computing capabilities at the tactical edge as well as leading research and development around hardening of all platforms
to support our customers' critical missions.
Program Protection and Mission Assurance
We support highly-classified programs with secrecy management and security infrastructure services. Our services include
vulnerability assessment, insider threat protection, exposure analysis, secrecy architecture design, security policy development
and implementation, lifecycle acquisition program security (OPSEC, INFOSEC, COMSEC and PERSEC), anti-tamper, export
compliance support, foreign disclosure, system security engineering, security awareness and training, comprehensive security
support services and technical certification and accreditation services. Additionally, as part of our program protection support, we
provide network architecture planning and implementation services and systems engineering services within secure environments
requiring the application of multi-level security policies across the enterprise. We provide comprehensive mission assurance in
the development, acquisition, manufacturing, testing, integration and site support for launch support and systems safety for mission-
critical systems. Our goal is to provide seamless, end-to-end security protections of national security's most sensitive programs.
5
Systems Engineering
With five decades of experience, we are recognized across the markets we serve for our operational, engineering and technical
expertise across major domains, including land, sea, air, space and cyberspace. We apply systems engineering across a wide array
of large-scale system development and acquisition programs used by government and industry. We provide world-class talent,
proven management and technical processes to manage some of the most complex projects throughout their lifecycle, from concept
through deployment. The systems engineering services we provide include requirement analysis, development and management;
systems development and integration; enterprise architecture and concept of operations; and systems engineering and technical
assistance. Our test and evaluation services are closely 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 and verification. We use digital representation of systems and the
resulting digital artifacts to sustain national defense systems, following the DoD's Digital Engineering Strategy.
Training
We deliver advanced training solutions using a range of environments including live, virtual, constructive, immersive and
gaming scenarios. We leverage dedicated subject matter experts, a virtual cyber training range, and our longstanding, acclaimed
learning center, ManTech University, in developing customized training solutions for our customers. We have also developed an
online interactive multimedia instruction authoring environment that allows us to create optimal environments for "sharable content
object reference" models to enhance e-learning. Our offerings include mobile training teams; instructional systems design; web-
based and instructor-led training; live, virtual, constructive training; and interactive courseware and simulations. We meet the
global mission support demands of our customers by providing training and education tools in the most effective manner for our
customers, whether in the classroom, in virtualized environments, or at customer locations in the U.S. and around the world.
Supply Chain Management and Logistics
We provide supply chain management and logistics services involving the use of sophisticated systems that secure the entire
supply chain, from supplies to data. Our comprehensive set of integrated logistics and supply chain management services include
supply chain management support (such as warehousing, logistics management, shipping/receiving and global property
management), maintenance and reset of ground vehicles and electronics, business process outsourcing, transportation using
contracted and government provided services and other field services support (including fielding, training and operations support).
Our tools and systems can predict requirements and provide secure, real-time tracking analysis and reporting data to meet our
customers' needs. We have overseen some of the most important mission-critical logistics and supply chain management efforts
for the U.S. government and have provided a full range of logistics and maintenance support across the globe.
Our Employees
Our customers' successes are the end result of the hard work of our talented and dedicated employees. At year end, our
workforce consisted of approximately 8,900 employees, 68% of whom hold security clearances and approximately 45% of whom
are veterans.
Our Customers
We derive the vast majority of our revenues from U.S. government customers. We have successful, long-standing relationships
with these customers, having supported many of them for almost half a century.
Backlog
At December 31, 2019, our backlog was $9.1 billion, of which $1.3 billion was funded backlog. At December 31, 2018, our
backlog was $8.4 billion, of which $1.3 billion was funded backlog.
We define backlog as our estimate of the remaining future revenue from existing signed contracts, assuming the exercise of
all options relating to such contracts and including executed task orders issued under Indefinite Quantity/Indefinite Delivery (ID/
IQ) contracts. We also include an estimate of revenue for solutions that we believe we will be asked to provide in the future under
the terms of ID/IQ contracts for which there are established patterns of revenues.
We define funded backlog as 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.
6
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 over a much longer period
of time.
A variety of circumstances or events may cause changes in the amount of our backlog and funded backlog, including the
execution of new contracts, the extension of existing contracts, the non-renewal or completion of current contracts, 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.
Seasonality
Our business is not seasonal. However, in order to avoid the loss of unexpended fiscal year funds it is not uncommon for
U.S. government agencies to award extra tasks or complete other contract actions in the weeks before September 30, which is the
end of the government fiscal year. 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 revenue in the first and fourth quarters of our fiscal
year.
Competitive Landscape
We compete in a market shaped by customer requirements and federal budget priorities and constraints. Our key competitors
currently include divisions of large defense contractors, as well as a number of large and 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 we bid
against these companies in other situations.
Available Information
Our internet address is www.mantech.com. Through links on 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). In addition, the SEC
maintains a website (www.sec.gov) that contains reports, proxy statements and other information we file electronically with the
SEC.
Item 1A.
Risk Factors
Set forth below are the risks that we believe are material to our investors. 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. Any of the following risks could materially and adversely affect our
business, financial condition, results of operations and prospects, as well as the actual outcome of matters as to which forward-
looking statements are made in this Annual Report.
The risks described below are not the only risks we face. 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. government for substantially all of our revenues. If our relationships with the U.S.
government are harmed, our business, future revenues and growth prospects could be adversely affected.
We derive the vast majority of our revenues from U.S. government customers, and we anticipate that U.S. government contracts
will be the primary source of our revenues for the foreseeable future. Any issue that compromises our relationship with the U.S.
government generally, or any U.S. government agency that we serve, could adversely and materially harm our business, prospects,
financial condition or operating results. Among the key factors in maintaining our relationships with U.S. government agencies
are our performance on our contracts and task orders, the strength of our professional reputation, compliance with applicable laws
and regulations, and the strength of our relationships with our customers and client personnel. To the extent our reputation or
relationships with U.S. government agencies is impaired, our revenue and operating profits could materially decline.
7
We may fail to attract and retain skilled and qualified employees with requisite specialized skill sets or security clearances,
which could impair our ability to effectively serve our clients, require more subcontracting work than is optimal, impact our
profitability and limit our growth prospects.
Our business depends in large part upon our ability to attract and retain sufficient numbers of employees who have advanced
IT and technical services skills. Often, these employees must also have some of the highest security clearances in the United
States. Cleared employees are in great demand (particularly as it relates to the limited supply of cleared personnel with certain IT
and technical service skills), and we compete intensely for such qualified personnel with other U.S. government contractors, the
U.S. government and private industry. The government and industry have recognized that the current process for obtaining security
clearances is time-consuming, inefficient and can present a risk to customer mission. While some improvements have been made
to the process in the last couple of years, security clearances at the highest levels may still take months or even years to complete.
We anticipate that such personnel may remain a limited resource for the foreseeable future. If we are unable to hire a sufficient
number of qualified employees or cannot obtain their appropriate security clearances in a timely manner, our ability to serve our
clients could be harmed, and we may not be able to grow our business. Additionally, if we cannot hire sufficient qualified employees
to staff our contracts, we may be required to engage more contracted personnel, which could reduce our profit margins. Even if
we are able to attract the requisite skilled employees, intense competition for such employees may result in attrition in our employee
ranks, and we may need to expend additional resources to hire, train and replace such personnel.
U.S. government spending and mission priorities could change in a manner that adversely affects our future revenues and
limits our growth prospects.
We depend on continued expenditures by the U.S. government on programs that we support. Spending levels on programs
that we support (including those related to intelligence, defense, homeland security, and federal health IT missions) have varied
over time, and our customers may reduce expenditures for our services for any number of reasons, to include changing mission
priorities, the availability of discretionary spending in light of the country’s growing debt and long-term fiscal challenges, and the
implementation of efficiency and cost reduction efforts. A reduction in U.S. government spending levels, or changes in spending
priorities, could adversely affect our business and impact our future revenues.
We encounter intense competition to win contracts and most of our contracts are awarded through competitive bidding processes;
our revenue and profitability may be adversely impacted if we fail to compete effectively for such awards, or if there are delays
as a result of our competitors' protests of contract awards that we receive.
We operate in a highly competitive industry, with contract awards typically subject to competitive bidding processes. We may
not be able to continue to win competitively awarded contracts at historic levels. We compete with larger companies who have
significant financial resources, as well as smaller, more specialized companies that may be able to concentrate their resources into
highly-skilled niche markets. Our competitors may be able to provide our customers with more desirable capabilities or better
contract terms than we can provide, including price, technical qualifications, past contract experience, geographic presence and
the availability of qualified professional personnel.
Our failure to compete effectively in competitive procurements could adversely impact our future revenues. Participating in
the competitive bidding process also involves costs, risks and uncertainties, including the cost, time and effort required to prepare
bids and proposals for contracts that may not ultimately be awarded to us; the need to expend resources or make financial
commitments (such as procuring leased premises) in advance of an award decision, or the need to bid on programs prior to the
completion of their design, which may result in execution challenges, cost overruns, or in the case of unsuccessful competitions,
the loss of committed costs; and the ability to accurately estimate the resources and costs structure required to service any contract
we are awarded. The loss of business to our competitors could adversely impact our revenues and, if we are forced to reduce our
prices, adversely impact our profitability.
In recent years, the competitive environment has also resulted in an increase in bid protests from unsuccessful bidders on
contract awards. It can take months to resolve protests by one or more of our competitors relating to contracts that are awarded
to us. Even where the protest is unsuccessful and the award to us is upheld, the resulting delay in startup and funding of the work
under such contracts may adversely impact our revenues and profitability.
Cyber attacks and other security threats could disrupt our business and impair our ability to effectively provide services to our
customers; as a leading provider of cyber security services to our customers, any significant cyber incident could damage our
reputation and have a material adverse effect on our business and financial results.
We create, implement and maintain IT and engineering systems, and provide services that are often critical to our customers'
8
operations, some of which involve classified or other sensitive information in intelligence, national security and other classified
or sensitive customer functions. Our network and systems are subject to continuous exposure to cyber and other security threats,
including computer viruses, attacks by individual and state-sponsored computer hackers and physical break-ins. We also face a
heightened risk of a security breach or disruption due to our custody of classified and other sensitive information. We, like other
government contractors, are regularly the target of cyber incidents, and these attempted cyber intrusions are expected to continue
to proliferate.
If we are unable to protect our network and systems from significant cyber attacks, or if we are unable to detect intrusion
attempts or other cyber incidents quickly and remediate those incidents successfully, we may experience one or more of the
following adverse effects:
•
•
•
•
•
loss of revenue due to adverse customer reaction;
exposure to claims for damages, or the incurrence of significant costs related to upgrading systems, networks and
our cyber security program generally;
loss of revenue due to the redeployment of staff for remediation efforts instead of work on billable contracts;
damage to our reputation, which could adversely impact our ability to attract or retain customers or market our
services that relate to the creation or maintenance of secure IT systems; and
be unable to successfully market services that rely on the creation and maintenance of secure IT systems.
While we maintain cyber risk insurance to provide some coverage for certain risks arising from cybersecurity breaches, there
is no assurance that such insurance would cover all or a significant portion of the costs or consequences associated with a
cybersecurity breach. In addition to these costs and the adverse effects described in this risk factor, a significant cyber breach
could result in one or more of our customers terminating or reducing the scope of our contracts with them.
Security breaches in customer systems could adversely affect our business.
Many of the programs we support and the systems we develop, install and maintain involve managing and protecting
information involved in intelligence, national security and other classified or sensitive customer functions. Losses from a security
breach in one of these systems could cause serious harm to our business, damage our reputation and impact our eligibility for
further work on critical systems for our current customers or for other U.S. government customers generally. Losses could also
exceed the policy limits of our errors and omissions and product liability insurance coverage. If our reputation is damaged or our
eligibility to compete for additional work is compromised our revenues could be adversely affected.
Congress may fail to approve budgets on a timely basis for the federal agencies we support which 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 government fiscal year on September 30, Congress
typically funds government operations pursuant to a continuing resolution, which allows federal government agencies to operate
at spending levels approved in the previous budget cycle. When the government operates under a continuing resolution, funding
we expect to receive from customers for current work may be delayed and new initiatives may be delayed or even canceled. The
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. A prolonged delay in Congressional budget approval could delay our customers’
procurement of our services and adversely impact our business and results of operations.
Our earnings and profitability may vary based on the mix of our contracts, and may be adversely affected if we fail to accurately
estimate and manage our costs, time and resources.
We generate revenues under different types of government contracts, including cost-reimbursable, time-and-materials and
fixed-price contracts. Our earnings and profitability may vary depending on changes in the amount of revenues we derive from
each type of contract, the nature of services or solutions provided, or the level of achievement of performance objectives required
to receive award fees. For example, cost-reimbursable contracts generally offer lower margin opportunities than fixed-price
contracts, but tend to minimize financial risk. However, to varying degrees, each contract type involves some risk of underestimating
the costs and resources necessary to fulfill the contract obligations. Our profitability is adversely impacted when we incur contract
costs that we cannot bill to our customers. While fixed-price contracts allow us to benefit from cost savings, these contracts also
increase our exposure to the risk of cost overruns. When bidding on proposals involving fixed-price contracts, we rely heavily on
our estimates of costs and the time required to complete the associated projects and make assumptions regarding technical issues.
Our failure to accurately estimate these costs or the resources and technology necessary to perform these contracts, or to effectively
manage and control our costs during performance of work could result, and in some instances has resulted, in reduced profits or
9
in losses. More generally, any increased or unexpected costs or unanticipated delays in connection with performing our contracts
(including costs and delays caused by factors outside of our control) could make our contracts less profitable than expected.
U.S. government contracts contain provisions giving our customers a variety of rights that are unfavorable to us, including
the ability to terminate a contract at any time for convenience.
U.S. government contracts contain provisions and are subject to laws and regulations that provide the government with rights
and remedies not typically found in commercial contracts. Among other rights, these contracts give the government the ability to:
•
•
•
•
•
•
•
terminate existing contracts for convenience, as well as for default;
reduce orders under, or otherwise modify, contracts or subcontracts;
decline to exercise an option to renew multi-year contracts or issue task orders under multiple award contracts;
suspend or debar us from doing business with the U.S. government or with a government agency;
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 are subject to complex laws and regulations, and if we fail to comply with these laws and regulations, we could be subject
to severe penalties and sanctions and harm our business.
As a government contractor, we are subject to numerous laws and regulations that govern how we conduct business with our
customers. The following are among the more noteworthy laws and regulations:
•
the Federal Acquisition Regulation and the Defense Federal Acquisition Regulation Supplement, which
comprehensively regulate the formation, administration and performance of U.S. government contracts;
• Truthful Cost or Pricing Data, 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-reimbursable U.S. 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;
•
•
the Foreign Corrupt Practices Act; and
the False Claims Act, which prohibits the submission of fraudulent claims to the government for payment or
approval. Actions under the False Claims Act may be brought by either the government or by individuals 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 be subject to contractual damages, fines, civil or criminal penalties
or administrative sanctions, and could harm our reputation. For more severe misconduct, sanctions and penalties may include the
termination of contracts, forfeiture of profits, the triggering of price reduction clauses, suspension of payments, fines and the
suspension or debarment from doing business with federal government agencies, any of which could adversely affect our business,
financial condition, operating results and future prospects.
Unfavorable results of U.S. government audits or other investigations could 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), Defense Contract Management Agency (DCMA) and other government
agencies routinely audit and investigate government contracts and contractor systems. These agencies review our contract
performance, cost structure and compliance with applicable laws, regulations and standards. The DCAA and DCMA also review
the adequacy of, and compliance with, internal control systems and policies, including 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,
10
while such costs already reimbursed must be refunded. If our internal control systems or policies are found to be non-compliant
or inadequate, payments may be withheld or suspended, or we may be subject to increased government scrutiny and approval
requirements that could delay or adversely affect our ability to invoice and receive timely payment for services we perform on
our contracts. Adverse findings by DCAA or DCMA may also impair our ability to compete for and win new contracts with the
U.S. government.
We may acquire businesses, and these transactions involve numerous risks and uncertainties that could adversely impact
ongoing operations.
As part of our operating strategy, we selectively pursue acquisitions. These transactions pose many risks, including:
•
•
•
•
•
•
our inability to identify suitable acquisition candidates at prices we consider attractive;
our inability to compete successfully for an identified acquisition candidate, consummate an acquisition or accurately
estimate the financial effect of acquisitions on our business;
difficulty retaining an acquired company's key employees, customers or contracts;
difficulty integrating acquired businesses, resulting in unforeseen difficulties and greater expense than anticipated;
our failure to discover or adequately assess liabilities of a business that we acquire; and
the need to record write-downs from future impairments of intangible assets, which could reduce our future reported
earnings.
Acquired entities may not achieve to the level of profitability or revenue that we anticipate. Additionally, we may not realize
anticipated synergies. If our acquisitions perform poorly, our business and financial results could be adversely affected.
We face risks associated with our international business, and our business operations in foreign countries involve considerable
risks and hazards.
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; business practices and customs that are unfamiliar or inconsistent with business practices in the U.S.; requirements
to provide up-front performance bonds (guaranteed by a letter of credit from our lender); difficulties in collecting receivables and
the lack of legal remedies in the event of contract disputes; adverse tax treatment; and additional compliance requirements relating
to international and U.S. laws.
We also provide services to the U.S. government in foreign countries that may be experiencing political unrest, war or terrorism.
In connection with these deployments, we may be exposed to increased risk of incurring liabilities arising from incidents involving
our employees or third parties. We may also incur additional costs in connection with such deployments, such as increased insurance
costs, the cost of liabilities that are in excess of or not covered by our insurance policies, or the costs of repatriation of our employees
or executives for reasons beyond our control.
Goodwill represents a significant asset on our balance sheet, and changes in future business conditions could cause these
investments to become impaired, requiring substantial write-downs that would reduce our operating income.
As of December 31, 2019, our goodwill was $1.2 billion. 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. 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, material
changes in our financial outlook, as well as events outside of our control, such as deteriorating market conditions for companies
in our industry, may indicate a potential impairment. When there is an impairment, we are required to write down the recorded
amount of goodwill, which is reflected as a charge against operating income.
Covenants in the instruments governing our revolving credit facility 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 million revolving credit facility. The maturity date for the credit agreement is August 17, 2022.
The credit agreement requires us to comply with specified financial covenants, including the maintenance of certain consolidated
total leverage ratios and a certain fixed charge coverage ratio, and contains negative covenants that, among other things, may limit
or impose restrictions on the ability of us to incur additional indebtedness, make investments, make acquisitions and undertake
certain other actions. Additionally, an event of default under the credit agreement could result in our creditors exercising rights
that could have a material adverse effect on our business.
11
Changes in tax law could adversely impact our results of operations.
We are subject to taxation in the U.S. and certain other foreign jurisdictions. Any future changes in applicable federal, state
and local, or foreign tax laws and regulations or their interpretation or application, including those that could have a retroactive
effect, could result in us incurring additional tax liabilities in the future. Any final determination of tax audits or related litigation
may be materially different than our current provisional amounts, which could materially affect our tax obligations and effective
tax rate.
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. In addition to the risk factors
already identified in this section of our Form 10-K, a number of additional factors could cause our revenues, cash flows and
operating results to vary from quarter-to-quarter, including:
•
•
•
•
fluctuations in revenues earned on fixed-price contracts and contracts with a performance-based fee structure;
timing of significant bid and proposal costs;
seasonal or quarterly fluctuations in our workdays and staff utilization rates; and
changes in the volume of purchase requests from customers for equipment and materials.
Because most of our expenses are fixed, cash flows from our operations may vary significantly as a result of changes in the
level of services we provide under existing contracts, as well as the number of contracts that are commenced, completed or
terminated during any quarter. Depending on the nature of the contract, we may incur significant operating expenses during the
start-up and early stages of large contracts and not receive corresponding payments from the customer 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.
We have maintained a regular cash dividend program since 2011. We anticipate continuing to pay quarterly dividends during
2020. However, any future payment of dividends, including the timing and amount of any such dividends, is at the discretion of
our Board of Directors and may depend upon our earnings, liquidity, financial condition, alternate capital deployment opportunities
or any other factors that our Board considers relevant. A change in our regular cash dividend program could have an adverse effect
on the market price of our common stock.
Mr. Pedersen, our Executive Chairman and Chairman of the Board, effectively controls us, and his interests may not be aligned
with those of other stockholders.
As of December 31, 2019, Mr. Pedersen owned approximately 33% 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. As of December 31, 2019, Mr. Pedersen beneficially owned 13,187,195 shares of Class B common and controlled
approximately 83% of the combined voting power of our stock. Accordingly, Mr. Pedersen controls the vote on substantially 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 us, regardless of whether a premium is offered over then-current market prices. Mr. Pedersen will also be
able to cause a change of control of us. 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 adversely affect the trading
price of our stock.
12
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 us, 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 our Board to issue preferred stock; the inability of stockholders to take action by written consent;
and advance notice requirements relating to director nominations or other proposals submitted by our stockholders.
Item 1B.
Unresolved Securities and Exchange Commission 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 do not own any facilities or real estate that are material to our operations.
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 U.S. 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
are 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 U.S.
government or a particular agency or civil or criminal proceedings seeking penalties and/or fines. Audits and investigations
conducted by the U.S. 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.
13
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. There is no established public market for our Class B common stock. As of February 19, 2020,
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 years 2019 and 2018, we declared and paid quarterly dividends, each in the amount of $0.27 and $0.25 per
share, respectively, on all issued and outstanding shares of common stock. For 2020, we anticipate we will continue paying
quarterly dividends, and on February 19, 2020, the Board of Directors declared a quarterly cash dividend in the amount of $0.32
per share; however any future dividends declared will be at the discretion of our Board of Directors and will depend, among other
factors, upon our earnings, liquidity, financial condition, alternate capital allocation opportunities or any other factors our Board
of Directors deems relevant.
Recent Sales of Unregistered Securities
We did not issue or sell any securities in fiscal year 2019 that were not registered under the Securities Act of 1933.
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
We did not purchase equity securities during the year ended December 31, 2019.
14
Performance Graph
The stock performance graph compares the cumulative total shareholder return of our common stock to the NASDAQ
Composite-Total Returns Index, Standard & Poor's MidCap 400 Index, Russell 2000 Index and Standard & Poor's 1500 IT
Consulting & Services Index. The period measured is December 31, 2014 to December 31, 2019. The graph assumes an investment
of $100 in our common stock and each of the indices with reinvestment of all dividends.
15
Item 6.
Selected Financial Data
The selected financial data presented for each of the five years ended December 31, 2019 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 (4)
Total assets
Long-term debt
2019 (1)
2018 (2)
Year Ended
December 31,
2017 (3)
2016
2015
(in thousands, except per share amounts)
$ 2,222,559
$ 1,958,557
$ 1,717,018
$ 1,601,596
$ 1,550,117
$
$
$
$
$
138,325
113,890
2.85
2.83
1.08
$
$
$
$
$
112,742
82,097
2.08
2.06
1.00
$
$
$
$
$
98,194
114,141
2.94
2.91
0.84
$
154,753
$
196,652
$
138,879
$ 1,191,259
$ 1,085,806
$ 1,084,560
$
$
$
$
$
$
$
90,963
56,391
1.48
1.47
0.84
229,659
955,874
$
$
$
$
$
$
$
84,886
51,127
1.36
1.36
0.84
189,276
919,591
$ 2,107,914
$ 1,803,871
$ 1,744,475
$ 1,598,464
$ 1,506,424
$
36,500
$
7,500
$
31,000
$
— $
—
(1) On January 1, 2019, we adopted Accounting Standards Codification (ASC) 842, Leases, using the modified retrospective
method at the beginning of the period of adoption, January 1, 2019, through the recognition of a lease obligation and
corresponding right of use asset. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842,
while prior periods amount were not adjusted and continue to be reported in accordance with ASC 840, Leases.
(2) On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective
method applied to those contracts that were not substantially complete as of January 1, 2018. Results for reporting periods
beginning after January 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to
be reported in accordance with ASC 605, Revenue Recognition.
(3) The Tax Cuts and Jobs Act, enacted on December 22, 2017, reduces the U.S. corporate tax rate from 35% to 21%
beginning in 2018. Due to the enactment of the Tax Cuts and Jobs Act, our income tax expense was reduced by $50.6 million
for the year ended December 31, 2017 from the re-measurement of our existing deferred tax assets and liabilities.
(4) Over the past five years, we completed 7 acquisitions. In aggregate, these acquisitions have added $343.6 million in
goodwill. For additional information on our recent acquisitions, see Note 5 to our consolidated financial statements in Item 8.
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 Supplementary Data." This
discussion contains forward-looking statements that involve risks and uncertainties. For a description of these forward-looking
statements, refer to Part I “Cautionary Note Regarding 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 those discussed elsewhere in this Annual Report.
Overview
We provide mission-focused technology solutions and services for U.S. defense, intelligence community and federal civilian
agencies. We excel in full-spectrum cyber, data collection & analytics, enterprise IT, systems and software engineering solutions
that support national and homeland security.
16
Approximately 98% of our revenues during the year ended December 31, 2019 were generated from contracts with the U.S.
government, or through prime contractors supporting the U.S. government. The U.S. government is the largest consumer of
services and solutions in the U.S. In government fiscal year (GFY) 2019, the U.S. government obligated approximately $355
billion on contracted services, a 6% increase from the prior year. Our business is impacted by the overall U.S. government budget
and the alignment of our capabilities and offerings with the U.S. government's spending priorities. The Department of Defense
(DoD) is the largest purchaser of services and solutions in the U.S. government. Federal spending, particularly the DoD, has
experienced six years of consecutive growth. In July 2019, Congress passed, and the President signed, legislation that increased
budgetary control caps for GFY 2020 and GFY 2021 above limits previously set by the Budget Control Act of 2011, effectively
ending the possibility of sequestration. The legislation also included an extension of the federal debt limit to July 2021. In
December 2019, Congress passed and the President signed into law, two appropriation bills funding the government through GFY
2020. The appropriations bill contained $705 billion excluding emergency funding in GFY 2020 for defense. The continued
budget clarity over the last few years has resulted in our customers making more award decisions and procuring services to meet
mission needs on a more regular and predictable basis. We believe the current appropriations and the Administration's stated
priorities for national and homeland security aligns favorably with our capabilities and offerings.
We continually monitor U.S. government spending and budgetary priorities to align our investments in new capabilities to
drive organic growth. We will selectively pursue acquisitions that broaden our domain expertise and service offerings and/or
establish relationships with new customers. In 2019 we acquired Kforce Government Solutions (KGS), a provider of services,
IT solutions, transformation and management consulting and data analytics - most notably in the healthcare IT market. During
2019, we also acquired H2M Group (H2M), a provider of intelligence and analysis services and solutions primarily to the National
Geospatial-Intelligence Agency. Since going public in 2002, we have acquired and integrated 30 businesses into our operations.
Our industry remains competitive on price. While there has been a trend away from the lowest-price technically acceptable
procurement model for a majority of our customers, contracts continue to be awarded through a competitive bidding process
(including indefinite delivery, indefinite quantity and other multi-award contracts), which could increase pricing pressure. To
ensure our cost structure remains competitive, we continually evaluate and adjust our levels of indirect spending to stay in line
with the expected business opportunities. Our industry also remains competitive with respect to attracting and retaining employees
with the necessary skills and security clearances to perform certain services that are a priority for our customers.
We classify indirect costs incurred as cost of services and general and administrative expenses in the same manner as such
costs are defined in our disclosure statements under the government's Cost Accounting Standards. Effective January 1, 2019, we
updated our disclosure statements with the DCMA, resulting in certain costs being classified differently either as cost of services
or as general and administrative expenses on a prospective basis. This change has caused a net increase in the reported cost of
services and a net decrease in reported general and administrative expenses in 2019 as compared to 2018; however, total operating
costs were not affected by this change.
Revenues
Substantially all of our revenues are derived from services and solutions provided to the U.S. government or to prime contractors
supporting the U.S. government, including services provided by our employees and our subcontractors, and solutions that include
third-party hardware and software that we purchase and integrate as a part of our overall solutions. Customer requirements may
vary from period-to-period depending on specific contract and customer requirements.
We provide our services and solutions under three types of contracts: cost-reimbursable; time-and-materials; and fixed-price.
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-and-materials contracts than cost-reimbursable contracts. Fixed-
price contracts generally offer higher profit margin opportunities but can involve greater financial risk because we bear the impact
of cost overruns in return for the full benefit of any cost savings.
Cost of Services
Cost of services primarily includes direct costs incurred to provide services and solutions to our 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.
17
Changes in the mix of services and equipment provided under our contracts can result in variability in the proportion that cost
of services bears to revenues. As we typically earn higher profits on our own labor services, we expect the ratio of cost of services
as a percentage 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 increases relative to our own labor services,
we expect the ratio of cost of services as a percentage of revenues to increase.
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 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 expenses 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 used 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 on our debt
and deferred financing charges.
Interest Income
Interest income is primarily from cash on hand and late invoice payments by the government.
Results of Operations
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
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, 2018 to
December 31, 2019.
REVENUES
Cost of services
General and administrative
expenses
OPERATING INCOME
Interest expense
Interest income
Other income (expense), net
INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND
EQUITY METHOD
INVESTMENTS
Provision for income taxes
Equity in earnings of unconsolidated
subsidiaries
NET INCOME
Year Ended
December 31,
2019
2018
2019
2018
Dollars
Percentages
(dollars in thousands)
Year-to-Year Change
2018 to 2019
Dollars
Percent
$ 2,222,559
$ 1,958,557
1,893,461
1,678,100
100.0%
85.2%
100.0% $
264,002
85.7%
215,361
190,773
138,325
(2,594)
450
(83)
167,715
112,742
(2,378)
161
80
136,098
(22,212)
110,605
(28,530)
4
22
$
113,890
$
82,097
18
8.6%
6.2%
0.1%
—%
—%
6.1%
1.0%
—%
5.1%
8.5%
5.8%
0.1%
—%
—%
5.7%
1.5%
—%
4.2% $
23,058
25,583
216
289
(163)
25,493
(6,318)
(18)
31,793
13.5 %
12.8 %
13.7 %
22.7 %
9.1 %
179.5 %
(203.8)%
23.0 %
(22.1)%
(81.8)%
38.7 %
Revenues
The primary driver of our increase in revenues relates to revenues from new contract awards, growth on existing contracts
and the acquisitions we completed during the year. These increases were offset by contracts and tasks that ended during the year
and reduced scope of work on some contracts including contracts with variable material purchase requirements. We expect revenues
to increase in 2020 due to recent and future new contract awards and growth on existing programs.
Cost of services
The increase in cost of services was primarily due to increases in revenues. As a percentage of revenues, direct labor costs
remained stable at 47% for the years ended December 31, 2019 and 2018. As a percentage of revenues, other direct costs, which
include subcontractors and third party equipment and materials used in the performance of our contracts, also remained stable at
39% for the years ended December 31, 2019 and 2018. In 2020, we expect cost of services as a percentage of revenues to be
comparable to 2019.
General and administrative expenses
The increase in general and administrative expenses was primarily due to increases to support the growth of our business,
infrastructure improvements, bad debt expense and legal matters. These increases were partially offset by lower amortization on
acquired intangibles and the reclassification of certain allocable expenses from general and administrative expenses to cost of
services related to a change in disclosed cost accounting practices with the Defense Contract Management Agency. As a percentage
of revenues, general and administrative expenses increased for the year ended December 31, 2019 as compared to the same period
in 2018. In 2020, we expect general and administrative expenses as a percentage of revenues to be comparable to 2019.
Provision for income taxes
Our effective tax rate is affected by recurring items, such as the relative amount of income we earn in various taxing jurisdictions
and their tax rates. It is also affected by discrete items that may occur in any given year, but are not consistent from year-to-year.
Our effective income tax rate was 16% and 26% for the years ended December 31, 2019 and 2018, respectively. The reduction
in our effective tax rate is due to an increase in research and development credits we claimed on previously filed tax returns and
will be claimed on our 2019 tax return. The increase in research and development credits is the result of a project we completed
during the fourth quarter of 2019 to improve the method by which we identify expenditures that qualify for the research and
development tax credit. We recognized $9.4 million in research and development credits related to tax years 2015-2018 and $2.5
million related to the 2019 tax year. While we expect this method to provide continued benefits in 2020, we expect our effective
tax rate to increase in relation to 2019 due to the research and development credits to be recognized being limited to a single tax
year. For additional information concerning the research and development tax credit, see Note 13 to our consolidated financial
statements in Item 8.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
To review the comparison of our results of operations for the fiscal year ended December 31, 2018 with our results of operations
for the fiscal year ended December 31, 2017, please refer to the section titled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Backlog
For the years ended December 31, 2019 and 2018 our backlog was $9.1 billion and $8.4 billion, respectively, of which $1.3
billion and $1.3 billion , respectively, was funded backlog. The increase in our backlog is due to our receipt of new contract awards
and our acquisitions. We believe our backlog, together with new contract awards, will support continued growth in our business.
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, 2019, our cash and cash equivalents balance was $8.9 million. There were $36.5 million in outstanding
19
borrowings under our revolving credit facility at December 31, 2019. At December 31, 2019, we were contingently liable under
letters of credit totaling $5.8 million, which reduced our ability to borrow under our revolving credit facility by that amount. The
maximum available borrowings under our revolving credit facility at December 31, 2019 were $457.7 million.
Generally, cash provided by operating activities is adequate to fund our operations, including payments under our regular
cash dividend program. Due to short-term fluctuations in our cash flows and level of operations, it may become necessary from
time-to-time to increase borrowings under our revolving credit facility to meet cash demands.
Cash Flows from Operating Activities
Our operating cash flow is primarily affected by our ability to invoice and collect from our clients 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. Our accounts receivable days sales outstanding (DSO) were 59 and 73 for the quarters ended December 31,
2019 and 2018, respectively. For the years ended December 31, 2019 and 2018, our net cash flows from operating activities were
$221.4 million and $93.4 million, respectively. The increase in net cash flows from operating activities during the year ended
December 31, 2019 when compared to the same period in 2018 was primarily due to timing of receivable collections and an
increase in operating income.
Cash Used in Investing Activities
Our cash used in investing activities consists primarily of business combinations, purchases of property and equipment and
investments in capitalized software for internal use. For the years ended December 31, 2019 and 2018, our net cash used in
investing activities were $214.9 million and $44.3 million, respectively. For the year ended December 31, 2019, our net cash used
in investing activities were primarily due to the acquisitions of Kforce Government Solutions and H2M Group and the purchase
of equipment to support managed IT service contracts, infrastructure and capitalized software for internal use. For the year ended
December 31, 2018, our net cash used in investing activities were primarily due to capital expenditures.
Cash Flows Used in Financing Activities
For the years ended December 31, 2019 and 2018, our net cash used in financing activities were $2.9 million and $53.3
million, respectively. For the year ended December 31, 2019, our net cash used in financing activities were primarily due to
dividends paid, offset by net borrowings under our revolving credit facility to fund our acquisitions this year and proceeds from
the exercise of stock options. For the year ended December 31, 2018, our net cash used in financing activities were primarily due
to repayment of borrowings and payments of dividends, which were partially offset by proceeds from the exercise of stock options.
Revolving Credit Facility
We maintain a credit agreement with a syndicate of lenders led by Bank of America, N.A., as sole administrative agent. The
credit agreement provides for a $500 million revolving credit facility, with a $75 million letter of credit sublimit and a $30 million
swing line loan sublimit. The credit agreement also includes an accordion feature that permits us to arrange with the lenders for
the provision of additional commitments. The maturity date is August 17, 2022.
Borrowings under our credit agreement are collateralized by substantially all the assets of us and our Material Subsidiaries
(as defined in the credit agreement) and bear interest at one of the following variable rates as selected by us at the time of borrowing:
a London Interbank Offer Rate (LIBOR) based rate plus market spreads (1.25% to 2.25% based on our consolidated total leverage
ratio) or Bank of America's base rate plus market spreads (0.25% to 1.25% based on our 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 us to comply with specified financial covenants, including the maintenance of certain
consolidated leverage ratios and a certain consolidated 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 other actions. As of, and during the fiscal years ending
December 31, 2019 and 2018, we were in compliance with our financial covenants under the credit agreement.
There was $36.5 million and $7.5 million outstanding on our revolving credit facility at December 31, 2019 and 2018,
respectively.
20
Capital Resources
We believe the capital resources available to us from cash on hand, our remaining 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. 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; and additional borrowings of debt or issuance of equity.
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 years ended December 31, 2019 and 2018, we declared and paid quarterly dividends in the amount of $0.27 and
$0.25 per share on both classes of common stock. On February 19, 2020, we declared a quarterly cash dividend in the amount of
$0.32 per share, to be paid on March 20, 2020. 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 of Directors deems relevant.
Off-Balance Sheet Arrangements
In the ordinary course of business, we use letters of credit to satisfy certain contractual terms with our customers. As of
December 31, 2019, $5.8 million in letters of credit were issued but undrawn. We have an outstanding performance bond in
connection with a contract between ManTech MENA, LLC and Jadwalean International Operations and Management Company
to fulfill technical support requirements for the Royal Saudi Air Force. This performance bond is guaranteed by a letter of credit
in the amount of $5.7 million.
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 U.S.
generally accepted accounting principles (GAAP). 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 account for a contract when both we and the customer approve and commit; our rights and those of the customer are
identified, payment terms are identified; the contract has commercial substance; and collectability of consideration is probable.
At contract inception, we identify the distinct goods or services promised in the contract, referred to as performance obligations.
Then we determine the transaction price for the contract; the consideration to which we can expect in exchange for the promised
goods or services in the contract. The transaction price can be a fixed or variable amount. It is common for our contracts to contain
award fees, incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts
generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based
upon customer discretion. We estimate variable consideration at the most likely amount to which we expect to be entitled. We
include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable
consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment
of our anticipated performance and historical, current and forecasted information that is reasonably available to us. The transaction
price is allocated to each distinct performance obligation using our best estimate of the standalone selling price for each distinct
good or service promised in the contract. The primary method used to estimate standalone selling price is the expected cost plus
21
a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate
margin for that distinct good or service promised. Revenue is recognized when, or as, the performance obligation is satisfied.
We recognize revenue over time when there is a continuous transfer of control to our customer. For our U.S. government
contracts, this continuous transfer of control to the customer is supported by clauses in the contract that allow the U.S. government
to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any
work in process. When control is transferred over time, revenue is recognized based on the extent of progress towards completion
of the performance obligation. Based on the nature of the products and services provided in the contract, we use our judgment to
determine if an input measure or output measure best depicts the transfer of control over time. For services contracts, we typically
satisfy our performance obligations as services are rendered. We typically use a cost-based input method to measure progress.
Contract costs include labor, material and allocable indirect expenses. Revenue is recognized proportionally as contract costs are
incurred plus estimated fees. For time-and-material contracts, we bill the customer per labor hour and per material, and revenue
is recognized in the amount invoiced since the amount corresponds directly to the value of our performance to date. For stand-
ready service contracts, a time-elapsed output method is used to measure progress, and revenue is recognized straight-line over
the term of the contract. If a contract does not meet the criteria for recognizing revenue over time, we recognize revenue at a point
in time. Revenue is recognized at the point in time when control of the good or service is transferred to our customer. We consider
control to transfer when we have a present right to payment and our customer has legal title. Determining a measure of progress
and when control transfers requires us to make judgments that affect the timing of when revenue is recognized. Essentially all of
our contracts satisfy their performance obligations over time.
Contracts are often modified to account for changes in contract specifications and requirements. Contract modifications
impact the contact when the modification either creates a new performance obligation or changes the existing enforceable rights
and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance
obligation to which it relates is recognized as a cumulative adjustment to revenue and profit. Furthermore, a significant change
in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts
in the period identified. The impact of adjustments in contract estimates can be reflected in either revenue or operating expenses
on our consolidated statement of income.
We have an Estimate at Completion process in which management reviews the progress and execution of our performance
obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract
matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes
in estimates of revenue and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve
the contract milestones and other technical contract requirements. Management must make assumptions and estimates regarding
labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to
complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer
and overhead cost rates, among other variables. A significant change in one or more of these estimates could affect the profitability
of our contracts.
Results for periods prior to January 1, 2018 were reported in accordance with ASC 605. Revenue for cost-reimbursable
contracts were recorded as reimbursable costs were incurred, including an estimated share of the applicable contractual fees earned.
For performance-based fees under cost-reimbursable contracts, we recognized 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, or upon approval by the customer. For time-and-materials contracts,
revenue was recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred.
For long-term fixed-price contracts, revenue was recognized at a rate per unit as the units were delivered or by other methods to
measure services provided. Revenue from other long-term fixed-price contracts were recognized ratably over the contract period
or by other appropriate methods to measure services provided. Contract costs were 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, Revenue
Recognition - Construction-Type and Production-Type Contracts, we applied the percentage of completion method. Under the
percentage of completion method, income was 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 required estimating the total revenue and total
contract cost at completion of the contract. These estimates were periodically reviewed and revisions were made as required using
the cumulative catch-up method. The impact on revenue and contract profit as a result of these revisions was included in the
periods in which the revisions were made. Estimated losses on contracts at completion were recognized when identified. In certain
circumstances, revenue was recognized when contract amendments were not finalized.
Accounting for Business Combinations, Goodwill and Other Intangible Assets
The purchase price of an acquired business is allocated to the tangible assets, financial assets and separately recognized
22
intangible assets acquired less liabilities assumed based upon their respective fair values, with the excess recorded as goodwill.
Determining the fair value of assets acquired and liabilities assumed requires significant judgment, which includes, among other
factors, analysis of historical performance and estimates of future performance. These factors may cause final amounts to differ
materially from original estimates. In some cases, we use discounted cash flow analyses, which are based on our best estimate of
future revenue, earnings and cash flows as well as our discount rate adjusted for risk.
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.
In reviewing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence
of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit
is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely
than not, the entity is then required to perform the existing two-step quantitative impairment test (described below), otherwise no
further analysis is required. We also may elect not to perform the qualitative assessment and, instead, proceed directly to the two-
step quantitative impairment test.
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 value (including goodwill). If the reporting unit's fair
value exceeds its carrying value, no further procedures are required. However, if the reporting unit's fair value is less than its
carrying value, an impairment of goodwill may exist, requiring a second step to be performed. Step two of this test measures the
amount of the impairment loss, if any. Step two of this test requires the allocation of the reporting unit's fair value to its assets
and liabilities, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of
goodwill as if the reporting unit were being acquired in a business combination. If the implied fair value of goodwill is less than
the carrying value, the difference is recorded as a goodwill impairment charge in operations.
The fair values of the reporting units are determined based on a weighting of the income approach, market approach and
market transaction approach. 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 us. Valuation ratios, which relate market prices to selected financial statistics
derived from comparable companies, are selected and applied to us 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 provides a reasonable basis for comparison to us. Valuation ratios, which relate market
prices to selected financial statistics derived from comparable companies, are selected and applied to us 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 our 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), and then assess the reasonableness of our implied control premium.
We have elected to perform our annual review as of October 31st of each calendar year. The results of our annual goodwill
impairment test as of October 31, 2019 indicated that the estimated fair value of each reporting unit substantially exceeded its
respective carrying value. 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 that could cause the fair value of our long-lived assets to decrease include: changes in our business environment or market
conditions; a material change in our financial outlook, including declines in expected revenue growth rates and operating margins;
or a material decline in the market price for our stock. 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 our recorded
goodwill, differences in assumptions may have a material effect on the results of our goodwill impairment analysis.
23
Accounting for 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% likelihood of being realized upon ultimate settlement
with the relevant tax authority. The determination that a tax position meets the "more likely than not" criteria requires a significant
amount of judgment, which may differ significantly from what is ultimately accepted by the relevant taxing authority.
Recently Issued But Not Yet Adopted Accounting Standards Updates
For information on the recently issued but not yet adopted Accounting Standards Updates, see Note 2 to our consolidated
financial statements in Item 8.
Contractual Obligations
Our contractual obligations as of December 31, 2019 are as follows (in thousands):
Contractual Obligations
Total
Payments Due By Period
Less than 1
Year
1-3 Years
3-5 Years
More than 5
Years
Operating lease obligations (1)
$
143,109
$
32,770
$
64,155
$
37,961
$
8,223
Debt obligations (2)
Accrued defined benefit obligations (3)
Finance lease obligations (1)
Other long-term liabilities (4)
36,500
749
507
377
—
83
160
24
36,500
158
306
353
—
145
41
—
—
363
—
—
Total
$
181,242
$
33,037
$
101,472
$
38,147
$
8,586
(1) See Note 4 to our consolidated financial statements in Item 8 for additional information regarding leases.
(2) We may elect to pay all of or a portion of this obligation earlier than contractually required. See Note 9 to our consolidated
financial statements in Item 8 for additional information regarding debt and related matters.
(3) Includes 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. See
Note 12 to our consolidated financial statements in Item 8 for additional information regarding retirement plans.
(4) Excludes approximately $9.6 million of gross unrecognized tax benefits as we are not able to reasonably estimate the timing
of future cash flows to such unrecognized tax benefits. See Note 13 to our consolidated financial statements in Item 8 for
additional information regarding gross unrecognized tax benefits. Excludes finance lease liabilities-long term.
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, 2019, we had $36.5 million outstanding 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 a $0.2 million effect on our interest
expense for the year ended December 31, 2019.
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.
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.
24
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, 2019 and 2018
Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2019, 2018 and
2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Page
26
29
30
31
32
33
35
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of ManTech International Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ManTech International Corporation and subsidiaries (the
"Company") as of December 31, 2019 and 2018, 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, 2019, and the related notes
and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity
with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 21, 2020, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Income Taxes - Unrecognized Tax Benefits - Refer to Notes 2 and 13 to the financial statements
Critical Audit Matter Description
The Company’s other long-term liabilities includes unrecognized tax benefits related to research and development tax credits.
During the year ended December 31, 2019, the Company recognized an increase in unrecognized tax benefits of approximately
$7.7 million related to an increase in research and development tax credits available for tax years 2016-2018 and $1.8 million for
the 2019 tax year. The Company is subject to examination by the Internal Revenue Service (“IRS”) for years subsequent to 2014.
The Company’s measurement of unrecognized tax benefits involves significant estimates and management judgment and includes
complex considerations of the Internal Revenue Code, related regulations, case law, and prior-year audit settlements. Given the
complexity and the subjective nature of the research and development tax credits that remain open for examination by the IRS,
evaluating management’s estimates relating to their determination of unrecognized tax benefits required extensive audit effort and
a high degree of auditor judgment, including involvement of our income tax specialists.
26
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures to evaluate management’s estimates of unrecognized tax benefits related to research and development
tax credits included the following, among others:
• We evaluated the appropriateness and consistency of management’s methods and assumptions used in the identification,
recognition, measurement, and disclosure of unrecognized tax benefits, which included testing the effectiveness of the related
internal controls.
• With the assistance of our income tax specialists:
We read and evaluated management’s documentation, including relevant accounting policies and information obtained
by management from outside tax specialists, that detailed the computational basis of the unrecognized tax benefits.
We evaluated the reasonableness of management’s judgments regarding the future resolution of the unrecognized tax
benefits, including an evaluation of the technical merits of the unrecognized tax benefits.
We evaluated whether management had appropriately considered new information that could significantly change the
recognition, measurement or disclosure of the unrecognized tax benefits.
We evaluated the reasonableness of management’s estimates by considering how tax law, including statutes, regulations
and case law, impacted management’s judgments.
• We tested the mathematical accuracy of management’s calculations.
Revenue Recognition - Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue on contracts over time when there is a continuous transfer of control to the customer over the
duration of the contract as the services are rendered. The accounting conclusions for contracts involves judgment, particularly as
it relates to determining the amount, timing and presentation of revenue that will be recognized for each performance obligation
within the contract, and the distinct number of performance obligations represented by the contract.
On certain contracts, revenue is recognized over time using a cost-based input method that measures the extent of progress towards
completion of a performance obligation. Contract costs include labor, material and allocable indirect expenses. Revenue is
recognized proportionally as contract costs are incurred plus estimated fees. Management must make assumptions and estimates
regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length
of time to complete the performance obligation, execution by subcontractors, the availability and timing of funding from our
customer and overhead cost rates, among other variables. A significant change in one or more of these estimates could affect the
profitability of the Company’s contracts.
Given the judgments necessary to determine the amount, timing and presentation of revenue and to estimate total costs and fees
for the performance obligations that recognize revenue using a cost-based input method, auditing such estimates required extensive
audit effort due to the volume and complexity of these contracts and a high degree of auditor judgment when performing audit
procedures and evaluating the results of those procedures. For all contracts, understanding and differentiating the number of
performance obligations contained in the contract represented a high degree of auditor judgment because of the variety of contracts
and services promised and the interrelationship among those elements.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s conclusion on amount, timing and presentation of revenue recognition, as well as
the estimates of total costs and fees for the performance obligations that recognize revenue using a cost-based input method
included the following, among others:
• We tested the effectiveness of controls over contract revenue, including management’s controls over the initial setup of new
contract arrangements and the estimates of total costs and fees for performance obligations.
• We developed an expectation of revenue and compared it to the recorded balance.
•
For a selection of contracts we performed elements of the following for each contract:
Evaluated the terms and conditions of each contract and the appropriateness of the accounting treatment in accordance
with generally accepted accounting principles by:
Inspecting the executed contract to test that the facts on which management’s conclusions were reached were
consistent with the actual terms and conditions of the contract.
Evaluating the contract within the context of the five-step model prescribed by ASC 606, Revenue from Contracts
with Customers, and evaluating whether management’s conclusions were appropriate by evaluating the nature
of the promises within the contract, the interrelationship of the promised services provided, the pattern by which
obligations are fulfilled, the number of performance obligations identified, and which party is responsible for
27
fulfillment.
Involving industry experts in evaluating the appropriateness of management’s conclusions.
Compared the transaction price to the consideration expected to be received based on current rights and obligations under
the contracts and any modifications that were agreed upon with the customers.
Tested the accuracy and completeness of the costs incurred to date for the performance obligation.
Evaluated the estimates of total cost and fees for the performance obligation by:
Comparing costs incurred to date to the costs management estimated to be incurred by that date.
Evaluating management’s ability to achieve the estimates of total cost and fees by performing corroborating
inquiries with the Company’s project managers, and comparing the estimates to management’s work plans.
Comparing management’s estimates for the selected contracts to costs and fees of similar performance
obligations, when applicable.
Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.
• We analyzed adjustments in contract estimates recorded during the year to assess whether such adjustments were the result
of changes in facts and circumstances and not estimates that were previously inaccurate.
Valuation of Acquired Intangible Assets - Refer to Notes 2 and 5 to the financial statements
Critical Audit Matter Description
During 2019 the Company completed the acquisitions of Kforce Government Solutions, Inc. and H2M for approximately $114.6
million and $38.5 million, respectively (collectively referred to as “the acquired entities”). The Company accounted for the
acquisitions under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on their respective fair values, including customer relationship and backlog
intangible assets with an aggregate fair value of $46.6 million. The Company estimated the fair value of the customer relationship
and backlog intangible assets using the excess earnings method (income approach), which is a specific discounted cash flow
method. The fair value determination of the customer relationship and backlog intangible assets required management to make
significant estimates and assumptions related to future revenue, earnings and cash flows, as well as discount rates adjusted for
risk.
We identified the customer relationship and backlog intangible assets for the acquired entities as a critical audit matter because
of the significant estimates and assumptions management made to determine the fair value these assets. This required a high degree
of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing
audit procedures to evaluate the reasonableness of management’s forecast of future revenue, earnings and cash flows, and the
selection of discount rates adjusted for risk.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecast of future cash flows and the selection of customer attrition rates and discount rates
for the customers relationships and backlog intangible assets for the acquired entities included the following, among others:
• We tested the effectiveness of controls over the valuation of the customer relationship and backlog intangible assets, including
management’s controls over forecasts of future cash flows and the selection of discount rates.
• We assessed the reasonableness of management’s forecast of future cash flows by comparing the projections to historical
results.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies and (2)
discount rates, which included testing the source information underlying the determination of the discount rates, testing the
mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the
discount rates selected by management.
/s/ Deloitte & Touche LLP
Mclean, Virginia
February 21, 2020
We have served as the Company's auditor since 1999.
28
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share and Per Share Amounts)
December 31,
2019
2018
ASSETS
$
8,854
$
Cash and cash equivalents
Receivables—net
Taxes receivable—current
Prepaid expenses
Other current assets
Total Current Assets
Goodwill
Other intangible assets—net
Operating lease right of use assets
Property and equipment—net
Employee supplemental savings plan assets
Investments
Other assets
TOTAL ASSETS
LIABILITIES
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses
Accrued salaries and related expenses
Operating lease obligations—current
Contract liabilities
Total Current Liabilities
Deferred income taxes
Operating lease obligations—long term
Long term debt
Accrued retirement
Other long-term liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
398,976
21,996
20,030
4,878
454,734
1,191,259
196,778
117,728
85,631
36,777
11,550
13,457
5,294
405,378
—
23,398
5,915
439,985
1,085,806
171,962
—
51,427
30,501
11,830
12,360
$
2,107,914
$
1,803,871
$
146,016
$
126,066
97,298
29,047
27,620
299,981
131,782
103,148
36,500
35,552
10,309
617,272
89,058
—
28,209
243,333
108,956
—
7,500
30,999
11,889
402,677
Common stock, Class A—$0.01 par value; 150,000,000 shares authorized; 27,235,860 and
26,817,513 shares issued at December 31, 2019 and 2018; 26,991,747 and 26,573,400
shares outstanding at December 31, 2019 and 2018
Common stock, Class B—$0.01 par value; 50,000,000 shares authorized; 13,187,195 and
13,188,045 shares issued and outstanding at December 31, 2019 and 2018
Additional paid-in capital
Treasury stock, 244,113 and 244,113 shares at cost at December 31, 2019 and 2018
Retained earnings
Accumulated other comprehensive loss
TOTAL STOCKHOLDERS' EQUITY
272
132
525,851
(9,158)
973,767
(222)
1,490,642
268
132
506,970
(9,158)
903,084
(102)
1,401,194
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
2,107,914
$
1,803,871
See notes to consolidated financial statements.
29
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 AND
EQUITY METHOD INVESTMENTS
(Provision) benefit for income taxes
Equity in earnings of unconsolidated subsidiaries
NET INCOME
BASIC EARNINGS PER SHARE:
Class A common stock
Class B common stock
DILUTED EARNINGS PER SHARE:
Class A common stock
Class B common stock
Year Ended
December 31,
2019
2018
2017
$
2,222,559
$
1,958,557
$
1,717,018
1,893,461
1,678,100
190,773
138,325
(2,594)
450
(83)
136,098
(22,212)
4
113,890
2.85
2.85
2.83
2.83
$
$
$
$
$
167,715
112,742
(2,378)
161
80
110,605
(28,530)
22
82,097
2.08
2.08
2.06
2.06
$
$
$
$
$
1,463,599
155,225
98,194
(1,375)
104
319
97,242
16,859
40
114,141
2.94
2.94
2.91
2.91
$
$
$
$
$
See notes to consolidated financial statements.
30
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS):
Translation adjustments, net of tax
Cumulative-effect adjustment for adoption of Accounting Standards
Update 2018-02
Actuarial gain (loss) on defined benefit pension plans, net of tax
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
$
Year Ended
December 31,
2019
2018
2017
$
113,890
$
82,097
$
114,141
(77)
(24)
(19)
(120)
113,770
(27)
—
245
218
$
82,315
$
(55)
—
(84)
(139)
114,002
See notes to consolidated financial statements.
31
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
Common Stock, Class A
At beginning of year
Stock option exercises
Stock-based compensation expense
At end of year
Common Stock, Class B
At beginning of year
At end of year
Additional Paid-In Capital
At beginning of year
Stock option exercises
Stock-based compensation expense
Payment consideration to tax authority on employees' behalf
Cumulative-effect adjustment for adoption of Accounting Standards
Update 2016-09
At end of year
Treasury Stock, at cost
At beginning of year
At end of year
Retained Earnings
At beginning of year
Net income
Dividends
Cumulative-effect adjustment for adoption of Accounting Standards
Update 2014-09
Cumulative-effect adjustment for adoption of Accounting Standards
Update 2016-09
At end of year
Accumulated Other Comprehensive Loss
At beginning of year
Translation adjustments, net of tax
Cumulative-effect adjustment for adoption of Accounting Standard
Update 2018-02
Actuarial gain (loss) on defined benefit pension plans, net of tax
At end of year
Total Stockholders' Equity
2019
December 31,
2018
2017
$
268
$
263
$
3
1
272
132
132
4
1
268
132
132
506,970
12,892
7,492
(1,503)
492,030
12,591
5,072
(2,723)
—
—
258
5
—
263
132
132
471,906
13,619
6,319
—
186
525,851
506,970
492,030
(9,158)
(9,158)
903,084
113,890
(43,207)
—
—
(9,158)
(9,158)
860,027
82,097
(39,627)
587
—
973,767
903,084
(102)
(77)
(24)
(19)
(222)
1,490,642
$
$
(320)
(27)
—
245
(102)
1,401,194
$
(9,158)
(9,158)
778,710
114,141
(32,709)
—
(115)
860,027
(181)
(55)
—
(84)
(320)
1,342,974
See notes to consolidated financial statements
32
MANTECH INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
Noncash lease expense
Deferred income taxes
Stock-based compensation expense
Bad debt expense
Contract loss reserve
Loss on sale and retirement of property and equipment
Equity in (earnings) of unconsolidated subsidiaries
Change in assets and liabilities—net of effects from acquired businesses:
Receivables-net
Taxes receivable—current
Prepaid expenses
Other current assets
Employee supplemental savings plan asset
Accounts payable and accrued expenses
Accrued salaries and related expenses
Operating lease obligations
Contract liabilities
Accrued retirement
Other long-term liabilities
Other
Net cash flow from operating activities
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Acquisition of businesses-net of cash acquired
Purchases of property and equipment
Deferred contract costs
Investment in capitalized software for internal use
Proceeds from equity method investment
Proceeds from corporate owned life insurance
Payments to acquire investments
Proceeds from sale of property and equipment
Net cash used in investing activities
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Borrowings under revolving credit facility
Repayments under revolving credit facility
Dividends paid
Proceeds from exercise of stock options
Payment consideration to tax authority on employee's behalf
Principal paid on financing leases
Debt issuance costs
Net cash flow from (used in) financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
33
Year Ended
December 31,
2018
2017
2019
$ 113,890
$
82,097
$ 114,141
55,879
27,619
15,739
7,493
3,000
(1,481)
171
(4)
24,660
(21,996)
419
4,060
(6,297)
10,850
2,796
(28,520)
(589)
4,553
9,380
(216)
221,406
(152,851)
(54,795)
(3,878)
(3,677)
283
21
—
—
(214,897)
624,000
(595,000)
(43,205)
12,895
(1,503)
(136)
—
(2,949)
3,560
5,294
8,854
$
52,569
—
11,762
5,073
—
—
75
(22)
(87,098)
18,732
(613)
(1,321)
1,754
5,327
2,095
—
6,110
(3,518)
1,384
(967)
93,439
(5,279)
(30,114)
(5,233)
(5,018)
—
1,300
—
—
(44,344)
575,500
(599,000)
(39,624)
12,595
(2,723)
—
—
(53,252)
(4,157)
9,451
5,294
$
$
33,792
—
(24,815)
6,319
—
—
76
(40)
18,643
(7,725)
(3,619)
5,103
(4,172)
(541)
13,095
—
1,177
3,936
(1,976)
(436)
152,958
(177,193)
(31,118)
(2,877)
(7,744)
—
—
(110)
3
(219,039)
136,500
(105,500)
(32,705)
13,624
—
—
(1,323)
10,596
(55,485)
64,936
9,451
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest
Noncash investing and financing activities:
Noncash investing activities
Operating lease obligations arising from obtaining right of use assets
Finance lease obligations arising from obtaining right of use assets
Deferred contract costs incurred but not yet paid
$
$
$
$
$
2,436
5,981
31,010
368
$
$
$
$
— $
2,315
340
$
$
— $
— $
— $
1,166
1,345
—
—
872
See notes to consolidated financial statements.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2019, 2018 and 2017
1. Description of the Business
ManTech International Corporation (depending on the circumstances, “ManTech” “Company” “we” “our” “ours” or “us”)
provides mission-focused technology solutions and services for U.S. defense, intelligence community and federal civilian agencies.
We excel in full-spectrum cyber, data collection & analytics, enterprise IT, systems engineering and software application
development solutions that support national and homeland security.
2. Summary of Significant Accounting Policies
Principles of Consolidation - Our consolidated financial statements include the accounts of ManTech International
Corporation, subsidiaries we control and variable interest entities that are required to be consolidated. All intercompany accounts
and transactions have been eliminated.
Use of Accounting Estimates - We prepare our consolidated financial statements in conformity with U.S. GAAP, which
requires 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 us. Therefore, actual amounts could differ from these estimates.
Business Combinations - The accounting for our business combinations consists of allocating the purchase price to tangible
and intangible assets acquired and liabilities assumed based on their estimated fair values, with the excess recorded as goodwill.
We have up to one year from the acquisition date to use information as of each acquisition date to adjust the fair value of the
acquired assets and liabilities, which may result in material changes to their recorded values with an offsetting adjustment to
goodwill. Determining the fair value of assets acquired and liabilities assumed requires significant judgment, which includes,
among other factors, analysis of historical performance and estimates of future performance. In some cases, we have used discounted
cash flow analyses, which were based on our best estimate of future revenue, earnings and cash flows as well as our discount rate,
adjusted for risk, and estimated attrition rates.
Fair Value of Financial Instruments - The carrying value of our cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate their fair value because of the short-term nature of these amounts.
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.
Contract Assets - Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms, either at
periodic intervals or upon achievement of contractual milestones. Generally, revenue recognition occurs before billing, resulting
in contract assets. These contract assets are referred to as unbilled receivables and are reported within receivables, net on our
consolidated balance sheet.
Billed Receivables - Amounts billed and due from our customers are classified as billed receivables and are reported within
receivables, net on the consolidated balance sheet. The portion of the payments retained by the customer until final contract
settlement is not considered a significant financing component because the intent is to protect the customer.
Goodwill - 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. 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 this annual review as of October 31st of each
calendar year.
In reviewing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence
of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit
is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely
than not, the entity is then required to perform the existing two-step quantitative impairment test (described below), otherwise no
further analysis is required. We also may elect not to perform the qualitative assessment and, instead, proceed directly to the two-
step quantitative impairment test.
35
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 reporting unit's
fair value exceeds its carrying value, no further procedures are required. However, if the reporting unit's fair value is less than its
carrying value, an impairment of goodwill may exist, requiring a second step to be performed. Step two of this test measures the
amount of the impairment loss, if any. Step two of this test requires the allocation of the reporting unit's fair value to its assets
and liabilities, including any unrecognized intangible assets in a hypothetical analysis that calculates the implied fair value of
goodwill as if the reporting unit were being acquired in a business combination. If the implied fair value of goodwill is less than
the carrying value, the difference is recorded as a goodwill impairment charge in operations.
The fair values of the reporting units are determined based on a weighting of the income approach, market approach and
market transaction approach. 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 us. Valuation ratios, which relate market prices to selected financial statistics
derived from comparable companies, are selected and applied to us 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 provides a reasonable basis for comparison to us. Valuation ratios, which
relate market prices to selected financial statistics derived from comparable companies, are selected and applied to us 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 our 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) and then assess the reasonableness of our implied control premium.
Other Intangible Assets - Contract rights and other intangible assets are amortized primarily using the pattern of benefits
method over periods ranging from one year to twenty-five years.
We account for the cost of computer software developed or obtained for internal use in accordance with ASC 350-985,
Intangibles - Goodwill and Other - Software. These capitalized software costs are included in other intangible assets, net.
We account for software development costs related to software products for sale, lease or otherwise marketed in accordance
with Accounting Standards Codification (ASC) 985-20, Software - 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 period of five years or other such shorter period as may
be required.
Leases - We adopted ASC 842, Leases, on January 1, 2019. We elected to apply the provisions of the standard as of the date
of adoption, and, therefore, have not restated prior comparative periods. Upon adoption, we recorded operating lease obligations
of $129.6 million and operating lease right of use (ROU) assets of $118.7 million. We elected the practical expedient to recognize
the lease payments related to short-term leases as profit or loss on a straight-line basis over the lease term and variable lease
payments in the period in which the obligation for those payments are incurred. We also elected the following transition related
practical expedients: not to reassess whether expired or existing contracts are or contain leases, not to reassess lease classification
as determined under ASC 840 and not to reassess initial direct costs from any existing lease. We elected the practical expedient
as an accounting election not to separate nonlease components from lease components on all classes of underlying assets. Our
leases include nonlease components such as common area maintenance, utilities and operating expenses. Additionally, we
implemented internal controls and key system functionality to enable the preparation of financial information upon adoption. ASC
842 had a material impact on our consolidated balance sheet, but did not have an impact on our consolidated income statement.
The most significant impact was the recognition of ROU assets and lease obligations for operating leases, while our accounting
for finance leases remained substantially unchanged.
We determine if a contract is or contains a lease at inception. A contract is or contains a lease if the contract conveys the right
to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. We
have the right to control the use of the identified asset when we have both of the following: the right to obtain substantially all of
36
the economic benefits from use of the identified asset and the right to direct the use of the identified asset. In making this
determination, we consider all relevant facts and circumstances. We reassess whether a contract is or contains a lease only if the
terms and conditions of the contract are changed. We account for lease components and nonlease components associated with a
lease as a single lease component. Operating leases are included in Operating lease right of use assets, Operating lease obligations
—current and Operating lease obligations—long term on our consolidated balance sheets. Finance leases are included in Property
and equipment—net, Accounts payable and other accrued expenses and Other long-term liabilities on our consolidated balance
sheets.
Our ROU asset is recognized as the lease obligation, any initial indirect costs and any prepaid lease payments, less any lease
incentives. Our lease obligations are recognized based on the present value of the future minimum lease payments over the lease
term at commencement date. Our lease payments consist of amounts relating to the use of the underlying asset during the lease
term, specifically fixed payments, payments to be made in optional periods when we are reasonably certain to exercise an option
to extend the lease or not to exercise an option to terminate the lease and the amounts probable of being owed by us under residual
guarantees. Our variable lease payments are excluded in measuring ROU assets and lease obligations because they do not depend
on an index or a rate or are not in substance fixed payments. We exclude lease incentives and initial direct costs incurred from
our lease payments. Our leases typically do not provide an implicit rate, we use our incremental borrowing rate based on the
information available at the commencement date in determining the present value of future payments.
For operating leases, after lease commencement, we measure our lease obligation for each period at the present value of any
remaining lease payments, discounted by using the rate determined at lease commencement. In our consolidated statement of
income, we recognize a single operating lease expense calculated on a straight-line basis over the remaining lease term. The
depreciation of the ROU asset increases each year as a result of the declining lease obligation balance. Variable lease payments
are not recognized in the measurement of the lease obligation; they are recognized in the period in which the related obligation
has been incurred.
For finance leases, after lease commencement, we measure our lease obligation by using the effective interest rate method.
In each period, the lease obligation will be increased to reflect the interest that is accrued on the related lease obligation by using
the appropriate discount rate, offset by a decrease in the lease obligation resulting from the periodic lease payments. We recognize
the ROU asset at cost, reduced by any accumulated depreciation. The ROU asset is depreciated on a straight-line basis. Together,
the interest expense and depreciation expense result in a front-loaded expense profile. We will present interest expense and
depreciation expense separately on our consolidated statement of income.
In our consolidated statement of income, we recognize lease expense within general and administrative expense or cost of
goods sold depending on the use of the underlying lease. For leases classified as financing, the interest on lease obligations is
classified within interest expense.
Property and Equipment - Property and equipment are recorded at original cost to us. 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.
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, Compensation - General -
Deferred Compensation - Rabbi Trust, 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 us. The assets held by the rabbi
trusts are recorded 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.
Investments - Investments where we have the ability to exercise significant influence, but we do not control, are accounted
for under the equity method of accounting and are included in Other assets on our consolidated balance sheets. Significant influence
typically exists if we have a 20% to 50% ownership interest in the investee. Under this method of accounting, our share of the
net earnings (losses) of the investee is included in Equity in earnings (losses) of unconsolidated subsidiaries on our consolidated
statement of income.
Investments where we have less than 20% ownership interest in the investee and lack the ability to exercise significant influence
are accounted for under the cost method. Under the cost method, we recognize our investment in the stock of an investee as an
asset. The investment is measured initially at cost. We recognize as income dividends received that are distributed from net
accumulated earnings. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions
of costs of the investment. Impairment is assessed at the individual investment level. An investment is impaired if the fair value
37
of the investment is less than its costs. If it is determined that the impairment is other than temporary, then an impairment loss is
recognized in earnings. The fair value of the investment would become the new cost basis of the investment and will not be
adjusted for subsequent recoveries in fair value.
Deferred Contract Costs - Costs of obtaining or fulfilling a contract that meet the criteria in ASC 340, Other Assets and
Deferred Costs, are capitalized and amortized on a systematic basis that is consistent with the transfer of goods or services to the
customer. Deferred contracts costs are reported on our consolidated balance sheet within current or non-current other assets based
on the expected life of the related contract. At December 31, 2019, we had $9.4 million of deferred contract costs related to the
fulfillment of future contract obligations. For the year ended December 31, 2019 we recorded amortization expense of $2.5 million.
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 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.
Contract Liabilities - We receive advances and milestone payments from our customers on selected contracts that exceed
revenue earned to date, resulting in contract liabilities. Contract liabilities typically are not considered a significant financing
component because it is used to meet working capital demands that can be higher in the early stages of a contract and to protect
us from the customer failing to adequately complete some or all of its obligations under the contract. Contract liabilities are
reported on our consolidated balance sheet on a net contract basis at the end of each reporting period.
Revenue Recognition - On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, using the modified
retrospective method applied to those contracts that were not substantially complete as of January 1, 2018. ASC 606 outlines a
five-step model whereby revenue is recognized as performance obligations within the contract are satisfied. ASC 606 also requires
new, expanded disclosures regarding revenue recognition. We recognized the cumulative effect of adopting ASC 606 as an increase
to the 2018 opening balance of retained earnings in the pretax amount of $0.8 million, with the impact primarily related to fixed-
price contracts. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period
amounts were not adjusted and continue to be reported in accordance with ASC 605, Revenue Recognition. Revenue for the year
ended December 31, 2018 increased $2.4 million as a result of applying ASC 606.
We account for a contract when: both we and the customer approve and commit; our rights and those of the customer are
identified, payment terms are identified; the contract has commercial substance; and collectability of consideration is probable.
At contract inception, we identify the distinct goods or services promised in the contract, referred to as performance obligations.
Then we determine the transaction price for the contract; the consideration to which we can expect in exchange for the promised
goods or services in the contract. The transaction price can be a fixed or variable amount. It is common for our contracts to contain
award fees, incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts
generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based
upon customer discretion. We estimate variable consideration at the most likely amount to which we expect to be entitled. We
include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable
consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment
of our anticipated performance and historical, current and forecasted information that is reasonably available to us. The transaction
price is allocated to each distinct performance obligation using our best estimate of the standalone selling price for each distinct
good or service promised in the contract. The primary method used to estimate standalone selling price is the expected cost plus
a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate
margin for that distinct good or service promised. Revenue is recognized when, or as, the performance obligation is satisfied.
We recognize revenue over time when there is a continuous transfer of control to our customer. For our U.S. government
contracts, this continuous transfer of control to the customer is supported by clauses in the contract that allow the U.S. government
to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any
work in process. When control is transferred over time, revenue is recognized based on the extent of progress towards completion
of the performance obligation. Based on the nature of the products and services provided in the contract, we use our judgment to
determine if an input measure or output measure best depicts the transfer of control over time. For services contracts, we typically
satisfy our performance obligations as services are rendered. We typically use a cost-based input method to measure progress.
Contract costs include labor, material and allocable indirect expenses. Revenue is recognized proportionally as contract costs are
incurred plus estimated fees. For time-and-material contracts, we bill the customer per labor hour and per material, and revenue
is recognized in the amount invoiced since the amount corresponds directly to the value of our performance to date. For stand-
ready service contracts, a time-elapsed output method is used to measure progress, and revenue is recognized straight-line over
the term of the contract. If a contract does not meet the criteria for recognizing revenue over time, we recognize revenue at a point
38
in time. Revenue is recognized at the point in time when control of the good or service is transferred to our customer. We consider
control to transfer when we have a present right to payment and our customer has legal title. Determining a measure of progress
and when control transfers requires us to make judgments that affect the timing of when revenue is recognized. Essentially all of
our contracts satisfy their performance obligations over time.
Contracts are often modified to account for changes in contract specifications and requirements. Contract modifications
impact the contract when the modification either creates a new performance obligation or changes the existing enforceable rights
and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance
obligation to which it relates is recognized as a cumulative adjustment to revenue and profit. Furthermore, a significant change
in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts
in the period identified. The impact of adjustments in contract estimates can be reflected in either revenue or operating expenses
on our consolidated statement of income.
We have an Estimate at Completion process in which management reviews the progress and execution of our performance
obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract
matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes
in estimates of revenue and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve
the contract milestones and other technical contract requirements. Management must make assumptions and estimates regarding
labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to
complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer
and overhead cost rates, among other variables. A significant change in one or more of these estimates could affect the profitability
of our contracts. For the year ended December 31, 2019, the aggregate impact of adjustments in contract estimates increased our
revenue by $11.3 million. No adjustment on any one contract was material to our consolidated financial statements for the year
ended December 31, 2019.
Results for 2017 were reported in accordance with ASC 605. Revenue for cost-reimbursable contracts were recorded as
reimbursable costs were incurred, including an estimated share of the applicable contractual fees earned. For performance-based
fees under cost-reimbursable contracts, we recognized 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, or upon approval by the customer. For time-and-materials contracts, revenue was recognized
to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred. For long-term fixed-
price contracts, revenue was recognized at a rate per unit as the units were delivered or by other methods to measure services
provided. Revenue from other long-term fixed-price contracts were recognized ratably over the contract period or by other
appropriate methods to measure services provided. Contract costs were 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, Revenue Recognition
- Construction-Type and Production-Type Contracts, we applied the percentage of completion method. Under the percentage of
completion method, income was 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 required estimating the total revenue and total contract cost at
completion of the contract. These estimates were periodically reviewed and revisions were made as required using the cumulative
catch-up method. The impact on revenue and contract profit as a result of these revisions were included in the periods in which
the revisions were made. Estimated losses on contracts at completion were recognized when identified. In certain circumstances,
revenue was recognized when contract amendments were not finalized.
Contract Costs - Contract costs include direct labor, direct materials, overhead and, when applicable, general and administrative
expenses. Incremental costs of obtaining a contract that we expect to recover are recognized as deferred contract costs and are
amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services. Other incremental
costs are expensed when incurred. Costs of fulfilling a contract that relate directly to a contract or to an anticipated contract that
can be specifically identified, generate or enhance resources that will be used in satisfying future performance obligations and are
expected to be recovered are recognized as deferred contract costs and amortized on a systematic basis that is consistent with the
transfer of the goods or services to the customer. Other costs of fulfilling a contract (costs of wasted materials, labor or other
resources to fulfill the contracts that were not reflected in the price of the contract and costs that relate to satisfied performance
obligations in the contract) are expensed when incurred.
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 include stock-based compensation, as well as
depreciation and amortization expenses related to the general and administrative function. We recognize interest related to
unrecognized tax benefits within interest expense and penalties related to unrecognized tax benefits in general and administrative
39
expenses.
We classify indirect costs incurred as cost of services and general and administrative expenses in the same manner as such
costs are defined in our disclosure statements under U.S. Government Cost Accounting Standards.
Depreciation and Amortization Method - Furniture and office equipment are depreciated using the straight-line method with
estimated useful lives ranging from one year to seven years. Leasehold improvements are amortized using the straight-line method
over the shorter of the asset's useful life or the term of the lease.
Stock-based Compensation - We account for stock-based compensation in accordance with ASC 718, Compensation - Stock
Compensation, which 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 of stock options on the dates of grant for our stock options.
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. The grant date fair value of the restricted stock is equal to the closing market price of our
common stock on the date of grant. The compensation expense for restricted stock is recognized over the service period and is
based on the grant date fair value of the shares. The grant date fair value of the restricted stock unit (RSU) is equal to the closing
market price of our common stock on the grant date less the present value of dividends expected to be awarded during the service
period. We recognize the grant date fair value of RSUs of shares we expect to issue as compensation expense ratably over the
requisite service period. We account for forfeitures as they occur.
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% 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 (Loss) - Comprehensive income (loss) consists of net income; translation adjustments, net of tax;
and actuarial gain (loss) on defined benefit pension plan, net of tax.
Recently Adopted ASUs
ASU 2016-02, Leases (ASC 842) supersedes the leases requirements in ASC 840, Leases. The objective of ASC 842 is to
establish the principles that lessees and lessors should apply to report useful information to users of financial statements about the
amount, timing and uncertainty of cash flows arising from a lease. We elected to adopt using the modified retrospective method
at the beginning of the period of adoption, January 1, 2019, through the recognition of a lease obligation and corresponding right
of use asset. We elected the following transition related practical expedients; not to reassess whether any expired or existing
contracts are or contain leases, not to reassess lease classification as determined under ASC 840 and, not to reassess initial direct
costs for any existing lease. We have also elected not to apply the recognition and measurement requirements to short-term leases
(less than 1 year). Additional details are included in Note 4 below.
Other ASUs adopted during the year ended December 31, 2019 did not have a material impact on our consolidated financial
statements.
Recently Issued But Not Yet Adopted ASUs
ASUs effective after December 31, 2019 are not expected to have a material effect on our consolidated financial statements.
3. Revenue from Contracts with Customers
40
We derive revenue from contracts with customers primarily from contracts with the U.S. government in the areas of defense,
intelligence, homeland security and other federal civilian agencies. Substantially all of our revenue is derived from services and
solutions provided to the U.S. government or to prime contractors supporting the U.S. government, including services by our
employees and our subcontractors, and solutions that include third-party hardware and software that we purchase and integrate
as a part of our overall solutions. Customer requirements may vary from period-to-period depending on the contract. We provide
our services and solutions under three types of contracts: cost-reimbursable, fixed-price and time-and-materials. 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 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. 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 have one reportable segment. Our U.S. government customers typically exercise independent decision-making and
contracting authority. Offices or divisions within an agency or department of the U.S. government may directly, or through a
prime contractor, use our services as a separate customer as long as the customer has independent decision-making and contracting
authority within its organization. We treat sales to U.S. government customers as sales within the U.S. regardless of where the
services are performed. We generated 99%, 98% and 98% from revenue generated in the U.S. for the years ended December 31,
2019, 2018 and 2017, respectively.
The following tables disclose revenue (in thousands) by contract type, customer and prime or subcontractor for the periods
presented. Year ended December 31, 2017 amounts have not been adjusted under the modified retrospective method.
Cost-reimbursable
Fixed-price
Time-and-materials
U.S. government
State agencies, international agencies and commercial entities
Prime contractor
Subcontractor
Year Ended
December 31,
2019
2018
2017
$ 1,541,687
$ 1,325,024
$ 1,130,134
451,312
229,560
435,599
197,934
370,517
216,367
$ 2,222,559
$ 1,958,557
$ 1,717,018
Year Ended
December 31,
2019
2018
2017
$ 2,175,734
$ 1,913,461
$ 1,674,345
46,825
45,096
42,673
$ 2,222,559
$ 1,958,557
$ 1,717,018
Year Ended
December 31,
2019
2018
2017
$ 1,995,471
$ 1,742,097
$ 1,514,924
227,088
216,460
202,094
$ 2,222,559
$ 1,958,557
$ 1,717,018
41
We deliver a broad array of IT and technical services solutions under contracts with the U.S. government, state and local
governments and commercial customers. The components of receivables are as follows (in thousands):
Billed receivables
Unbilled receivables
Allowance for doubtful accounts
Receivables-net
December 31, 2019 December 31, 2018
$
$
311,061
$
99,493
(11,578)
398,976
$
301,716
109,895
(6,233)
405,378
Receivables at December 31, 2019 are expected to be substantially collected within one year except for approximately $1.4
million, of which 100% is related to receivables from sales to the U.S. government or from contracts in which we acted as a
subcontractor to other contractors selling to the U.S. government. We do not believe that we have significant exposure to credit
risk as billed receivable and unbilled receivables are primarily due from the U.S. government. The allowance for doubtful accounts
represents our estimate for exposure to compliance, contractual issues and bad debts related to prime contractors.
The following table discloses contract liabilities (in thousands):
Contract liabilities
December 31, 2019
December 31, 2018
$
27,620
$
28,209
Changes in the balance of contract liabilities are primarily due to the timing difference between our performance and our
customers' payments. For the year ended December 31, 2019, the amount of revenue that was included in the opening contract
liabilities balance was $23.8 million.
The remaining performance obligation at December 31, 2019 was $3.0 billion. The following table discloses when we expect
to recognize the remaining performance obligation as revenue (in billions):
For the year ending
December 31, 2020
December 31, 2021
Thereafter
$
4. Leases
1.9
$
0.5
$
0.6
We elected to adopt ASC 842 using the modified retrospective method at the beginning of the period of adoption, January 1,
2019, through the recognition of a lease obligation and corresponding right of use asset. We elected the following transition related
practical expedients: not to reassess whether any expired or existing contracts are or contain leases, not to reassess lease classification
as determined under ASC 840, Leases, and, not to reassess initial direct costs for any existing lease. We have also elected not to
apply the recognition and measurement requirements to short-term leases (less than 1 year). Prior to the adoption of ASC 842,
we accounted for leases under the requirements of ASC 840. The amounts for years prior to the adoption on January 1, 2019 have
not been adjusted under the modified retrospective method.
ASC 842 Accounting
Our operating leases are primarily made up of real estate. Our variable lease payments do not depend on an index or a rate
or are not in substance fixed payments. Our leases have remaining lease terms of 1 month to 11 years, some of which include
options to extend the leases for up to 14 years, and some of which include options to terminate the leases within 1 year. Our
transportation vehicles and equipment leases include a residual value guarantee, which is a guarantee made to the lessor that the
value of the underlying asset returned to the lessor at the end of the lease will be at least a specific amount. We sublease some of
our real estate space. Sublease income is immaterial and is presented net with the corresponding lease expense. We do not have
any leases that have not yet commenced due to construction or design of the underlying asset. We recognize payments related to
short-term leases (less than one year) as expense on a straight-line basis over the lease term and variable lease payments in the
period in which the obligation for those payments were incurred. As such, our short-term lease expense for the year ended December
31, 2019 was $5.4 million. For the year ended December 31, 2019, we incurred variable lease costs of $2.4 million.
42
$
$
$
$
$
$
$
$
$
$
December 31,
2019
117,728
29,047
103,148
641
(206)
435
142
297
For the year
ended
December 31,
2019
33,622
147
44
December 31,
2019
5 years
3 years
3%
5%
The balance sheet information related to our leases was as follows (dollars in thousands):
Operating Leases
Operating lease right of use assets
Operating lease obligations—current
Operating lease obligations—long term
Finance Leases
Property and equipment—gross
Accumulated depreciation
Property and equipment—net
Accounts payable and accrued expenses
Other long-term liabilities
The components of lease expense were as follows (in thousands):
Operating lease expenses
Finance Leases
Depreciation of right of use assets
Interest on lease liabilities
The weighted average information related to leases was as follows:
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
43
Future minimum lease payments under non-cancellable leases as of December 31, 2019 were as follows (in thousands):
For the year ended:
December 31, 2020
December 31, 2021
December 31, 2022
December 31, 2023
December 31, 2024
Thereafter
Total future minimum lease payments
Less imputed interest
Total
ASC 840 Accounting
Operating
Leases
Financing
Leases
$
32,770
$
33,989
30,166
25,136
12,824
8,224
143,109
(10,914)
132,195
$
$
160
156
150
41
—
—
507
(68)
439
We leased office space and equipment under operating leases. A number of the leases contained renewal options and escalation
clauses. Office space and equipment rent expense totaled approximately $39.9 million and $36.9 million for the years ended
December 31, 2018 and 2017, respectively. We had $13.2 million of deferred rent liabilities resulting from recording rent expense
on a straight-line basis over the life of the respective lease for the year ended December 31, 2018. At December 31, 2018, our
aggregate future minimum rental commitments under these leases are as follows (in thousands):
Year ending:
December 31, 2019
December 31, 2020
December 31, 2021
December 31, 2022
December 31, 2023
Thereafter
Total
5. Acquisitions
$
33,953
28,954
25,794
21,852
18,353
9,296
$
138,202
H2M Group (H2M)—On August 8, 2019, we completed the acquisition of H2M through a membership interest purchase
agreement by and among H2M Group, HHM Holding LLC, and the Members and ManTech International Corporation. H2M is
a provider of intelligence and analysis services and solutions primarily to the National Geospatial-Intelligence Agency (NGA).
This acquisition strengthens our ability to help key government agencies implement new automation techniques that enable
intelligence analysts to more efficiently navigate large amounts of data and distill critical information to inform actionable
intelligence and make mission-critical decisions.
The acquisition was accounted for as a business combination. The results of H2M's operations have been included in our
consolidated financial statements since that date. We funded the acquisition with cash on hand and borrowings on our revolving
credit facility.
The purchase price of $38.5 million, which includes the finalized working capital adjustment, was preliminarily allocated to
the underlying assets and liabilities based on their estimated fair value at the date of acquisition. The excess of the purchase price
over the fair value of assets acquired and liabilities assumed was recorded as goodwill. As we are still in the process of reviewing
the fair value of the assets acquired and liabilities assumed, the purchase price allocation for H2M is not complete as of December 31,
2019. In accordance with ASC 805, Business Combinations, we expect to finalize our purchase price allocation within one year
of the acquisition date.
Determining the fair value of assets acquired and liabilities assumed requires significant judgment, which includes, among
other factors, analysis of historical performance and estimates of future performance of H2M's contracts. In some cases, we have
44
used discounted cash flow analyses, which were based on our best estimate of future revenue, earnings and cash flows as well as
our discount rate adjusted for risk.
Recognition of goodwill is largely attributed to the value paid for H2M's capabilities to support government agencies in the
implementation of high-quality geospatial and professional services. The goodwill recorded for this transaction will be deductible
for tax purposes over 15 years. The components of other intangible assets associated with the acquisition were customer
relationships and backlog valued at $9.6 million and $2.3 million, respectively. The fair values of the customer relationships and
backlog were determined using the excess earnings method (income approach) in which the value is derived from an estimation
of the after-tax cash flows specifically attributable to backlog and customer relationships. Assumptions used in the analysis
included revenue and expense forecasts, contributory asset charges, tax amortization benefit and discount rates. Customer contracts
and related relationships represent the underlying relationships and agreements with H2M's existing customers. Customer
relationships are amortized using the pattern of benefits method over their estimated useful lives of approximately 20 years.
Backlog is amortized using the pattern of benefits method over its estimated useful life of 2 years. The weighted-average
amortization period for other intangible assets is 17 years.
The following table represents the preliminary purchase price allocation for H2M (in thousands):
Cash and cash equivalents
Receivables
Prepaid expenses
Other current assets
Goodwill
Other intangible assets
Operating lease right of use assets
Property and equipment
Other assets
Accounts payable and accrued expenses
Accrued salaries and related expenses
Operating lease obligations—long term
Net assets acquired and liabilities assumed
$
$
29
4,187
188
5
25,079
11,900
152
56
7
(1,946)
(1,023)
(152)
38,482
For the year ended December 31, 2019, we incurred approximately $0.3 million of acquisition costs related to the H2M
transaction, which are included in general and administrative expenses in our consolidated statement of income.
Kforce Government Solutions (KGS)—On April 1, 2019, we completed the acquisition of KGS. KGS was a wholly owned
subsidiary of the publicly traded commercial technology and staffing company KForce, Inc. The acquisition was completed
through an equity purchase agreement dated February 28, 2019, by and among Kforce Government Solutions, Inc and other
beneficiaries and ManTech International Corporation. KGS provides services, IT solutions, transformation and management
consulting and data analytics - most notably in the healthcare IT market. This acquisition expands our presence with important
customers such as the Department of Veteran Affairs (VA).
The acquisition was accounted for as a business combination. The results of KGS's operations have been included in our
consolidated financial statements since that date. We funded the acquisition with cash on hand and borrowings on our revolving
credit facility.
The purchase price of $114.6 million, which includes the finalized working capital adjustment, was allocated to the underlying
assets and liabilities based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair
value of assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocation of KGS is complete as
of December 31, 2019.
Determining the fair value of assets acquired and liabilities assumed requires significant judgment, which includes, among
other factors, analysis of historical performance and estimates of future performance of KGS’s contracts. In some cases, we have
used discounted cash flow analyses, which were based on our best estimate of future revenue, earnings and cash flows as well as
our discount rate adjusted for risk.
Recognition of goodwill is largely attributed to the value paid for KGS's capabilities to support customers in IT solutions,
45
transformation and management consulting and data analytics. A majority of the goodwill recorded will not be deductible for tax
purposes.
The components of other intangible assets associated with the acquisition were customer relationships and backlog valued at
$33.1 million and $1.6 million, respectively. The fair values of the customer relationships and backlog were determined using the
excess earnings method (income approach) in which the value is derived from an estimation of the after-tax cash flows specifically
attributable to backlog and customer relationships. Assumptions used in the analysis included revenue and expense forecasts,
contributory asset charges, tax amortization benefit and discount rates. Customer contracts and related relationships represent the
underlying relationships and agreements with KGS's existing customers. Customer relationships are amortized using the pattern
of benefits method over their estimated useful lives of approximately 20 years. Backlog is amortized straight-line over its estimated
useful life of 1 year. The weighted-average amortization period for other intangible assets is 19 years.
The following table represents the finalized purchase price allocation for KGS (in thousands):
Cash and cash equivalents
Receivables
Prepaid expenses
Other current assets
Goodwill
Other intangible assets
Property and equipment
Accounts payable and accrued expenses
Accrued salaries and related expenses
Deferred income taxes
Other long-term liabilities
Net assets acquired and liabilities assumed
$
$
154
17,071
368
168
80,374
34,839
361
(6,895)
(4,421)
(7,087)
(379)
114,553
For the year ended December 31, 2019, we incurred approximately $0.9 million of acquisition costs related to the KGS
transaction, which are included in general and administrative expenses in our consolidated statement of income.
6. 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 our 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 the years ended December 31, 2019, 2018 and 2017, we declared and paid quarterly
dividends, in the amount of $0.27, $0.25 and $0.21 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 have been
computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares
that were outstanding during each period.
46
The net income available to common stockholders and weighted average number of common shares outstanding used to
compute basic and diluted earnings per share for each class of common stock are as follows (in thousands, except per share
amounts):
Distributed earnings
Undistributed earnings
Net income
Class A common stock:
Basic net income available to common stockholders
Basic weighted average common shares outstanding
Basic earnings per share
Diluted net income available to common stockholders
Effect of potential exercise of stock options
Diluted weighted average common shares outstanding
Diluted earnings per share
Class B common stock:
Basic net income available to common stockholders
Basic weighted average common shares outstanding
Basic earnings per share
Diluted net income available to common stockholders
Diluted weighted average common shares outstanding
Diluted earnings per share
Year Ended
December 31,
2018
$
$
$
$
$
$
$
$
$
$
39,627
42,470
82,097
54,715
26,354
2.08
54,937
324
26,678
2.06
27,382
13,189
2.08
27,160
13,189
2.06
$
$
$
$
$
$
$
$
$
$
2019
43,207
70,683
113,890
76,294
26,763
2.85
76,555
279
27,042
2.83
37,596
13,188
2.85
37,335
13,188
2.83
$
$
$
$
$
$
$
$
$
$
2017
32,709
81,432
114,141
75,413
25,685
2.94
75,698
288
25,973
2.91
38,728
13,190
2.94
38,443
13,190
2.91
For the years ended December 31, 2019, 2018 and 2017, options to purchase 288,133 shares, 293,898 shares and 265,866
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, 2019, 2018 and 2017, there were 338,748 shares, 420,524 shares
and 463,800 shares, respectively, issued from the exercise of stock options.
7. Property and Equipment
Major classes of property and equipment are summarized as follows (in thousands):
Furniture and equipment
Leasehold improvements
Finance leases
Property and equipment-gross
Accumulated depreciation and amortization
Property and equipment-net
December 31,
2019
2018
$
150,640
$
49,625
641
200,906
(115,275)
85,631
$
$
97,577
43,065
—
140,642
(89,215)
51,427
Depreciation and amortization expense related to property and equipment for the years ended December 31, 2019, 2018 and
2017 was $27.6 million, $25.5 million and $9.5 million, respectively.
47
8. Goodwill and Other Intangible Assets
The changes in the carrying amounts of goodwill during fiscal years 2019 and 2018 were as follows (in thousands):
Goodwill at December 31, 2017
Acquisition fair value adjustment
Goodwill at December 31, 2018
Acquisitions
Goodwill at December 31, 2019
Other intangible assets consisted of the following (in thousands):
Goodwill
Balance
$
1,084,560
1,246
1,085,806
105,453
$
1,191,259
December 31, 2019
December 31, 2018
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Other intangible assets:
Contract and
program intangible
assets
Capitalized software
cost for internal use
Total other intangible
assets-net
$
$
402,532
$
221,437
$
181,095
$
355,932
$
201,298
$
154,634
52,411
36,728
15,683
50,925
33,597
17,328
454,943
$
258,165
$
196,778
$
406,857
$
234,895
$
171,962
Amortization expense relating to intangible assets for the years ended December 31, 2019, 2018 and 2017 was $25.4 million,
$26.3 million and $23.5 million, respectively. We estimate that we will have the following amortization expense for the future
periods indicated below (in thousands):
Year ending:
December 31, 2020
December 31, 2021
December 31, 2022
December 31, 2023
December 31, 2024
9. Debt
$
$
$
$
$
25,402
23,170
20,237
16,943
15,202
Revolving Credit Facility - We maintain a credit agreement with a syndicate of lenders led by Bank of America, N.A., as sole
administrative agent. The credit agreement provides for a $500 million revolving credit facility, with a $75 million letter of credit
sublimit and a $30 million swing line loan sublimit. The credit agreement also includes an accordion feature that permits us to
arrange with the lenders for the provision of additional commitments. The maturity date is August 17, 2022.
Borrowings under our credit agreement are collateralized by substantially all of our assets and our Material Subsidiaries (as
defined in the credit agreement) and bear interest at one of the following variable rates as selected by us at the time of borrowing:
a LIBOR based rate plus market spreads (1.25% to 2.25% based on our consolidated total leverage ratio) or Bank of America's
base rate plus market spreads (0.25% to 1.25% based on our consolidated total leverage ratio). The aggregate annual weighted
average interest rates were 4.11% and 3.91% for the years ended December 31, 2019 and 2018, respectively.
The terms of the credit agreement permit prepayment and termination of the loan commitments at any time, subject to certain
48
conditions. The credit agreement requires us to comply with specified financial covenants, including the maintenance of certain
leverage ratios and a certain consolidated 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 other actions. As of, and during the fiscal years ending, December 31,
2019 and 2018, we were in compliance with our financial covenants under the credit agreement.
There was $36.5 million and $7.5 million outstanding on our revolving credit facility at December 31, 2019 and 2018,
respectively. The weighted average borrowings under the revolving portion of the facility during the years ended December 31,
2019 and 2018 were $37.0 million and $34.2 million, respectively. The maximum available borrowing under the revolving credit
facility at December 31, 2019 was $457.7 million. At December 31, 2019 and 2018, we had $5.8 million and $9.6 million,
respectively, outstanding on our letter of credit that reduces our availability to borrow under our revolving credit facility.
10. 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 our operations are
conducted in accordance with these requirements and the terms of the relevant contracts. U.S. government investigations of us,
whether related to our 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 us, or could lead to suspension or debarment from future
U.S. government contracting activities. 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 has completed our incurred cost audits through
2016 with no material adjustments. The remaining audits for 2017 through 2019 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, except for the matter noted below.
An officer of our Company was party to an arbitration proceeding with a former employer relating to a breach of a contract
claim. Pursuant to indemnification arrangements we have with this officer, we were exposed to a loss related to this claim. During
2019, we settled the claim. The settlement amount was not material to our consolidated financial statements.
We have $5.8 million outstanding on our letter of credit, of which $5.7 million is related to an outstanding performance bond
in connection with a contract between ManTech MENA, LLC and Jadwalean International Operations and Management Company
to fulfill technical support requirements for the Royal Saudi Air Force.
11. Stockholders' Equity and Stock-Based Compensation
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, 2019, there were 26,991,747
shares of Class A common stock outstanding, 244,113 shares of Class A common stock recorded as treasury stock and 13,187,195
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 Executive Chairman and Chairman of the Board), 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 common
stock and Class B common stock is equal in respect to 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
49
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 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, 2019 and 2018, 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 2016 Management Incentive Plan (the Plan) was designed to attract, retain and motivate key employees. The types of
awards available under the Plan include stock options, restricted stock and RSUs, among others. Equity 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, 2020, there were 602,681 additional shares
made available for issuance under the Plan. Through December 31, 2019, the Board of Directors has authorized the issuance of
up to 15,148,321 shares under this Plan. Through December 31, 2019, the remaining aggregate number of shares of our common
stock available for future grants under the Plan was 6,416,141. The Plan expires in March 2026.
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, 2019, 2018 and 2017, we recorded $7.5 million, $5.1
million and $6.3 million of stock-based compensation expense, respectively. No compensation expense of employees with stock
awards was capitalized during the years ended December 31, 2019, 2018 and 2017. For the year ended December 31, 2019, 2018
and 2017 we recorded $2.1 million, $3.4 million and $2.7 million, respectively, to income tax benefit related to the exercise of
stock options, vested cancellations and the vesting of restricted stock and restricted stock units.
Stock Options - Under the Plan, we have issued stock options. A stock option granted gives the holder the right, but not the
obligation to purchase a certain number of shares at a predetermined price for a specific period of time. 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, 2019, 2018 and 2017,
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
stock option awards on the 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, 2019, 2018
and 2017:
• Volatility - The expected volatility of the options granted was estimated based upon historical volatility of our share price
through weekly observations of our trading history.
• Expected life of options - The expected life of options granted to employees was determined from historical exercises of
the grantee population. The options had 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.
• 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 the expected term of the underlying grants.
50
• Dividend yield - The Black-Scholes-Merton valuation model requires an expected dividend yield as an input. For the
years ended December 31, 2019, 2018 and 2017, we have calculated our expected dividend yield based on an expected
annual cash dividend of $1.08 per share, $1.00 per share and $0.84 per share, respectively.
The following table summarizes weighted-average assumptions used in our calculations of fair value for the years ended
December 31, 2019, 2018 and 2017:
Volatility
Expected life of options
Risk-free interest rate
Dividend yield
Year Ended
December 31,
2019
2018
2017
27.21%
26.57%
25.59%
3 years
3 years
3 years
1.98%
1.76%
2.72%
2.00%
1.72%
2.75%
Stock Option Activity - The weighted-average fair value of options granted during the years ended December 31, 2019, 2018
and 2017, as determined under the Black-Scholes-Merton valuation model, was $12.07, $10.42 and $6.75, respectively. Option
grants that vested during the years ended December 31, 2019, 2018 and 2017 had a combined fair value of $2.5 million, $1.5
million and $1.7 million, respectively.
The following table summarizes stock option activity for the years ended December 31, 2019, 2018 and 2017:
Stock options outstanding at December 31, 2016
Granted
Exercised
Cancelled and expired
Stock options outstanding at December 31, 2017
Granted
Exercised
Cancelled and expired
Stock options outstanding at December 31, 2018
Granted
Exercised
Cancelled and expired
Stock options outstanding at December 31, 2019
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(in
thousands)
Weighted
Average
Remaining
Contractual
Life
Number of
Shares
1,160,419
$
$
534,030
(463,800) $
(61,241) $
$
1,169,408
$
466,828
(420,524) $
(122,312) $
$
1,093,400
489,947
$
(338,748) $
(108,504) $
$
1,136,095
29.93
42.90
29.34
33.80
35.88
54.87
30.05
43.85
45.34
63.87
37.94
51.21
54.98
$
$
$
$
$
$
$
14,299
7,203
16,731
12,411
8,776
9,641
28,291
4 years
Stock options exercisable at December 31, 2019
290,540
$
44.90
$
10,163
3 years
51
The following table summarizes non-vested stock options for the year ended December 31, 2019:
Non-vested stock options at December 31, 2018
Granted
Vested
Cancelled
Non-vested stock options at December 31, 2019
Number of
Shares
Weighted
Average Fair
Value
774,402
$
489,947
$
(314,588) $
(104,206) $
$
845,555
8.77
12.07
8.06
9.31
10.88
Unrecognized compensation expense related to outstanding stock options was $7.4 million as of December 31, 2019, which
is expected to be recognized over a weighted-average period of 2 years and will be adjusted for forfeitures as they occur.
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 stock issued to members of 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. The grant date fair value of the restricted stock is equal to the
closing market price of our common stock on the date of grant.
Restricted Stock Activity - The following table summarizes the restricted stock activity during the years ended December 31,
2019 and 2018:
Non-vested restricted stock at December 31, 2017
Granted
Vested
Non-vested restricted stock at December 31, 2018
Granted
Vested
Non-vested restricted stock at December 31, 2019
Number of
Shares
Weighted
Average Fair
Value
24,000
$
24,000
$
(28,000) $
$
20,000
24,000
$
(20,000) $
$
24,000
37.90
52.83
40.03
52.83
62.66
52.83
62.66
RSUs - Under the Plan, we issued performance-based and time-based RSUs. RSUs are not actual shares, but rather a right
to receive shares in the future. The shares are not issued and the employee cannot sell or transfer shares prior to vesting and has
no voting rights until the RSUs vest. Employees who are granted RSUs do not receive dividend payments during the vesting
period. The employees' performance-based RSUs will result in the delivery of shares if (a) performance criteria is met and (b)
the employee remains employed, in good standing, through the date of the performance period of two years. The employees' time-
based RSUs will result in the delivery of shares in one-third increments on the first, second and third anniversaries of the date of
grant. The grant date fair value of the RSUs is equal to the closing market price of our common stock on the grant date less the
present value of dividends expected to be awarded during the service period. We recognize the grant date fair value of RSUs of
shares we expect to issue as compensation expense ratably over the requisite service period.
52
RSU Activity - For performance-based RSUs that vested in 2019 and 2018, each RSU awarded resulted in the issuance of 1.5
shares, which were issued net of applicable payroll tax withholdings. The following table summarizes the RSU activity during
the years ended December 31, 2019 and 2018:
RSUs at December 31, 2017
Granted
Vested
Forfeited
RSUs at December 31, 2018
Granted
Vested
Forfeited
RSUs at December 31, 2019
12. Retirement Plans
Number of Units
Weighted Average
Fair Value
$
161,343
76,713
$
(87,200) $
(13,260) $
$
137,596
145,440
$
(60,915) $
(11,294) $
$
210,827
31.36
53.97
28.40
38.98
45.11
59.43
42.75
51.88
55.31
As of December 31, 2019, 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 we 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 $26.7 million,
$23.5 million and $20.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.
As of December 31, 2019, we also maintained an Employee Supplemental Savings Plan (ESSP), which is a nonqualified
deferred compensation plan for certain key employees. Under this plan, eligible employees could 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 us for
benefit of the participating employees. The trust investments are in the form of variable universal life insurance products, which
are owned by us. These investments seek to replicate the return of the participant investment elections. Employee contributions
to this plan were approximately $3.4 million, $3.4 million and $3.0 million for the years ended December 31, 2019, 2018 and
2017, respectively.
We maintained a nonqualified supplemental defined benefit pension plan for certain retired employees of an acquired company
as of December 31, 2019. 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, 2019 and 2018, 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 was $0.7 million and $0.8 million at December 31, 2019 and 2018, respectively.
13. Income Taxes
The domestic and foreign components of income operations before income taxes and equity method investments were as
follows (in thousands):
Domestic
Foreign
Income from operations before income taxes and equity method
investments
53
Year Ended
December 31,
2019
2018
2017
136,164
(66)
$
110,514
$
91
97,718
(476)
136,098
$
110,605
$
97,242
$
$
The provision (benefit) for income taxes was comprised of the following components (in thousands):
Year Ended
December 31,
2018
2017
2019
Federal
State
Foreign
Current provision
Federal
State
Deferred provision (benefit)
Federal
State
Non-current provision (benefit) resulting from allocating tax benefits
directly to changes in liabilities
$
(9,092) $
6,015
97
(2,980)
13,451
2,301
15,752
9,440
—
9,440
11,602
$
4,937
133
16,672
8,010
3,586
11,596
234
28
262
Provision (benefit) for income taxes
$
22,212
$
28,530
$
The schedule of effective income tax rate reconciliation is as follows:
5,340
2,523
38
7,901
(28,013)
3,313
(24,700)
(60)
—
(60)
(16,859)
Statutory U.S. Federal tax rate
Increase (decrease) in tax rate resulting from:
Research and development credit
State taxes—net of Federal benefit
Stock-based compensation
ESSP
Excess executive compensation
Net deferred tax liability remeasurement
Section 199 deductions
Other, net
Effective tax rate
Year Ended
December 31,
2018
2017
2019
21.0 %
21.0 %
35.0 %
(8.8)%
4.8 %
(1.3)%
(1.0)%
0.8 %
— %
— %
0.8 %
16.3 %
— %
6.1 %
(2.2)%
0.4 %
0.8 %
— %
— %
(0.3)%
25.8 %
— %
3.9 %
(2.8)%
(1.5)%
0.4 %
(52.0)%
(0.4)%
0.1 %
(17.3)%
We paid income taxes, net of refunds of $21.4 million for the year ended December 31, 2019. We received an income tax
refund, net of payments of $4.3 million for the years ended December 31, 2018. We paid income taxes, net of refunds of $15.9
million for the years ended December 31, 2017.
54
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):
Goodwill and other intangibles
Lease arrangements
Property and equipment
Unbilled receivables - IRC Section 481(a)
Gross deferred tax liabilities
Lease obligations
Retirement and other liabilities
Allowance for potential contract losses and other contract reserves
Foreign and state operating loss carryforwards
Less: Valuation allowance
Gross deferred tax assets
Net deferred tax liabilities
December 31,
2019
2018
$ 136,882
$ 114,532
31,128
13,270
5,878
—
8,168
8,816
187,158
(34,146)
(18,614)
(2,205)
(2,239)
1,828
(55,376)
$ 131,782
131,516
—
(20,707)
(1,681)
(1,709)
1,537
(22,560)
$ 108,956
At December 31, 2019, we had state and foreign net operating losses of approximately $12.2 million and $7.9 million,
respectively. The state net operating losses expire beginning 2027 through 2038. We recorded a full valuation allowance against
the foreign net operating losses and a partial valuation allowance against the state net operating losses, as we do not believe those
losses will be fully utilized in the future.
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
Increases in tax positions for prior years
Increases in tax positions for current year
Decreases in tax positions for prior years
Lapse in statute of limitations
Gross unrecognized tax benefits at end of year
2019
December 31,
2018
2017
490
$
220
$
7,718
1,839
(412)
—
9,635
$
36
320
—
(86)
490
$
293
—
32
—
(105)
220
$
$
The total liability for gross unrecognized tax benefits as of December 31, 2019, 2018 and 2017 includes $9.6 million, $0.4
million and $0.2 million, respectively, of unrecognized net tax benefits which, if ultimately recognized, would reduce our annual
effective tax rate in a future period. These liabilities, along with liabilities for interest and penalties, are included in accounts
payable and accrued expenses and Other long-term liabilities in our consolidated balance sheet. Interest, which is included in
Interest expense in our consolidated statement of income, was not material for all years presented.
During the year ended December 31, 2019, we recognized an increase in unrecognized tax benefits of approximately $7.7
million related to an increase in research and development tax credits available to us for tax years 2016-2018 and $1.8 million for
the 2019 tax year.
We are 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. We are no longer subject to U.S. federal or
non-U.S. income tax examinations by tax authorities for the years before 2015. We are no longer subject to U.S. state tax
examinations by tax authorities for the years before 2014. We believe it is reasonably possible that within the next year our
unrecognized tax benefits may decrease by $1.9 million due to the acceptance of a portion of our amended research and development
credits.
55
14. Quarterly Financial Information (Unaudited)
The quarterly financial data reflects, in our opinion, all normal and recurring adjustments 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 and
equity method investments
Net income
Class A common stock:
Basic weighted average common shares outstanding
Basic earnings per share
Diluted weighted average common shares
outstanding
Diluted earnings per share
Class B common stock:
Basic weighted average common shares outstanding
Basic earnings per share
Diluted weighted average common shares
outstanding
Diluted earnings per share
Revenues
Operating income
Income from operations before income taxes and
equity method investments
Net income
Class A common stock:
Basic weighted average common shares outstanding
Basic earnings per share
Diluted weighted average common shares
outstanding
Diluted earnings per share
Class B common stock:
Basic weighted average common shares outstanding
Basic earnings per share
Diluted weighted average common shares
outstanding
Diluted earnings per share
2019
March 31,
June 30,
September 30,
December 31,
(in thousands, except per share data)
501,930
28,532
28,196
21,118
$
$
$
$
537,037
33,297
32,504
24,214
$
$
$
$
579,179
38,402
37,794
27,937
$
$
$
$
604,413
38,094
37,604
40,621
26,584
26,707
26,822
0.53
$
0.61
$
0.70
$
26,819
26,936
27,128
0.53
$
0.60
$
0.69
$
13,188
13,188
13,188
0.53
$
0.61
$
0.70
$
13,188
13,188
13,188
0.53
$
0.60
$
0.69
$
26,933
1.01
27,279
1.00
13,188
1.01
13,188
1.00
March 31,
June 30,
September 30,
December 31,
2018
(in thousands, except per share data)
473,236
26,421
25,706
20,067
$
$
$
$
491,044
28,329
27,757
19,915
$
$
$
$
497,205
29,399
28,827
21,923
$
$
$
$
26,115
26,339
26,421
0.51
$
0.50
$
0.55
$
26,525
26,627
26,743
0.51
$
0.50
$
0.55
$
13,189
13,189
13,189
0.51
$
0.50
$
0.55
$
13,189
13,189
13,189
0.51
$
0.50
$
0.55
$
56
497,072
28,593
28,315
20,192
26,536
0.51
26,812
0.50
13,188
0.51
13,188
0.50
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
We have had no disagreements with our 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
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, does 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 us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty
and that breakdowns can occur because of a 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.
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 the Internal
Control-Integrated Framework (2013) 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
57
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, 2019, 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 the Internal Control-Integrated Framework (2013) to assess the effectiveness of
our internal control over financial reporting. Based upon the assessments, our management has concluded that, as of December 31,
2019, 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, 2019, 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.
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of ManTech International Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of ManTech International Corporation and subsidiaries (the
“Company”) as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019, of the Company
and our report dated February 21, 2020 expressed an unqualified opinion on those financial statements.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Mclean, Virginia
February 21, 2020
59
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 2020 Annual Meeting of Stockholders (the “2020 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 2020 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 2020 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 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 2020 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 2020 Proxy Statement, and that information is incorporated by reference in this Annual Report on Form 10-K.
60
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2019 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)
1,136,095
—
1,136,095
$
$
54.98
—
54.98
6,416,141
—
6,416,141
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
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, 2020, there were 602,681 shares added
to the plan under this provision.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is included under the captions “Certain Relationships and Related Person Transactions”
and “Corporate Governance - Director Independence” in our 2020 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 is included under the caption “Ratification of Appointment of Independent Auditors”
in our 2020 Proxy Statement and that information is incorporated by reference in this Annual Report on Form 10-K.
61
PART IV
Item 15.
Exhibits, Financial Statement Schedule
(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, 2019 and 2018
Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
PAGE
26
29
30
31
32
33
35
(2)
Financial statement schedule:
SCHEDULE
NO.
DESCRIPTION
Schedule II
Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018 and 2017
PAGE
66
(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
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 Securities and Exchange Commission (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).
Third Amended and Restated Bylaws of the Registrant (incorporated herein by reference from registrant's Current
Report on Form 8-K, as filed with the SEC on December 13, 2017).
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, 2001, as amended).
3.1
3.2
3.3
4.1
4.2‡ Description of Securities of the Registrant.
Second Amended and Restated Credit Agreement dated August 17, 2017, 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, as filed with the SEC on August 23, 2017.)
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 2019 Executive Incentive Compensation Plan, adopted on March 5, 2019 in
which our executive officers participate (incorporated herein by reference from registrant’s Current Report on Form
8-K, as filed with the SEC on March 11, 2019).
Management Incentive Plan of ManTech International Corporation - 2016 Restatement (incorporated herein by
reference from registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, as filed with the
SEC on July 29, 2016).
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).
10.1
10.2*
10.3*
10.4*
10.5*
62
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
with the SEC on February 24, 2012).
Form of Performance-Based Restricted Stock Unit Agreement granted under the Management Incentive Plan
(incorporated herein by reference from registrant's Current Report on Form 8-K, as filed with the SEC on March
13, 2017).
Form of Executive Continuity and Stay Incentive Agreement, by and between each of our executive officers and
the registrant, (incorporated herein by reference from registrant's Annual Report on Form 10-K for the year ended
December 31, 2015, as filed with the SEC on February 19, 2016.)
Restricted Stock Unit Award Agreement, dated as of November 7, 2016, granted under the Management Incentive
Plan, between the Company and Kevin Phillips.
Form of Time-Based Restricted Stock Unit Award Agreement granted under the Management Incentive Plan
(incorporated herein by reference from registrant's Current Report on Form 8-K, as filed with the SEC on March
9, 2018).
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.
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline BRL document).
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
21.1‡
23.1‡
24.1
31.1‡
31.2‡
32‡
101.INS
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this report pursuant to Item
15(a)(3).
‡ Filed herewith
63
Item 16.
Form 10-K Summary.
None.
64
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/ KEVIN M. PHILLIPS
Kevin M. Phillips
President and Chief Executive Officer
February 21, 2020
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, Kevin M. Phillips or Michael Putnam as his/her attorney-
in-fact and agent, with full power of substitution and resubstitution for him/her 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/her substitutes may do or cause to be done by virtue hereof.
Name and Signature
Title
Date
/s/ GEORGE J. PEDERSEN
George J. Pedersen
Executive Chairman and Chairman of the
Board of Directors
February 21, 2020
/s/ KEVIN M. PHILLIPS
President, Chief Executive Officer and Director February 21, 2020
Kevin M. Phillips
(Principal Executive Officer)
Chief Financial Officer
February 21, 2020
(Principal Financial Officer and Principal
Accounting Officer)
/s/ JUDITH L. BJORNAAS
Judith L. Bjornaas
/s/ RICHARD L. ARMITAGE
Richard L. Armitage
/s/ MARY K. BUSH
Mary K. Bush
Director
Director
/s/ BARRY G. CAMPBELL
Director
Barry G. Campbell
/s/ RICHARD J. KERR
Director
Richard J. Kerr
/s/ PETER B. LAMONTAGNE
Peter B. LaMontagne
/s/ KENNETH A. MINIHAN
Kenneth A. Minihan
Director
Director
65
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
February 21, 2020
Valuation and Qualifying Accounts
SCHEDULE II
Activities in our allowance accounts for the years ended December 31, 2019, 2018 and 2017 were as follows (in thousands):
Doubtful Accounts
Charged to
Costs and
Expenses
Balance at
Beginning of
Period
$
$
$
7,508
6,157
6,233
—
—
3,000
Deductions
Other*
Balance at
End of
Period
—
—
—
(1,351) $
$
76
2,345
$
6,157
6,233
11,578
2017
2018
2019
* Other represents doubtful account reserves released or recorded as part of net revenues for estimated customer disallowances.
Deferred Tax Asset Valuation
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
$
$
$
272
717
1,537
444
820
291
Deductions
Other
—
—
—
Balance at
End of
Period
1
$
— $
— $
717
1,537
1,828
2017
2018
2019
66
2019 ANNUAL REPORT
CORPORATION INFORMATION
FORWARD-LOOKING STATEMENT
Corporate Headquarters
ManTech International Corporation
2251 Corporate Park Drive
Herndon, VA 20171
703-218-6000
Website
www.mantech.com
Employment
It is ManTech’s policy to provide equal employment
opportunities to all employees and to ensure that all
employment actions, including but not limited to recruiting,
hiring, training, promotions, and separations, occur without
unlawful regard to any characteristic protected by federal,
state, or local law.
SHAREHOLDER INFORMATION
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.astfinancial.com
Annual Meeting
ManTech’s Annual Meeting will be held on Thursday,
May 21, 2020, 11:00 AM ET, at 2251 Corporate Park Drive,
Herndon, VA 20171
Stock Exchange
Class A Common Stock
Stock Symbol: MANT
Listed: Nasdaq Stock Market
Independent Auditors
Deloitte & Touche LLP
McLean, VA
Investor Relations
Investors seeking copies of our Annual Report and
additional information about the company may call 703-
218-6000, write to Investor Relations at our corporate
headquarters, or email investor.relations@mantech.com.
ManTech’s earnings announcements, new releases, SEC
filings, and other investor information are available in the
Investor Relations section of our website.
All statements and assumptions contained in this Annual
Report that do not relate to historical facts constitute “forward-
looking statements.” These statements can be identified by the
fact that they do not relate strictly to historical or current facts.
Forward-looking statements often include the use of words
such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,”
“estimate,” “plan,” and words and terms of similar substance
in connection with discussions of future events, situations
or financial performance. While these statements represent
our current expectations, no assurance can be given that the
results or events described in such statements will be achieved.
These forward-looking statements are inherently subject to
risks and uncertainties, and 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: failure to maintain our relationship with the U.S.
government, or the failure to compete effectively for new
contract awards or to retain existing U.S. government contracts;
inability to recruit and retain a sufficient number of employees
with specialized skill sets or necessary security clearances who
are in great demand and limited supply; adverse changes in
U.S. government spending for programs we support, whether
due to changing mission priorities, socio-economic policies
or federal budget constraints generally; failure to compete
effectively for awards procured through the competitive
bidding process, and the adverse impact of delays resulting
from our competitors’ protests of new contracts that are
awarded to us; disruptions to our business or damage to our
reputation resulting from cyber attacks and other security
threats; failure to obtain option awards, task orders or funding
under our contracts; the government renegotiating, modifying
or terminating our contracts; failure to comply with, or adverse
changes in, complex U.S. government laws and procurement
regulations; adverse results of U.S. government audits or
other investigations of our government contracts; failure to
successfully integrate acquired companies or businesses into
our operations or to realize any accretive or synergistic effects
from such acquisitions; failure to mitigate risks associated
with conducting business internationally; and adverse changes
in business conditions that may cause our investments in
recorded goodwill to become impaired. These and other risk
factors are more fully discussed in the section entitled “Risk
Factors” in ManTech’s Annual Report on Form 10-K previously
filed with the Securities and Exchange Commission on Feb.
21, 2020, 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
Annual Report. We undertake no obligation to update any
forward-looking statement made herein following the date of
this Annual Report, whether as a result of new information,
subsequent events or circumstances, changes in expectations
or otherwise.
12_194431