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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
__________________________________________
FORM 10-Q 
__________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
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
(Exact Name of Registrant as Specified in its Charter) 
__________________________________________
Delaware22-1852179
State or Other Jurisdiction of
Incorporation or Organization
I.R.S. Employer
Identification No.
2251 Corporate Park DriveHerndonVA20171
Address of Principal Executive OfficesZip Code
(703) 218-6000
Registrant’s Telephone Number, Including Area Code 
__________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common StockMANTNasdaq
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No
Indicate by check mark whether the registrant has submitted electronically, 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
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
  (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth 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 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 Exchange Act).      Yes      No
As of August 1, 2022 there were 39,382,197 shares outstanding of our Class A common stock and 1,586,695 shares outstanding of our Class B common stock.




TABLE OF CONTENTS
  Page No.
Item 1.
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2022 and 2021
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021
Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021
Notes to Condensed Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Item 4.
Item 1.
Item 1A.Risk Factors
Item 6.

2


PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share and Per Share Amounts)
 (unaudited)
 June 30,
2022
December 31,
2021
ASSETS
Cash and cash equivalents$46,751 $53,374 
Receivables—net511,481 476,035 
Prepaid expenses41,975 32,600 
Taxes receivable—current19,975 22,140 
Other current assets8,779 13,372 
Total Current Assets628,961 597,521 
Goodwill1,511,068 1,498,988 
Other intangible assets—net244,338 265,555 
Property and equipment—net132,978 133,297 
Operating lease right of use assets74,233 75,319 
Employee supplemental savings plan assets30,792 43,342 
Investments11,555 11,555 
Other assets14,647 13,988 
TOTAL ASSETS$2,648,572 $2,639,565 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable$162,193 $169,140 
Accrued salaries and related expenses130,562 129,685 
Contract liabilities34,638 36,197 
Operating lease obligations—current31,007 32,557 
Accrued expenses and other current liabilities13,108 9,649 
Total Current Liabilities371,508 377,228 
Long-term debt300,000 300,000 
Deferred income taxes168,350 174,060 
Operating lease obligations—long term63,433 63,575 
Accrued retirement25,876 36,053 
Other long-term liabilities13,520 13,229 
TOTAL LIABILITIES942,687 964,145 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, Class A—$0.01 par value; 150,000,000 shares authorized; 39,624,611 and 27,863,041 shares issued at June 30, 2022 and December 31, 2021; 39,380,498 and 27,618,928 shares outstanding at June 30, 2022 and December 31, 2021
396 279 
Common stock, Class B—$0.01 par value; 50,000,000 shares authorized; 1,586,695 and 13,176,695 shares issued and outstanding at June 30, 2022 and December 31, 2021
16 132 
Additional paid-in capital576,430 566,573 
Treasury stock, 244,113 and 244,113 shares at cost at June 30, 2022 and December 31, 2021
(9,158)(9,158)
Retained earnings1,138,499 1,117,867 
Accumulated other comprehensive loss(298)(273)
TOTAL STOCKHOLDERS' EQUITY1,705,885 1,675,420 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$2,648,572 $2,639,565 
See notes to condensed consolidated financial statements.
3


MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(unaudited)
Three months ended
June 30,
(unaudited)
Six months ended
June 30,
 2022202120222021
REVENUE$669,352 $648,578 $1,344,897 $1,281,802 
Cost of services573,373 552,868 1,149,344 1,095,585 
General and administrative expenses61,054 47,048 116,790 95,134 
OPERATING INCOME34,925 48,662 78,763 91,083 
Interest expense(2,033)(366)(4,275)(720)
Interest income46 39 99 79 
Other income (expense), net(11)(12)101 (133)
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND EQUITY METHOD INVESTMENTS32,927 48,323 74,688 90,309 
Provision for income taxes(10,090)(11,714)(20,510)(21,371)
Equity in losses of unconsolidated subsidiaries   (1)
NET INCOME$22,837 $36,609 $54,178 $68,937 
BASIC EARNINGS PER SHARE:
Class A common stock$0.56 $0.90 $1.33 $1.70 
Class B common stock$0.56 $0.90 $1.33 $1.70 
DILUTED EARNINGS PER SHARE:
Class A common stock$0.55 $0.89 $1.32 $1.68 
Class B common stock$0.55 $0.89 $1.32 $1.68 

See notes to condensed consolidated financial statements.
4


MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(unaudited)
Three months ended
June 30,
(unaudited)
Six months ended
June 30,
2022202120222021
NET INCOME$22,837 $36,609 $54,178 $68,937 
OTHER COMPREHENSIVE LOSS:
Translation adjustments, net of tax(13)(7)(25)(19)
Total other comprehensive loss(13)(7)(25)(19)
COMPREHENSIVE INCOME$22,824 $36,602 $54,153 $68,918 

See notes to condensed consolidated financial statements.
5


MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
(unaudited)
Three months ended
June 30,
(unaudited)
Six months ended
June 30,
2022202120222021
Common Stock, Class A
At beginning of period$396 $277 $279 $275 
Conversion Class B to Class A common stock  116  
Stock-based compensation expense  1 1 
Stock option exercises 1  2 
At end of period396 278 396 278 
Common Stock, Class B
At beginning of period16 132 132 132 
Conversion Class B to Class A common stock  (116) 
At end of period16 132 16 132 
Additional Paid-In Capital
At beginning of period570,871 549,811 566,573 545,717 
Stock-based compensation expense4,428 4,113 8,345 7,555 
Stock option exercises1,142 3,291 5,152 6,432 
Payment consideration to tax authority on employees' behalf(11)(4)(3,640)(2,493)
At end of period576,430 557,211 576,430 557,211 
Treasury Stock, at cost
At beginning of period(9,158)(9,158)(9,158)(9,158)
At end of period(9,158)(9,158)(9,158)(9,158)
Retained Earnings
At beginning of period1,132,457 1,059,608 1,117,867 1,042,676 
Net income22,837 36,609 54,178 68,937 
Dividends(16,795)(15,455)(33,546)(30,851)
At end of period1,138,499 1,080,762 1,138,499 1,080,762 
Accumulated Other Comprehensive Loss
At beginning of period(285)(242)(273)(230)
Translation adjustments, net of tax(13)(7)(25)(19)
At end of period(298)(249)(298)(249)
Total Stockholders' Equity$1,705,885 $1,628,976 $1,705,885 $1,628,976 

See notes to condensed consolidated financial statements.

6


MANTECH INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
Six months ended
June 30,
 20222021
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income$54,178 $68,937 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization41,963 37,887 
Noncash lease expense15,174 15,855 
Stock-based compensation expense8,346 7,556 
Deferred income taxes(4,099)3,274 
Contract loss reserve(1,391) 
Bad debt expense(1,247)(999)
Change in assets and liabilities—net of effects from acquired businesses:
Receivables-net(33,158)(56,912)
Prepaid expenses(11,286)(9,186)
Taxes receivable—current1,941 5,247 
Other current assets6,336 401 
Employee supplemental savings plan asset7,192 (2,836)
Other assets(1,315)(2,415)
Accounts payable(7,923)30,392 
Accrued salaries and related expenses(54)1,330 
Contract liabilities(2,033)(6,159)
Accrued expenses and other current liabilities245 (5,896)
Operating lease obligations(18,733)(17,573)
Accrued retirement(10,177)(1,977)
Other(94)(469)
Net cash flow from operating activities43,865 66,457 
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment(23,409)(31,077)
Proceeds from corporate owned life insurance5,358 227 
Investments in capitalized software(375) 
Net cash (used in) investing activities(18,426)(30,850)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Borrowings under credit facility40,500 164,000 
Repayments under credit facility(40,500)(149,000)
Dividends paid(33,574)(30,866)
Proceeds from exercise of stock options5,152 6,433 
Payment consideration to tax authority on employee's behalf(3,640)(2,493)
Net cash (used in) financing activities(32,062)(11,926)
NET CHANGE IN CASH AND CASH EQUIVALENTS(6,623)23,681 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD53,374 41,193 
CASH AND CASH EQUIVALENTS, END OF PERIOD$46,751 $64,874 
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest$3,758 $664 
Cash paid for income taxes, net of refunds$22,348 $12,864 
Noncash investing and financing activities:
Operating lease obligations arising from obtaining right of use assets$17,041 $9,496 
Finance lease obligations arising from obtaining right of use assets$ $62 
Noncash investing activities$(140)$(764)
See notes to condensed consolidated financial statements.
7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
UNAUDITED

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 information technology (IT) and systems engineering and software application development solutions that support national and homeland security.

2.Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the U.S., have been condensed or omitted pursuant to those rules and regulations. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We recommend that you read these condensed consolidated financial statements in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, previously filed with the SEC. We believe that the condensed consolidated financial statements in this Form 10-Q reflect all adjustments that are necessary to fairly present the financial position, results of operations and cash flows for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results that can be expected for the full year.

3.Proposed Merger

On May 13, 2022 the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Moose Bidco, Inc., a Delaware corporation (Parent), and Moose Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (Merger Sub). Pursuant to the Merger Agreement, and in accordance with the terms and subject to the conditions thereof, Merger Sub will merge with and into the Company (the Merger), with the Company surviving the Merger as a wholly owned subsidiary of Parent. As a result of the Merger, the Company will be acquired by Parent, which will be controlled by investment funds managed by The Carlyle Group Inc.

ManTech’s Board of Directors has unanimously determined that the transactions contemplated by the Merger Agreement, including the Merger, are in the best interests of the Company and its stockholders, and approved the Merger Agreement and the transactions contemplated by the Merger Agreement. Our Board of Directors has also unanimously resolved to recommend that the Company’s stockholders vote to adopt the Merger Agreement and approve the Merger and other transactions contemplated thereby.

Under the Merger Agreement, in accordance with the terms and subject to the conditions set forth therein, at the effective time of the Merger, each issued and outstanding share of Class A Common Stock, par value $0.01 per share, of the Company and Class B Common Stock, par value $0.01 per share, of the Company will be automatically converted into the right to receive $96.00 in cash, without interest, other than (1) those shares owned by Parent, Merger Sub or the Company (as treasury stock or otherwise) or any of their respective wholly owned subsidiaries (which will be cancelled without any consideration) and (2) any shares as to which appraisal rights have been properly exercised, and not withdrawn, in accordance with the Delaware General Corporation Law.

The consummation of the merger is subject to the satisfaction or waiver of customary closing conditions specified in the Merger Agreement, including, among others, (1) the adoption of the Merger Agreement by the Company’s stockholders, (2) the expiration or termination of any waiting period (and any extension thereof) applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act which expired June 20, 2022), (3) the absence of any law or order by a governmental authority that has the effect of preventing, making illegal or prohibiting the consummation of the Merger or any other transaction contemplated by the Merger Agreement and (4) the absence of a “Company Material Adverse Effect” (as defined in the Merger Agreement). The consummation of the Merger is not subject to a financing condition.

The Merger Agreement provides that the Company or Parent may terminate the Merger Agreement under certain conditions, and in certain specified circumstances, upon termination of the Merger Agreement, the Company will be required to pay Parent a termination fee of $115.9 million or Parent will be required to pay the Company a termination fee of $239.7
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million.

We expect the Merger to close during the second half of calendar year 2022.

4.Revenue from Contracts with Customers

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 specific contract and customer requirements. 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 are generally reimbursed separately for allowable materials and expenses at cost.

For contracts that do not meet the criteria to measure performance as a right to invoice under the series guidance, we utilize an Estimate at Completion process to measure progress toward completion. We typically estimate progress towards completion based on cost incurred or direct labor incurred. As part of this process, we review 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 judgments about the ability and cost to achieve the contract milestones and other technical contract requirements. We 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 timing in which we recognize revenue on our contracts. For the three months ended June 30, 2022, the aggregate impact of adjustments in contract estimates decreased our revenue by $1.5 million. For the three months ended June 30, 2021, the aggregate impact of adjustments in contract estimates increased our revenue by $5.7 million. For the six months ended June 30, 2022, the aggregate impact of adjustments in contract estimates decreased our revenue by $1.9 million. For the six months ended June 30, 2021, the aggregate impact of adjustments in contract estimates increased our revenue by $6.7 million.

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. For the three months ended and six months ended June 30, 2022 and 2021, we generated 100% of our revenue from sales in the U.S.

The following tables disclose revenue (in thousands) by contract type, customer and contractor type for the periods presented.
Three months ended
June 30,
Six months ended
June 30,
2022202120222021
Cost-reimbursable$476,812 $443,950 $942,789 $863,725 
Fixed-price100,540 117,474 216,284 249,682 
Time-and-materials92,000 87,154 185,824 168,395 
Revenue$669,352 $648,578 $1,344,897 $1,281,802 

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Three months ended
June 30,
Six months ended
June 30,
2022202120222021
U.S. Government$665,773 $642,755 $1,338,486 $1,271,253 
State agencies, international agencies and commercial entities3,579 5,823 6,411 10,549 
Revenue$669,352 $648,578 $1,344,897 $1,281,802 

Three months ended
June 30,
Six months ended
June 30,
2022202120222021
Prime contractor$622,597 $602,306 $1,245,789 $1,191,380 
Subcontractor46,755 46,272 99,108 90,422 
Revenue$669,352 $648,578 $1,344,897 $1,281,802 

The components of our receivables are as follows (in thousands):
June 30, 2022December 31, 2021
Billed receivables$364,278 $370,115 
Unbilled receivables157,557 118,387 
Allowance for doubtful accounts(10,354)(12,467)
Receivables—net$511,481 $476,035 

Receivables at June 30, 2022 are expected to be substantially collected within one year except for approximately $8.2 million, of which 100% is related to U.S. government receivables. We do not believe that we have significant exposure to credit risk as billed receivables and unbilled receivables are primarily due from the U.S. government. The allowance for doubtful accounts represents our estimate for exposure due to compliance, contractual issues and bad debts related to prime contractors.

At June 30, 2022 and December 31, 2021, our contract liabilities were $34.6 million and $36.2 million, respectively. Changes in the balance of contract liabilities are primarily due to the timing difference between our performance and our customers' payments. For the three months ended June 30, 2022, the amount of revenue that was included in the opening contract liabilities balance was $3.4 million. For the six months ended June 30, 2022, the amount of revenue that was included in the opening contract liabilities balance was $23.1 million.

The remaining performance obligation as of June 30, 2022 is $2.3 billion. The following table discloses when we expect to recognize the remaining performance obligation as revenue (in billions):
For the remaining six months ending December 31, 2022For the year ending
December 31, 2023December 31, 2024Thereafter
$1.0 $0.6 $0.3 $0.4 

5.Acquisitions

Technical and Management Assistance Corporation (TMAC)—On December 30, 2021, we completed the acquisition of TMAC through a share purchase agreement by and among ManTech International Corporation, Technical and Management Assistance Corporation, Project Cipher, Inc, and its Shareholder. TMAC is a leading provider of advanced data engineering services and solutions that ensure the delivery of vital information to the U.S. Intelligence Community.

The acquisition was accounted for as a business combination. The results of TMAC's operations have been included in our consolidated financial statements since that date. We funded the acquisition with cash on hand.

The purchase price was $30.3 million, which includes the finalized working capital adjustment. The purchase price was preliminarily allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. The
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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 TMAC is not complete as of June 30, 2022. In accordance with ASC 805, Business Combinations, we expect to finalize our purchase price allocation within one year of the acquisition date.

Recognition of goodwill is largely attributed to the value paid for TMAC's capabilities, which will broaden our footprint within the U.S. Intelligence Community. The goodwill recorded for this transaction is valued at $15.0 million and 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 $15.0 million and $0.7 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 TMAC'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 1 year. The weighted-average amortization period of other intangibles is 19 years.

Gryphon Technologies, Inc. (Gryphon)—On December 9, 2021, we completed the acquisition of Gryphon through a unit purchase agreement by and among ManTech International Corporation, Gryphon Parent, LLC and Gryphon Finance, LLC. Gryphon will further strengthen our long-term competitive position by adding differentiated digital and systems engineering capabilities across the Department of Defense.

The acquisition was accounted for as a business combination. The results of Gryphon's operations have been included in our consolidated financial statements since that date. We funded the acquisition with cash on hand and borrowing under our credit facilities.

The preliminary purchase price was $358.9 million, which includes an estimated working capital adjustment. The preliminary purchase price 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 Gryphon is not complete as of June 30, 2022. In accordance with ASC 805, Business Combinations, we expect to finalize our purchase price allocation within one year of the acquisition date.

Recognition of goodwill is largely attributed to the value paid for Gryphon's capabilities, which will broaden our footprint within the Department of Defense. Pre-existing goodwill recorded for this transaction will be deductible for tax purposes over 13 years. The remainder of goodwill attributable to the acquisition of Gryphon will not be deductible for tax purposes.

The components of other intangible assets associated with the acquisition were customer relationships and backlog valued at $60.7 million and $5.0 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 Gryphon'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 of other intangibles is 19 years.

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The following table represents the preliminary purchase price allocation for Gryphon (in thousands):

Cash and cash equivalents$20,184 
Receivables58,554 
Prepaid expenses1,939 
Taxes receivable - current1,418 
Other current assets2,912 
Goodwill257,928 
Other intangible assets69,067 
Property and equipment2,736 
Operating lease right of use assets5,479 
Other assets352 
Accounts payable(12,471)
Accrued salaries and related expenses(20,411)
Contract liabilities(4,773)
Operating lease obligations—current(1,243)
Accrued expenses and other current liabilities(5,153)
Deferred income taxes(13,361)
Operating lease obligations—long term(4,287)
Net assets acquired and liabilities assumed$358,870 

For the three months ended June 30, 2022, we incurred no acquisition costs related to the Gryphon transactions. For the six months ended June 30, 2022, we incurred approximately $0.1 million of acquisition costs related to the Gryphon 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 six months ended June 30, 2022 and 2021, we declared and paid quarterly dividends in the amounts of $0.41 per share and $0.38 per share, respectively, 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.
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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): 
 Three months ended
June 30,
Six months ended
June 30,
 2022202120222021
Distributed earnings$16,795 $15,455 $33,546 $30,851 
Undistributed earnings6,042 21,154 20,632 38,086 
Net income$22,837 $36,609 $54,178 $68,937 
Class A common stock:
Basic net income available to common stockholders$21,948 $24,730 $44,771 $46,537 
Basic weighted average common shares outstanding39,344 27,434 33,778 27,376 
Basic earnings per share$0.56 $0.90 $1.33 $1.70 
Diluted net income available to common stockholders$21,954 $24,830 $44,834 $46,741 
Effect of potential exercise of stock options277 345 275 373 
Diluted weighted average common shares outstanding39,621 27,779 34,053 27,749 
Diluted earnings per share$0.55 $0.89 $1.32 $1.68 
Class B common stock:
Basic net income available to common stockholders$889 $11,879 $9,407 $22,400 
Basic weighted average common shares outstanding1,593 13,177 7,097 13,177 
Basic earnings per share$0.56 $0.90 $1.33 $1.70 
Diluted net income available to common stockholders$883 $11,779 $9,344 $22,196 
Diluted weighted average common shares outstanding1,593 13,177 7,097 13,177 
Diluted earnings per share$0.55 $0.89 $1.32 $1.68 

For the three months ended June 30, 2022 and 2021, options to purchase 1,505 shares and 428 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 six months ended June 30, 2022 and 2021, options to purchase 11,235 shares and 411 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 six months ended June 30, 2022 and 2021, there were 99,286 shares and 125,534 shares, respectively, issued from the exercise of stock options. For the six months ended June 30, 2022 and 2021 there were 139,082 shares and 117,129 shares, respectively, issued from the vesting of restricted stock units.

7.Property and Equipment

Major classes of property and equipment are summarized as follows (in thousands):
June 30,
2022
December 31,
2021
Furniture and equipment$248,513 $234,169 
Leasehold improvements76,361 70,932 
Finance leases797 797 
Property and equipment—gross325,671 305,898 
Accumulated depreciation and amortization(192,693)(172,601)
Property and equipment—net$132,978 $133,297 

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Depreciation and amortization expense related to property and equipment for the three months ended June 30, 2022 and 2021 was $10.7 million and $11.7 million, respectively. Depreciation and amortization expense related to property and equipment for the six months ended June 30, 2022 and 2021 was $23.5 million and $23.2 million, respectively.

8.Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill during the year ended December 31, 2021 and six months ended June 30, 2022 are as follows (in thousands):
Goodwill Balance
Goodwill at December 31, 2020$1,237,894 
Acquisitions260,863 
Acquisition fair value adjustment231 
Goodwill at December 31, 20211,498,988 
Acquisition fair value adjustment12,080 
Goodwill at June 30, 2022$1,511,068 

Other intangible assets consisted of the following (in thousands):

June 30, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Other intangible assets:
Contract and program intangible assets$512,032 $276,013 $236,019 $517,932 $262,105 $255,827 
Capitalized software58,264 49,945 8,319 56,938 47,210 9,728 
Total other intangible assets—net$570,296 $325,958 $244,338 $574,870 $309,315 $265,555 

Amortization expense relating to intangible assets for the three months ended June 30, 2022 and 2021 was $8.3 million and $6.3 million, respectively. Amortization expense relating to the intangible assets for the six months ended June 30, 2022 and 2021 was $16.6 million and $13.1 million, respectively. Amortization expense for the six months ended June 30, 2021 includes an impairment of $0.3 million for capitalized software. We estimate that we will have the following amortization expense for the future periods indicated below (in thousands):

For the remaining six months ending December 31, 2022$16,279 
For the year ending:
December 31, 2023$26,438 
December 31, 2024$23,885 
December 31, 2025$20,801 
December 31, 2026$19,341 
December 31, 2027$18,312 

9.Debt

On July 20, 2021, we amended and restated our credit agreement (Third Amended and Restated Credit Agreement) with a syndicate of lenders led by Bank of America, N.A., as sole administrative agent. The Third Amended and Restated Credit Agreement includes an aggregate principal amount of up to $1.1 billion made available through (i) a $500 million revolving credit facility with a $100 million letter of credit sublimit and a $50 million swing line loan sublimit and (ii) a $600 million delayed-draw term loan facility. Under the delayed-draw term loan facility, borrowings are available to be drawn prior to the first anniversary of the Third Amended and Restated Credit Agreement in up to three separate drawings in a minimal amount of $50 million. The Third Amended and Restated Credit Agreement also includes an accordion feature that permits us to arrange
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with the lenders for the provision of additional commitments. The maturity date of the Third Amended and Restated Credit Agreement is July 20, 2026.

Borrowings under the Third Amended and Restated Credit Agreement are collateralized by substantially all of our assets and those of our Material Subsidiaries and bear interest at one of the following variable rates as selected by us at the time of borrowing: a London Interbank Offer Rate base rate plus market-rate spreads (1.25% to 2.00% based on our consolidated total leverage ratio) or Bank of America's base rate plus market spreads (0.25% to 1.00% based on our consolidated total leverage ratio).

The terms of the Third Amended and Restated Credit Agreement permit prepayment and termination of the loan commitments at any time, subject to certain conditions. The Third Amended and Restated Credit Agreement requires us to comply with specified financial covenants, including the maintenance of certain leverage ratios and a consolidated coverage ratio. The Third Amended and Restated 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 six months ended June 30, 2022 and 2021, we were in compliance with these covenants.

There was $300.0 million outstanding on our credit facilities at both June 30, 2022 and December 31, 2021. The maximum available borrowing under the credit facilities at June 30, 2022 was $797.0 million. As of June 30, 2022, we were contingently liable under letters of credit totaling $3.0 million, which reduces our availability to borrow under our credit facilities.

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 a majority of our incurred cost audits through 2019 with no material adjustments. The remaining audits through 2021 are not expected to have a material effect on our financial position, results of operations or cash flow and management believes it has adequately reserved for any losses.

In the normal course of business, we are involved in certain governmental and legal proceedings, claims and disputes and have litigation pending under several suits. We believe that the ultimate resolution of these matters will not have a material effect on our financial position, results of operations or cash flows.

We have $3.0 million outstanding on our letter of credit, of which $1.6 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

On March 28, 2022, 11,580,000 shares of Class B common stock were converted to Class A common stock. On June 30, 2022, there were 39,380,498 shares of Class A common stock outstanding, 244,113 shares of Class A common stock as treasury stock, and 1,586,695 shares of Class B common stock outstanding.

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, among others, stock options, restricted stock and restricted stock units (RSUs). 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, 2022, there were 611,934 additional shares made available for issuance under the Plan. Through June 30, 2022, the Board of Directors has
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authorized the issuance of up to 16,970,005 shares under this Plan. Through June 30, 2022, the remaining aggregate number of shares of our common stock available for future grants under the Plan was 8,214,622. 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 three months ended June 30, 2022 and 2021, we recorded $4.4 million and $4.2 million, respectively, of stock-based compensation expense. For the six months ended June 30, 2022 and 2021, we recorded $8.3 million and $7.6 million, respectively, of stock-based compensation expense. No compensation expense of employees with stock awards, including stock-based compensation expense, was capitalized during the periods. For the three months ended June 30, 2022 and 2021, we recorded $0.1 million and $0.5 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. For the six months ended June 30, 2022 and 2021, we recorded $1.0 million and $1.5 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 in the past. A stock option 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 did not grant any options during the six months ended June 30, 2022 and year ended December 31, 2021.

We have used the Black-Scholes-Merton option pricing model to determine the fair value of our 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. Option grants that vested during the six months ended June 30, 2022 and 2021 had a combined fair value of $0.6 million and $1.1 million, respectively.

The following table summarizes stock option activity for the year ended December 31, 2021 and the six months ended June 30, 2022:
Number of SharesWeighted Average Exercise PriceAggregate Intrinsic Value
(in thousands)
Weighted Average Remaining Contractual Life
Stock options outstanding at December 31, 2020785,827 $56.33 $25,629 
Exercised(196,735)$48.65 $7,168 
Cancelled and expired(21,776)$63.80 
Stock options outstanding at December 31, 2021567,316 $58.70 $8,380 
Exercised(99,286)$52.15 $3,253 
Cancelled and expired(9,983)$64.05 
Stock options outstanding at June 30, 2022458,047 $60.01 $16,235 2 years
Stock options exercisable at June 30, 2022403,471 $58.00 $15,112 1 year

The following table summarizes non-vested stock options for the six months ended June 30, 2022:
Number of SharesWeighted Average Fair Value
Non-vested stock options at December 31, 2021114,067 $12.16 
Vested(55,167)$10.07 
Cancelled(4,324)$12.59 
Non-vested stock options at June 30, 202254,576 $14.23 

Unrecognized compensation expense related to non-vested awards was $0.3 million as of June 30, 2022, which is expected to be recognized over a weighted-average period of 0.3 years.
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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 on the one year anniversary of the grant date. The related compensation expense is recognized over the service period and is based on the grant date fair value of the stock. 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 following table summarizes the restricted stock activity during the year ended December 31, 2021 and the six months ended June 30, 2022:
Number of SharesWeighted Average Fair Value
Non-vested restricted stock at December 31, 202024,000 $71.11 
Granted24,000 $86.01 
Vested(24,000)$71.11 
Non-vested restricted stock at December 31, 202124,000 $86.01 
Vested(24,000)$86.01 
Non-vested restricted stock at June 30, 2022 $ 

RSUs—Under the Plan, we have issued restricted stock units (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 have no voting rights until the RSUs vest. Employees who are granted RSUs do not receive dividend payments during the vesting period. Our employees' time-based RSUs generally provide for 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.

The following table summarizes the non-vested RSU activity during the year ended December 31, 2021 and the six months ended June 30, 2022:
Number of UnitsWeighted Average Fair Value
Non-vested RSUs at December 31, 2020346,799 $64.48 
Granted236,240 $78.78 
Vested(152,121)$61.06 
Forfeited(25,564)$67.07 
Non-vested RSUs at December 31, 2021405,354 $73.94 
Granted200,760 $81.02 
Vested(116,422)$71.09 
Forfeited(24,622)$75.30 
Non-vested RSUs at June 30, 2022465,070 $77.64 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

All statements and assumptions contained in this Quarterly Report on Form 10-Q 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.

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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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in Item 1A "Risk Factors" in Part II of this Form 10-Q.

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 win 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;
disruptions to our business resulting from the COVID-19 pandemic or other similar global health epidemics, pandemics and/or other disease outbreaks;
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;
adverse changes in business conditions that may cause our investments in recorded goodwill to become impaired;
the conditions to the closing of the proposed Merger may not be satisfied or waived, and the proposed Merger may not be consummated within the expected time period or at all;
our business may suffer as a result of uncertainty surrounding the Merger, and the proposed Merger may disrupt our current plans and operations or divert management’s attention from ongoing business operations;
difficulties with our ability to retain and hire key personnel and maintain our business relationships as a result of the proposed Merger may occur;
we have incurred and expect to continue to incur significant costs in connection with the Merger, some of which are payable by us regardless of whether the Merger is completed;
the occurrence of certain events, changes or other circumstances could, under the terms of the Merger Agreement, give rise to termination of the Merger Agreement;
stockholder litigation in connection with the Merger could affect the timing or occurrence of the Merger and could result in significant costs; and
if the Merger is completed, stockholders will forego realization of any long-term value potential based on current strategy as an independent public company.

We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to update any forward-looking statement made herein following the date of this Quarterly Report, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

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, secure mission & enterprise IT, advanced data analytics, software and systems development, intelligent systems engineering, intelligence mission support and mission operations.

We are continuing to monitor impacts of the global outbreak of the COVID-19 pandemic including new variants of the virus, specific impacts and mitigation protocols enacted in regions in which we operate, and the vaccination status of our employees. In preparation of the President's Executive Order requiring all federal employees and contractors supporting the federal government be vaccinated (or to have an approved accommodation) as well as to promote the well-being of our workforce, we have and continue to encourage our employees to get vaccinated. There is currently an injunction suspending the President’s executive order requiring vaccination of our workforce. We cannot predict the potential impact of the
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vaccination mandate, if enforced, or the overall evolution of the pandemic and its further impacts on the economy or our business.

The U.S. is currently experiencing the highest inflation in 40 years. In response to the increasing inflation rates, the Federal Reserve has begun, and is signaling the intent to continue through 2022, increasing interest rates. Increasing interest rates will increase the amounts of interest we pay on our outstanding debt.

We recommend that you read this discussion and analysis in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, previously filed with the Securities and Exchange Commission.

Proposed Merger

On May 13, 2022 the Company entered into the Merger Agreement with Parent and Merger Sub. Pursuant to the Merger Agreement, and in accordance with the terms and subject to the conditions thereof, Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent. As a result of the Merger, the Company will be acquired by the Parent, which will be controlled by investment funds managed by The Carlyle Group Inc. The consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions specified in the Merger Agreement. Refer to Note 3, Proposed Merger, in the notes to the financial statements in this Form 10-Q.

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The following table sets forth certain items from our condensed consolidated statements of income and the relative percentage that certain items of expenses and earnings bear to revenue, as well as the period-to-period change from June 30, 2021 to June 30, 2022.
Three months ended
June 30,
Period-to-Period Change
20222021202220212021 to 2022
DollarsPercentageDollarsPercentage
(dollars in thousands)
REVENUE$669,352 $648,578 100.0 %100.0 %$20,774 3.2 %
Cost of services573,373 552,868 85.7 %85.2 %20,505 3.7 %
General and administrative expenses61,054 47,048 9.1 %7.3 %14,006 29.8 %
OPERATING INCOME34,925 48,662 5.2 %7.5 %(13,737)(28.2)%
Interest expense(2,033)(366)0.3 %0.1 %1,667 455.5