Annual Report Brochure

ManTech International Corporation 2011 Annual ReportCyber attacks have become more pervasive and destructive, and we must protect our data and networks from increasingly sophisticated adversaries. 1In February 2012, ManTech completed 10 years as a public company, a decade marked by impressive growth for our company and extraordinary contributions to the nation’s security by our industry. Our fi nancial results in 2011 refl ect the solid performance of our people and the ability of our acquisitions to deliver new customers and increase our presence in new business areas. In the process, we are proud of ManTech’s signifi cant contribution to national security, which is the basis of our business.George J. PedersenChairman of the Board and CEOG J P dTO OUR SHAREHOLDERSI am proud to report that we delivered ex cellent fi nancial results and improved our competitive position in 2011. ManTech is stronger than ever with nearly $3 billion in annual sales. With our excellent balance sheet and fi rm positioning on mission-critical programs, we will continue to grow and build on our reputation as a trusted technology partner on priority programs. We are confi dent that ManTech will continue to thrive even as federal spending slows. We have taken strategic actions over the last few years to position the company with customers, employees, job applicants, and investors as the premier provider of technology and engineering services and solutions within the federal government market. To achieve this objective, we are directly supporting our customers’ most critical missions, competing aggressively on new opportunities, building presence in new growth markets, and focusing on shareholder returns. Direct Support on Mission-Critical ProgramsManTech is honored to be a valued national security partner to the U.S. government. Our nation is still fi ghting a war in Afghanistan— even as we shift our strategic focus to mounting threats in the Pacifi c and increased instability along our southern border. Moreover, cyber attacks have become more pervasive and destructive, and we must protect our data and networks from increasingly sophisticated adversaries. Despite these threats, the size of our nation’s defi cit is alarming and government spending cannot continue to grow at recent levels. When resources are constrained, our customers will focus their resources on their central missions and rely on their most trusted prime contractors. Because our people often work side-by-side with customers, we understand our customers’ requirements and are often able to take initiatives to improve their operations by rapidly identifying and developing solutions for customer-specifi c needs.2ManTech International Corporation 2011 Annual ReportThe prime contractor position is increasingly important and we have aggressively pursued new prime positions both organically and through acquisitions. As a result of our eff orts, our prime contractor positions have increased dramatically. The two acquisitions completed in 2011 brought prime positions on important, multi-billion dollar contracts. In 2011, almost 86 percent of our revenue came through prime contracts, compared to less than 50 percent three years ago. As a prime, we are able to build closer and more productive relationships with our customers, ensure consistency and quality in the operations, foresee emerging requirements, and eff ectively manage project resources. Aggressive Focus on New OpportunitiesWe closely track our customers’ requirements and funding and have built our capability and capacity to forecast, analyze, and pursue opportunities on the horizon. Our global footprint, long-term customer relationships, and reputation for program performance will enable us to attract new customers and to cross-sell our broad array of solutions to our existing customers. At the end of the year, we were tracking a pipeline of qualifi ed opportunities of approximately $27 billion. In 2011, we won $3.0 billion in new business awards, including AMBIANCE, a seven-year, single-award contract with a value in excess of $400 million. As lead systems integrator supporting analytic modernization, we will enable our Department of Defense (DoD) customer to transform its enterprise to a cloud-based, service-oriented architecture. AMBIANCE solidifi es ManTech’s status as a leading full-spectrum systems integrator with the ability to govern large-scale developers. Other major new opportunities captured during the year include multi-billion dollar contracts for the Department of Justice and the FBI. Addressing New Growth Markets The government technical-services market will remain robust and we will focus our eff orts on the higher growth program areas within it. In particular, we intend to focus on providing new or improved solutions in cyber security, information assurance, and C4ISR lifecycle support and we have established plans around other potential high-growth areas, such as healthcare information technology (IT) and border security. We will augment our organic growth by selectively pursuing strategic acquisitions that broaden our domain expertise and service off erings and build relationships with new customers, as we did with two acquisitions in 2011. TranTech Inc. was a respected provider of IT services to the defense and intelligence communities, with a prime position on the $12 billion Defense Information Systems Agency (DISA) ENCORE II contract. This contract off ers a substantial channel for ManTech to provide a full range of Our global footprint, long-term customer relationships, and reputation for program performance will enable us to attract new customers3technology solutions that enable DISA and the U.S. Cyber Command to protect and secure defense networks and information. Since the acquisition, we have won more than $50 million in new contract awards under ENCORE II—several times the size of TranTech when we acquired it.The acquisition of Worldwide Information Network Systems, Inc. (WINS) adds signifi cant expertise in network and infrastructure engineering, enterprise architecture, systems and software development and integration, and end-user workspace management. WINS brought to ManTech both the $6.6 billion Defense Intelligence Agency (DIA) Solutions for Information Technology Enterprise (SITE) contract and a strong presence with the Department of State. In January 2012, we entered the healthcare IT market with the acquisition of Evolvent Technologies, Inc. Its systems and processes enable better decision-making at the point of care and full integration of medical information across diff erent platforms. This market allows us to take skills that we have gained in our core business—analyzing, manipulating, and protecting massive amounts of data—and apply them to new customers and new problems. We expect to make additional strategic acquisitions to augment Evolvent’s capability and customer relationships. We will continue to seek out new growth areas. To augment our strong cash generation, we entered into a new credit agreement that provides for a $500 million revolving credit facility with an accordion feature that can provide up to $250 million in additional commitments. As of the date of this publication we have no borrowing against this line of credit. Focus on Shareholder ReturnsManTech’s positioning on high-priority programs enabled us to sustain strong fi nancial performance despite uncertainties in our markets. Our 2011 revenues were $2.9 billion, up 10 percent compared to 2010. Our net income for the year was $133 million, up 7 percent, with diluted earnings per share of $3.63, marking a 6 percent increase over the prior year. Strong positive cash fl ow continues to be a true hallmark of ManTech. Cash fl ow from operating activities for 2011 was up 29 percent to $221 million, or 1.7 times net income. Our disciplined cash management and collections process enabled us to initiate a regular cash dividend program. We are committed to returning value to shareholders, and we paid $31 million in dividends to our shareholders in 2011. We believe that ManTech is a compelling investment due to our regular cash dividend program and our strong growth prospects. A Future Filled with PromiseIn February of 2002, we went public with a little more than $400 million in annual sales. I am tremendously proud of ManTech’s success over the past decade. We’ve grown to nearly $3 billion in revenues after acquiring 18 businesses and generating double-digit organic growth. We have built capabilities in vital areas that will spur growth in our business for years to come. As an example, our cyber practice began with our very fi rst acquisition after the initial public off ering (IPO), and we are now one of the leading providers of cyber security services in the world.Today, we are one of the leaders in our industry and in a great position for the future. We may face some headwinds as the nation withdraws from Afghanistan and pursues a new defense strategy, but our core business is strong, we are well positioned within the new strategic national-security framework, and I am excited about entering complementary new markets, such as healthcare. Our next step is to get to $5 billion in annual revenue, and the next decade will be another good one for ManTech. 4ManTech International Corporation 2011 Annual ReportWe are a $3 billion public company that brings innovation, adaptability, and critical thinking to our work in defense, intelligence, diplomacy, law enforcement, science, administration, and other fi elds—across the nation and in many countries throughout the world.We support more than 60 diff erent government agencies under 1,000 active contracts, and we are now applying the lessons we have learned in the unforgiving arena of national security to help the private sector protect networks and critical information.ManTech was founded in 1968 for the specifi c purpose of providing advanced technological services to the government. We began with a single contract with the U.S. Navy to develop war-gaming models for the submarine community. Over the years, our government’s technology needs have increased dramatically in scope and sophistication, and we have grown to meet that challenge. Today, ManTech carries out its work through three operating divisions: Our Mission, Cyber, and Technology Solutions (MCTS) group tackles some of the most challenging cyber security problems facing our nation.Our Systems Engineering and Advanced Technology (SEAT) group provides disciplined systems engineering support, integratingthe full spectrum of project management, systems engineering, and acquisition practices necessary to eff ectively manage a project or system over its lifecycle.WHO WE AREOur Technical Services Group (TSG) provides maintenance and sustainment, supply-chain management, and infrastructure support for communications, intelligence, surveillance and reconnaissance, and other systems worldwide.We are proud to include among the agencies we serve:• Intelligence Community• Department of Defense• All branches of the Armed Forces• Department of State• Department of Homeland Security• Department of Energy• Department of Justice, including the FBI• Space Community• Other U.S. federal government customersManTech International Corporation is one of the leading providers of advanced technology services to the United States government. 5FINANCIAL RESULTSAdditional Financial InformationResults from Continuing Operations (in thousands, except EPS)2007 2008 2009 2010 2011Revenues $1,448,098 $1,870,879 $2,020,334 $2,604,038 $2,869,982Operating income $113,704 $153,358 $179,079 $215,140 $227,354Income from continuing operations $67,327 $90,292 $111,764 $125,096 $133,306Diluted earnings per share $1.95 $2.55 $3.11 $3.43 $3.63Balance Sheet SummaryCash and cash equivalents $8,048 $4,375 $86,190 $84,829 $114,483Accounts receivable $337,467 $407,248 $399,239 $528,765 $540,468Working capital $68,409 $140,744 $276,087 $282,496 $300,366Total assets $937,503 $1,021,712 $1,100,747 $1,590,477 $1,760,206Total debt $165,000 $44,100 $0 $200,000 $200,000Total stockholders’ equity $551,305 $680,536 $817,465 $966,343 $1,089,2576666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666666ManTech International Corporation 2011 Annual ReportManTech is honored to be a valued national security partner to the U.S. government. Our nation is still fi ghting a war in Afghanistan—even as we shift our strategic focus to mounting threats in the Pacifi c and increased instability along our southern border.7Investor confi dence in ManTech is of paramount importance to us, and our corporate governance policies provide a framework for the effi cient operation of our company, consistent with the best interests of our stockholders and applicable legal and regulatory requirements. ManTech has a system of controls and procedures designed to ensure the integrity and accuracy of our fi nancial results. At ManTech, we have always been diligent in complying with our established fi nancial accounting policies (consistent with GAAP) and in reporting our results with objectivity and the highest degree of integrity. We are committed to providing fi nancial information that is transparent, timely, complete, relevant and accurate. We are also committed to rigorously and diligently exercising our oversight responsibilities throughout the company, managing our aff airs consistent with the highest principles of business ethics, and meeting or exceeding the corporate governance requirements of the SEC and NASDAQ. Some of the steps we have taken to fulfi ll this commitment include: • A majority of our Board members are independent of ManTech and its management• Our key Board committees – the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee – are comprised solely of independent directors• Our independent directors meet regularly in executive session, without management present • The charters of our key Board committees clearly establish their respective roles and responsibilities and are publicly available• Our Nominating and Corporate Governance Committee has established a formal policy regarding the recommendation of director candidates by our stockholders, a copy of which is available on our website• We have a code of business conduct and ethics that is monitored by our Corporate Compliance Department, a copy of which is available on our website • We have an ethics offi ce with a hotline available to all of our employees, and our Audit Committee has procedures in place for the anonymous submission of employee complaints about accounting, internal control, or auditing mattersWe are devoted to ensuring that the high standards that we have established are consistently maintained. Our culture demands integrity and an unyielding commitment to strong internal practices and policies. We have the highest confi dence in our fi nancial reporting, our underlying system of internal controls, and our people. We thank you for the confi dence you have placed in us. George J. PedersenChairman of the Board and CEOGeorge JJJ Pedersen8ManTech International Corporation 2011 Annual ReportOUR LEADERSHIP TEAMManagement TeamBoard of DirectorsLeft to RightTerry M. Ryan – President and Chief Operating Offi cer, ManTech Systems Engineering and Advanced Technology GroupLouis M. Addeo – President and Chief Operating Offi cer, ManTech Technical Services GroupGeorge J. Pedersen – Chairman of the Board and Chief Executive Offi cer, ManTech International CorporationL. William Varner – President and Chief Operating Offi cer, ManTech Mission, Cyber and Technology Solutions GroupKevin M. Phillips – Executive Vice President and Chief Financial Offi cer, ManTech International CorporationLeft to Right from Top to BottomGeorge J. Pedersen – Chairman of the Board and Chief Executive Offi cerAmbassador Richard L. Armitage – Former Deputy Secretary of State; Former Assistant Secretary of Defense; Former Presidential Special Envoy during the Gulf WarMary K. Bush – Founder and President, Bush International; Former Managing Director, Federal Housing Finance BoardBarry G. Campbell – Former Chairman and Chief Executive Offi cer, Tracor Systems Technology, Inc.Walter R. Fatzinger, Jr. – Director, Chevy Chase Trust Company and Director, ASB Capital Management, Inc.Admiral David E. Jeremiah – U.S. Navy (Ret.) – Former Vice Chairman of the Joint Chiefs of Staff Richard J. Kerr – Former Deputy Director, Central Intelligence Agency and CIA Offi cerLieutenant General Kenneth A. Minihan, – USAF (Ret.) – Managing Director of the Homeland Security Fund for Paladin Capital Group; Former Director, National Security Agency; Former Director, Defense Intelligence AgencyStephen W. Porter – Senior Counsel, Arnold and PorterUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-KÈ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2011OR‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File No. 000-49604(Exact name of registrant as specified in its charter)Delaware 22-1852179(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)12015 Lee Jackson Highway, Fairfax, VA 22033(Address of principal executive offices)(703) 218-6000(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredClass A Common Stock, Par Value $0.01 Per Share Nasdaq Stock MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È 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 ÈIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes È No ‘Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes È No ‘Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. ÈIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act(Check one):Large accelerated filer È Accelerated filer ‘Non-accelerated filer ‘ (Do not check if a smaller reporting company) Smaller reporting company ‘Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No ÈThe aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2011 was $1,042,159,519 (based on theclosing price of $44.42 per share on June 30, 2011, as reported by the Nasdaq National Market).There were the following numbers of shares outstanding of each of the registrant’s classes of common stock as of February 21, 2012:ManTech International Corp. Class A Common Stock, $0.01 par value per share, 23,686,059 shares; ManTech International Corp. Class BCommon Stock, $0.01 par value per share, 13,192,845 shares.DOCUMENTS INCORPORATED BY REFERENCECertain portions of the definitive Proxy Statement to be filed with the Securities Exchange Commission pursuant to Regulation 14A inconnection with the registrant’s 2012 Annual Meeting of Stockholders, to be filed subsequent to the date hereof, are incorporated by referenceinto 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 theCommission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.TABLE OF CONTENTSPagePart IItem 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Item 1B. Unresolved SEC Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Part IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 33Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 81Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Part IIIItem 10. Directors and Executive Officers of the Registrant and Corporate Governance . . . . . . . . . . . . . . . . 84Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . 85Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Part IVItem 15. Exhibits and Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Schedule II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89PART IIn this document, unless the context indicates otherwise, the terms “Company” and “ManTech” as well asthe words “we”, “our”, “ours” and “us” refer to both ManTech International Corporation and its consolidatedsubsidiaries. The term “registrant” refers only to ManTech International Corporation, a Delaware corporation.Industry and market data used throughout this Annual Report on Form 10-K were obtained through surveysand studies conducted by third parties, industry and general publications and internal company research. INPUT,an independent federal government market research firm, was the primary source for third-party industry andmarket data and forecasts. We have not independently verified any of the data from third-party sources nor havewe ascertained any underlying economic assumptions relied upon therein. While we are not aware of anymisstatements regarding the industry data presented herein, estimates involve risks and uncertainties and aresubject to change based on various factors, including those discussed under the heading “Risk Factors.”Forward-Looking StatementsThis Annual Report on Form 10-K contains forward-looking statements that involve substantial risks anduncertainties, many of which are outside of our control. We believe that these statements are within the definitionof the Private Securities Litigation Reform Act of 1995. You can identify these statements by the use of wordssuch as “may”, “will”, “expect”, “intend”, “anticipate”, “believe”, “estimate”, “continue,” or the negative ofthese terms or words of similar import. You should read statements that contain these words carefully becausethey discuss our future expectations, make projections of our future results of operations or financial condition orstate other “forward-looking” information.Although forward-looking statements in this Annual Report reflect our good faith judgment, such statementscan only be based on facts and factors currently known by us. Consequently, forward-looking statements areinherently subject to risks and uncertainties and actual results and outcomes may differ materially from theresults and outcomes discussed in or anticipated by the forward-looking statements. We believe that it isimportant to communicate our future expectations to our investors. However, there may be events in the futurethat we are not able to predict accurately or control. Factors that could cause actual results to differ materiallyfrom the results we anticipate include, but are not limited to, those discussed in Item 1A. “Risk Factors” below,as well as those discussed elsewhere in this Annual Report. We urge you not to place undue reliance on theseforward-looking statements, which speak only as of the date of this Annual Report. We undertake no obligationto update any forward-looking statement herein after the date of this Annual Report, whether as a result of newinformation, subsequent events or circumstances, changes in expectations or otherwise. We also suggest that youcarefully review and consider the various disclosures made in this Annual Report that attempt to advise interestedparties of the risks and factors that may affect our business, financial condition, results of operations andprospects.Item 1. BusinessBusiness OverviewManTech is a leading provider of innovative technologies and solutions for mission-critical national securityprograms for the intelligence community; Departments of Defense, State, Homeland Security, Energy andJustice, including the Federal Bureau of Investigations (FBI); the space community; and other U.S. federalgovernment customers.We support critical national security programs for approximately 60 federal agencies through approximately1,000 current contracts. ManTech supports major national missions, such as military readiness, terrorist threatdetection, information security and border protection.3For the year ended December 31, 2011, we had revenues of $2.87 billion, an increase of 10.2% over ourrevenues of $2.60 billion for the same period in 2010. We have grown substantially over the last decade, fromrevenues of $0.43 billion at the end of 2001, just prior to our Initial Public Offering (IPO) in February 2002, toour current levels.Industry BackgroundOur primary customer is the U.S. federal government, the largest consumer of services and solutions in theUnited States. In 2011, the U.S. federal government spent about $266 billion on contracted services. Althoughfederal spending is not projected to grow as rapidly as it has in the recent past given the nation’s debt level, webelieve that the federal government’s spending will remain robust over the next several years, driven primarilyby national and homeland security programs and the need for sophisticated intelligence gathering andinformation sharing activities in an increasingly dangerous world.The Department of Defense (DoD) is the largest purchaser of services and solutions in the federalgovernment, accounting for 54% of the total discretionary budget and nearly 60% of contracted services. InDecember 2011, President Obama signed the 2012 Consolidated Appropriations Act, which provides $646billion for the DoD, including $115 billion for Overseas Contingency Operations (OCO). With substantialfunding in place, our customers are able to procure services with certainty through September 30, 2012, the endof the government’s fiscal year.For federal fiscal year 2013, the Obama administration submitted a defense budget request of $525 billion,with an additional $88 billion for OCO. The administration published Sustaining U.S. Global Leadership:Priorities for 21st Century Defense, summarizing its new defense priorities:As we end today’s wars and reshape our Armed Forces, we will ensure that our military is agile, flexible,and ready for the full range of contingencies. In particular, we will continue to invest in the capabilitiescritical to future success, including intelligence, surveillance, and reconnaissance; counterterrorism,countering weapons of mass destruction; operating in anti-access environments; and prevailing in alldomains, including cyber.Based on these priorities, we believe that ManTech remains well positioned for growth. The U.S. iscommitted to maintaining its superiority in capabilities that we support, such as intelligence, surveillance andreconnaissance (ISR), cyber security and intelligence analysis and operations.In addition, our government customers are increasingly focused on information technology (IT) to generateefficiencies. Federal government spending on IT has increased each year since 1980. INPUT, an independentfederal government market research firm, expects this trend to continue, with contracted federal governmentspending on IT forecasted to increase from approximately $84 billion in federal fiscal year 2011 to $91 billion infederal fiscal year 2016. The government is actively looking to cloud-based solutions and data centerconsolidation to save money and to systems integration and interoperability to enable better coordination andcommunication within and among agencies and departments.Our Solutions and ServicesWe combine deep domain understanding and technical capability to deliver comprehensive IT, systemsengineering, technical and other services and solutions, primarily in support of mission critical national securityprograms for the intelligence community and DoD. We deploy our broad set of services in custom combinationsto best address the requirements of our customers’ long-term programs. The following solution sets that weprovide are aligned with the long-term needs of our national security clients: command, control,communications, computers, intelligence, surveillance and reconnaissance (C4ISR) lifecycle support; cybersecurity; global logistics support; intelligence/counter-intelligence support, information technologymodernization and sustainment; systems engineering; and test and evaluation.4C4ISR Lifecycle SupportMilitary operations increasingly rely on communication and information architectures that offer globalconnectivity and interoperability between joint, interagency and multi-national forces. We support the DoD,federal agencies and coalition partners in the development, deployment, operation and maintenance of C4ISRsystems and solutions. Our support spans the entire lifecycle continuum, from initial requirements definition,program management and acquisition support, through engineering, development and integration, test andevaluation, deployment and training to the ultimate operation and maintenance of C4ISR solutions. Ourexperience spans all of the military services, with support provided in the U.S. and in deployed locationsworldwide. We are also engaged at Fort Bliss, TX in support of the Army’s Network Integration Evaluationexercises and provide network engineering and other technical support to the C4ISR lifecycle.Through various roles from program management and acquisition support to software development andintegration, we have supported the delivery of C4ISR-related solutions for the U.S. Army Communications-Electronics Command (CECOM), the U.S. Navy Space & Naval Warfare Systems Command (SPAWAR) andthe U.S. Marine Corps Systems Command (MARCORSYSCOM). Our experience in supporting the delivery ofnew capabilities spans many key systems, including: the Joint Network Node (JNN), the Distributed CommonGround Systems-Army (DCGS-A), the Advanced Monitoring Display System (AMDS), the EQ-36 RADARsystem and many others. ManTech has a proven record in successful post-development support for C4ISRsystems. For major systems like the Army’s DCGS-A and Base Expeditionary Targeting and SurveillanceSystems—Combined (BETSS-C), we provide training, fielding, logistics support and forward maintenance.Cyber SecurityUbiquitous security challenges threaten not just traditional IT, but also C4ISR and other national securitysystems; embedded electronics on ground, sea and aerospace platforms; classified and law enforcementnetworks & systems; health IT; and systems providing critical civilian services. Our team of security expertstackles some of the most challenging cyber security problems facing the nation, such as identifying andneutralizing external cyber attacks, managing security operations centers (SOCs), developing robust insiderthreat detection programs and creating enterprise vulnerability management programs. We have providedcomputer network operations support to important national security customers for more than a decade, workingacross the three domains of computer network attack, defense and exploitation. We provide comprehensive cyberwarfare and cyber defense security solutions and services to the DoD, agencies in the intelligence community,Department of State, Department of Justice and other federal agencies. We operate 24/7 SOCs for several keygovernment customers, including the Departments of Justice and Agriculture and the FBI.We are also trusted partners in the area of information assurance. Our understanding of IT security guidanceand policy allows us to assist our customers in ensuring their programs are protected in accordance with thatpolicy and in developing mitigation strategies to reduce the risks of cyber threats. Our vulnerability assessmentand penetration testing capabilities allow us to emulate threats to information, whether from wired or wirelessnetworks, software applications or through social engineering. If a customer is unfortunate enough to haveexperienced a compromise, we can deploy our incident response team, comprised in part of former cyber federallaw enforcement agents, around the world to assist them.Our solutions also support unique mission areas such as computer forensics, cyber threat analysis, computercrimes investigations, security operations center management and specialized cyber training. We performadvanced services in the areas of data mining analysis, atypical data recovery techniques and data extraction. Forexample, in support of a customer, we developed and staff a national level computer forensic laboratory andprovide a broad spectrum of subject matter expertise, including reverse engineering and code analysis; forensicsignature creation, detection and analysis; damaged media recovery; hidden data processing; protected dataprocessing; forensic software development; and custom training development and implementation.5Global Logistics SupportIn recent years the DoD, Department of State and other federal agencies have experienced an increased needfor logistics support worldwide. For decades, ManTech has provided a wide range of core services to meet suchneeds, including supply chain management support (such as warehousing, logistics management, shipping/receiving and property management), maintenance and reset of ground vehicles and electronics and other fieldservices support (including fielding, training and operations support).We provide logistics, repair and maintenance services, unique system training and curriculum support,resource management and inventory tracking technologies for complex, critical and specialized customer systemsin deployed, isolated and remote locations worldwide. On behalf of the U.S. Army in Southwest Asia, wemaintain critical and life-sustaining operational readiness levels for counter-improvised explosive device (IED)vehicles and systems, including Mine-Resistant Ambush-Protected (MRAP) vehicles and MRAP All-TerrainVehicles (M-ATV). To that end, we develop and manage supply levels and the streamlined operation of supply-chain channels, including vendor partnerships with original equipment manufacturers to ensure the expedient,unencumbered delivery of systems and parts to forward operating theater locations.We also support the U.S. Department of State Global IT Modernization Program by centrally managing theworldwide modernization of their computer networks. We design, support the procurement of and integrate thelatest system software and hardware technologies including servers, switches, workstations and network printers.Our installation teams travel to State Department locations worldwide to complete each installation.Intelligence/Counter-Intelligence Solutions and SupportWe provide robust information technology solutions and mission support services that the nationalintelligence agencies and other classified program customers need to assure continuous operations, improve datagathering and analysis, collaborate securely and protect program security.The ability to collaborate and share information across non-traditional boundaries in a trusted fashion hasbecome critically important for national security. For example, we developed A-Space, a next-generation analyticsharing and collaboration program used by more than 24 intelligence analysts, and the DoD IntelligenceInformation Systems (DoDIIS) service-oriented architecture (SOA) framework, which helps intelligence analystscomb through millions of intelligence reports to find relevant and meaningful answers to national securityquestions.Our network architecture planning and implementation services and systems engineering services supportenterprise-wide network infrastructures and components that include local area network/wide area networkarchitectures, messaging architectures, network management solutions, directory services architecture and webhosting. These services are provided within secure environments requiring the application of multi-level securitypolicies across the enterprise. For example, we developed a state-of-the-art analytic environment that providesaccess to regional, national and international information with appropriate security level access controls,providing direct operational support to time-sensitive counterterrorism activities in support of an intelligencecommunity customer.We support strategic and tactical intelligence systems, networks and facilities across the intelligencecommunity and DoD. We develop and integrate collection and analysis systems and techniques. We also providesupport to the development and application of analytical techniques to counterintelligence, Human-Intelligenceoperations/training and counter-terrorist operations. For example, we support intelligence operations designed tocounter narcotics trafficking along our nation’s southwest border.Highly-classified programs, including intelligence operations and military programs, require secrecymanagement and security infrastructure services. These services can include vulnerability assessment, exposureanalysis, secrecy architecture design, security policy development and implementation, lifecycle acquisition6program security, operations security, information assurance, Anti-Tamper, Export Compliance support, foreigndisclosure, system security engineering, security awareness and training, comprehensive security support servicesand technical certification and accreditation services. We provide integrated security support for a number ofprograms, including the Joint Strike Fighter (JSF) Program, which presents one of the most complex securityproblem set of any weapon system in our nation’s history due to the numerous highly classified technologiesincorporated in its design and international content in both its development and its usage.Information Technology Modernization and SustainmentIT plays an increasingly central role in the missions of our defense, intelligence and federal civiliancustomers, and as a result, is an important part of many of our solution areas. We design, develop, deploy,modernize, operate and maintain IT systems and infrastructure as a stand-alone service offering to improvemission performance and lower costs for our government customers. For the Department of State, we modernizeover 650 classified and unclassified networks and systems in over 375 locations around the world. The backboneof our global capabilities is a comprehensive ISO 9001:2000-certified management and control system designedto provide best value for our customers and to lower the total cost of ownership across the systems’lifecycles. For the Defense Commissary Agency, we provided Network Operations Center services to sustain itsglobal network infrastructure and manage hardware and software at remote sites from headquarters.Systems EngineeringSince 1968, ManTech’s scientists and engineers have provided disciplined systems engineering support to awide range of customers that presently include programs and offices within the Department of HomelandSecurity (DHS), DoD, intelligence community and National Aeronautics and Space Administration (NASA). Forexample, we perform comprehensive systems engineering services to analyze, develop and integrate solutions forU.S. Navy hardware and software requirements across subsurface, surface, ground, air and space domains;provide systems engineering support for DHS’s Domestic Nuclear Detection Office (DNDO); provideacquisition and program management support for the DHS’s Customs and Border Protection (CBP) Office ofTechnology, Innovation and Acquisition; and support current and future space launch operations for the U.S. AirForce Launch and Range Systems Wing with systems engineering and integration services. In 2011, we beganproviding scientific, engineering and technical support services to the Department of Energy’s SunShot Initiative,which aims to reduce by 75% the cost of utility-scale electricity at the grid by the year 2020.Our proprietary systems engineering toolset, the ManTech Enterprise Framework, provides a regimentedand interdisciplinary approach to transition from a stated need to an operationally effective and suitable system,service or capability. Based in “Systems Thinking,” the framework is an overarching and proven process thatintegrates the full spectrum of project management, systems engineering and acquisition practices necessary toeffectively manage a project or system over its lifecycle. Through it, we address a full 360-degree perspective ofa program, including disciplines of system, software, hardware, acoustics, communications, reliability, safety andtest engineering, as well as modeling, simulation and analysis. Our long-term commitment to the systemsengineering discipline is exemplified by our achievement of our Capability Maturity Model® Integration(CMMI) Level 3 rating for Software and Systems Engineering.Moreover, because ManTech is not a major system developer, we provide systems engineering advisoryservices to our government customers without concerns about potential conflicts of interest. In fact, ManTechwas one of the first companies to have sought and received certification as a “non-conflicted” services providerfrom the National Reconnaissance Office.Test and EvaluationManTech is a leading provider of test and evaluation services to a wide range of defense, intelligence,homeland security and space customers. Our test and evaluation services are tightly linked with our systemsengineering capabilities and include specific competencies in test engineering, preparation and planning; modelingand simulation; test range operations and management; and Independent Validation & Verification (IV&V).7For DNDO, we provide system analysis, modeling and testing of technologies and systems that are beingdeployed to identify and detect nuclear and radiological sources that are attempting entry into the U.S. We alsotest complex and mission-critical hardware and software systems used by the Army, Navy, NASA and Customsand Border Patrol, with many of these customer relationships spanning more than three decades. We have playedkey roles in improving the performance, reliability, maintainability, supportability and weapons effectiveness ofall Navy in-service rotary and fixed wing platforms and their associated ordnance.We perform independent tests to certify that new or upgraded systems operate in accordance with designrequirements and interoperate with legacy systems. For example, for the past 23 years ManTech has installed,operated and maintained a large and complex joint test environment for the Defense Information SystemsAgency (DISA), Joint Interoperability Test Command. Recently, we built a systems integration lab (SIL) for aDoD customer that enables engineers to test new hardware and software on a virtual copy of the enterprisearchitecture. Once per quarter, virtual snapshots are taken of more than 150 servers and placed in the SIL tocreate an accurate facsimile of the production environment. We have also performed certification services foraircraft weapon systems in support of U.S. Naval Air Systems Command programs.Additionally, we are the prime contractor supporting the U.S. Army’s Electronic Proving Ground at FortHuachuca, AZ. ManTech provides support testing for command, control, communications, computers andintelligence, navigation and sensor systems for reliability, availability and maintainability, electromagneticinterference/electromagnetic compatibility and security. We provide a full spectrum of services includingscientific, engineering, technical, administrative, maintenance and logistics. Other services includeinstrumentation and hardware/software-related development, as well as laboratory/test bed operations and specialstudies in Aberdeen Proving Ground, MD; Fort Huachuca; Yuma Proving Ground, AZ; Fort Hood and Fort Bliss,TX; Fort Lewis, WA; and White Sands Missile Range, NM.Our Growth StrategyWe are positioning the Company to thrive despite slowing market growth. We aspire to be recognized bycustomers, employees, job applicants and investors as the premier provider of technology and engineeringservices and solutions to the federal government market. Our strategies for achieving this objective include thefollowing:? Provide Direct Support to Our Customers’ Most Critical MissionsWhen resources are constrained, we believe that our customers will increasingly focus on mission and relyon their most trusted prime contractors. Since our founding in 1968, we have focused on providing technology-based solutions and services for mission-critical national security programs. Most of our work centers around ourcustomers’ core mission as opposed to support functions. We have several long standing customer relationships;many of our early customers are still our customers today. Because our personnel are on-site with, or work inclose proximity to, our customers, we understand their requirements and are often able to enhance theiroperations by rapidly identifying and developing solutions for customer-specific requirements.The prime contractor position is increasingly important, and we have aggressively pursued new primepositions both organically and through acquisitions. For example, as a result of the two acquisitions completed infiscal year 2011, we now have prime positions on the $6.6 billion Defense Intelligence Agency (DIA) Solutionsfor Information Technology Enterprise (SITE) contract and the $12.0 billion DISA ENCORE II contract. Infiscal year 2011, we derived 85.6% of our revenue as a prime contractor, compared to 75.9% and 64.8% in fiscalyears 2010 and 2009, respectively. As a prime contractor, we are able to enhance the relationship with ourcustomers, ensure overall program success, foresee emerging requirements and manage project resources.? Compete Aggressively on New OpportunitiesWe closely track our customers’ requirements and funding and have built our capability and capacity topursue the opportunities that arise. We intend to capitalize on our global footprint and long-term relationships8with our customers and our reputation within the intelligence community, DoD and other government agencies toattract new customers and to cross-sell our broad array of solutions to our existing customers. Our successfultrack record and technical expertise give us credibility with our current customers and enhance our ability to gainfollow-on contracts and compete for new programs. At the end of 2011, we had a pipeline of qualifiedopportunities of $26.9 billion.In 2011, we won approximately $3.0 billion in new business awards, including the AMBIANCE contract toprovide full spectrum system integration services that support the DoD’s analytic modernization efforts. Thisseven-year, single-award contract with a value in excess of $0.4 billion was highly competitive. As leadintegrator, we will enable our DoD customer to transform their enterprise to a cloud-based, service orientedarchitecture. AMBIANCE solidifies ManTech’s status as a leading full-spectrum systems integrator with theability to integrate and govern large scale developers. Other major new opportunities captured during the yearinclude multi-billion dollar Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts for the Department ofJustice and the FBI.? Build Presence in New Growth MarketsWe believe the projected growth in government technical services spending will offer opportunities fordevelopment and delivery of advanced technology solutions for enterprise applications and information systems.We intend to expand our service offerings in such high growth program areas. In particular, we intend to focus onproviding new or improved solutions in cyber security, information assurance and C4ISR lifecycle support, andhealth IT, and we have established plans around the potential high growth area of border security.Our market, business model and financial discipline enable us to generate substantial cash to accelerate ourgrowth. We plan to enhance our internal growth by selectively pursuing strategic acquisitions of businesses thatcan cost-effectively broaden our domain expertise and service offerings and allow us to establish relationshipswith new customers. We have successfully acquired 19 businesses since our IPO in February 2002, acceleratingour overall revenues growth. Since December 31, 2010, we completed the following acquisitions:• Evolvent Technologies, Inc. (Evolvent)-On January 6, 2012, we acquired Evolvent, a provider ofservices in clinical IT, clinical business intelligence, imaging cyber security, behavioral health,tele-health, software development and systems integration to the DoD Health organizations, theVeterans Administration and the Department of Health and Human Services.• Worldwide Information Network Systems, Inc. (WINS)-On November 15, 2011, we acquiredWINS, a leading provider of information technology solutions with network engineering andcyber security technical expertise to the DoD, Department of State and other agencies.• TranTech, Inc. (TranTech)-On February 11, 2011, we acquired TranTech, a provider ofinformation technology, networking and cyber security services to the federal government.We will continue to seek out new growth areas. Our balance sheet and revolving credit facility provide uswith ample capacity to expand our business through strategic acquisitions. During 2011, we entered into a new$500.0 million revolving credit facility. The credit agreement also contains an accordion feature for up to $250.0million in additional commitments. The new credit agreement enhances the Company’s strong capital positionand financial flexibility, providing an increased ability to target high-growth areas organically and throughstrategic acquisitions.? Focus on Shareholder ReturnsIn May 2011, our Board of Directors approved the initiation of a regular cash dividend program, whichdemonstrates our commitment to returning value to stockholders and reflects our confidence in our financialstrength, our ability to sustain strong cash flows and continue to grow. During fiscal year 2011, we generated$221.4 million in operating cash flow and paid $30.8 million in dividends to our shareholders. We believe thatManTech is a compelling investment due to our regular cash dividend program and our strong growth prospects.9Our CustomersOur primary customers are U.S. federal government intelligence, military and civilian agencies. In addition,we support some state and local governments and commercial customers. We derive most of our revenues fromnational security and homeland defense customers. We have successful, long-standing relationships with ourcustomers, having supported many of them for over 40 years.Fiscal YearPercentage of Revenues fromFederal GovernmentCustomersPercentage of Revenues fromNational Security andHomeland Defense Customers2011 . . . . . . . . . . . . . . . . . . . . . . . . 99.2% 96.6%2010 . . . . . . . . . . . . . . . . . . . . . . . . 98.7% 95.8%2009 . . . . . . . . . . . . . . . . . . . . . . . . 98.3% 95.0%Our national security and homeland defense customers include: the DoD; the Department of State; the DHS;the Department of Justice, including the FBI; various intelligence agencies; federal intelligence and terrorismtask forces; the U.S. Army, Navy, Air Force and Marine Corps; and joint military commands. Our other U.S.federal government customers include NASA and the Patent & Trademark Office.To provide deep understanding of our customers’ missions, we target candidates for employment who haveserved in the military or as civilian experts in the intelligence community and DoD, as well as those who areleading specialists in their technology disciplines. Since 2006, we have annually been ranked in the Top 10 in thenation on the G.I. Jobs Magazine Military-Friendly Employers list.Our federal government customers typically exercise independent contracting authority, and even offices ordivisions within an agency or department may directly, or through a prime contractor, use our services as aseparate customer so long as that customer has independent decision-making and contracting authority within itsorganization. For example, under a contract with one of the Army’s contracting agencies, program managersthroughout the Army and from other services and defense agencies are able to purchase a wide range of oursolutions. The U.S. Army Tank-Automotive Armament Command (TACOM) contract accounted for 17.0%,12.2% and 20.2% of our revenues for the years ended December 31, 2011, 2010 and 2009, respectively. Inaddition, there were no sales to any customers within a single country (except for the United States) where suchsales accounted for 10% or more of our total revenues.Foreign OperationsWe treat sales to U.S. government customers as sales within the United States, regardless of where servicesare performed. North Atlantic Treaty Organization is the Company’s largest international customer. Thepercentages of total revenues by geographic customer for the last three years were as follows:Year Ended December 31,2011 2010 2009United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.7% 99.2% 99.0%International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3% 0.8% 1.0%Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%BacklogAt December 31, 2011, our backlog was $4.7 billion, of which $1.3 billion was funded backlog. AtDecember 31, 2010, our backlog was $4.9 billion, of which $1.6 billion was funded backlog. Backlog representsestimates that we calculate on the basis described below. We expect that approximately 50% of our total backlogwill be recognized as revenues prior to December 31, 2012.10We define backlog as our estimate of the remaining future revenues from existing signed contracts,assuming the exercise of all options relating to such contracts and including executed task orders issued underindefinite delivery/indefinite quantity (ID/IQ) contracts. We also include an estimate of revenues for solutionsthat we believe we will be asked to provide in the future under the terms of ID/IQ contracts for which we have anestablished pattern of revenues.We define funded backlog to be the portion of backlog for which funding currently is appropriated andallocated to the contract by the purchasing agency or otherwise authorized for payment by the customer uponcompletion of a specified portion of work. Our funded backlog does not include the full value of our contracts,because Congress often appropriates funds for a particular program or contract on a yearly or quarterly basis,even though the contract may call for performance that is expected to take a number of years.Changes in the amount of our backlog and funded backlog result from potential future revenues from theexecution of new contracts or the extension of existing contracts, reductions from contracts that end or are notrenewed, reductions from the early termination of contracts and adjustments to estimates for previously includedcontracts. Changes in the amount of our funded backlog also are affected by the funding cycles of thegovernment. Our estimates of future revenues are inexact and the receipt and timing of any of these revenues issubject to various contingencies, many of which are beyond our control. The actual accrual of revenues onprograms included in backlog and funded backlog may never occur or may change because a program schedulecould change, a program could be canceled, a contract could be modified or canceled, an option that we haveassumed would be exercised is not exercised or initial estimates regarding the amount of services that we mayprovide could prove to be wrong. For the same reason, we believe that period-to-period comparisons of backlogand funded backlog are not necessarily indicative of future revenues that we may receive.EmployeesWe currently have approximately 9,300 employees, including approximately 1,800 employees locatedoutside of the United States. Of our overall employee base, approximately 85% hold security clearances andapproximately 41% hold Top Secret or higher level clearances.Patents, Trademarks, Trade Secrets and LicensesWe own a limited number of patents. We also maintain a number of trademarks and service marks toidentify and distinguish the goods and services we offer. While we believe protecting our patents, marks, tradesecrets and vital confidential information is important, we do not consider our business to be dependent on theexistence or protection of such intellectual property.SeasonalityOur business is not seasonal. However, it is not uncommon for federal government agencies to award extratasks or complete other contract actions in the weeks before the end of the federal government’s fiscal year(which is September 30) in order to avoid the loss of unexpended fiscal year funds. Additionally, our quarterlyresults are impacted by the number of working days in a given quarter. There are generally fewer working daysfor our employees to generate revenues in the first and fourth quarters of our fiscal year.CompetitionOur key competitors currently include divisions of large defense contractors, as well as a number ofmid-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 withthese and other companies to compete for large contracts and bid against these team members in other situations.Major differentiators for ManTech in our markets include our distinctive technical competencies, extensiveexperience supporting critical intelligence and military missions, successful past contract performance, reputationfor quality at a competitive price and key management with domain expertise.11Company Information Available on the InternetOur Internet address is www.mantech.com. Through a link to the Investor Relations section of our website,we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, currentreports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) ofthe Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish itto, the Securities and Exchange Commission (SEC).You may request a copy of the materials identified in the preceding paragraph, at no cost, by writing ortelephoning us at the following address or telephone number:ManTech International CorporationAttention: Investor Relations12015 Lee Jackson HighwayFairfax, Virginia 22033-3300Phone: (703) 218-600012Item 1A. RISK FACTORSForward-Looking and Cautionary StatementsSet forth below are the risks that we believe are material to investors who purchase our common stock. Youshould carefully consider the following risks together with the other information contained in or incorporated byreference into this Annual Report on Form 10-K, including our consolidated financial statements and notesthereto. The risks described below are not the only risks facing us. Additional risks and uncertainties notcurrently known to us, or those we currently deem to be immaterial, may also materially and adversely affect ourbusiness, financial condition or results of operations. This section contains forward-looking statements. Youshould refer to the explanation of the qualification and limitations of forward-looking statements set forth at thebeginning of this Annual Report.Risks Related to Our BusinessWe depend on contracts with the U.S. federal government for substantially all of our revenues. If ourrelationships with the federal government were harmed, our business, future revenues and growth prospectscould be adversely affected.We expect that federal government contracts will continue to be the primary source of our revenues for theforeseeable future. We derived approximately 99.2%, 98.7% and 98.3% for fiscal years 2011, 2010 and 2009,respectively, of our revenues from our federal government customers (consisting primarily of national securitycustomers in the intelligence community; departments of Defense, State, Homeland Security, Energy and Justice;the space community; and other U.S. federal government customers). Our business, prospects, financial conditionor operating results could be materially harmed if:• We are suspended or debarred from contracting with the federal government or a significantgovernment agency;• Our reputation or relationship with government agencies is impaired; or• The government ceases to do business with us, or significantly decreases the amount of business it doeswith us.Among the key factors in maintaining our relationships with federal government agencies are ourperformance on individual contracts and task orders, the strength of our professional reputation and therelationships of our senior management with our customers.Federal government spending and mission priorities may change in a manner that adversely affects our futurerevenues and limits our growth prospects.Our business depends upon continued federal government expenditures on intelligence, defense and otherprograms that we support. These expenditures have not remained constant over time. In the late 1980s and early1990s the overall U.S. defense budget declined, resulting in a slowing of new program starts, program delays andprogram cancellations. As a result, certain defense-related government contractors experienced decliningrevenues, increased pressure on operating margins and, in some cases, net losses. After the 2001 terrorist attacksand more recently in support of U.S. war efforts in Southwest Asia, spending authorizations for intelligence anddefense-related programs by the government increased. Today, in the face of growing national debt, and long-term fiscal challenges facing the nation, the U.S. defense budget has again come under pressure. Although webelieve there will continue to be pockets of growth for many of the services that we provide, the focus oncreating efficiencies and savings may increase, affecting future levels of expenditures, changing missionpriorities and shifting authorizations to programs in areas where we do not currently provide services. Forexample, current federal government spending levels on defense-related programs are in part related to the U.S.military operations in Southwest Asia, and may not be sustainable if stability in the region increases and there isa shift toward supporting other initiatives. In this regard, there was a withdrawal of U.S. combat troops from Iraq13at the end of 2011 and the United States Secretary of Defense has announced the planned withdrawal of U.S.combat troops from Afghanistan for 2013. More generally, our business, prospects, financial condition oroperating results could be materially harmed by the following:• Budgetary constraints affecting federal government spending, generally, or specific departments oragencies in particular, and changes in fiscal policies or available funding;• Changes in federal programs or requirements;• Realignment of funds with changed federal government priorities, which may impact the U.S. warefforts, including reductions in funds for in-theater missions;• Efforts to improve efficiency and reduce costs affecting federal government programs generally,• Curtailment of the federal government’s outsourcing of mission critical and technology supportservices;• The adoption of new laws or regulations; and• General economic conditions.These or other factors could cause federal government agencies and departments to reduce their purchasesunder contracts, incorporate less favorable terms in existing or future contracts, exercise their right to terminatecontracts or not exercise options to renew contracts, any of which could cause us to lose revenues. A significantdecline in overall U.S. government spending or a shift in expenditures away from agencies or programs that wesupport could cause a material decline in our revenues.The failure by Congress to approve budgets on a timely basis for the federal agencies we support could delayprocurement 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 wesupport. In years when Congress is not able to complete its budget process before the end of the federalgovernment’s fiscal year on September 30, Congress typically funds government operations pursuant to acontinuing resolution. A continuing resolution allows federal government agencies to operate at spending levelsapproved in the previous budget cycle. When the U.S. government operates under a continuing resolution, it maydelay funding we expect to receive from customers on work we are already performing and will likely result innew initiatives being delayed or in some cases canceled. The federal government’s failure to complete its budgetprocess, or to fund government operations pursuant to a continuing resolution, may result in a federalgovernment shutdown, such as that which occurred during the 1996 fiscal year.If we fail to comply with complex procurement laws and regulations, we could lose business and be liable forvarious penalties or sanctions.We must comply with laws and regulations relating to the formation, administration and performance offederal government contracts. These laws and regulations affect how we conduct business with our federalgovernment customers. In complying with these laws and regulations, we may incur additional costs.Non-compliance may also allow for the assignment of additional fines and penalties, including contractualdamages. Among the more significant laws and regulations affecting our business are the following:• The Federal Acquisition Regulation, which comprehensively regulates the formation, administrationand performance of federal government contracts;• The Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data inconnection with contract negotiations;• The Cost Accounting Standards and Cost Principles, which impose accounting requirements thatgovern our right to reimbursement under certain cost-based federal government contracts;14• Laws, regulations and executive orders restricting the use and dissemination of information classifiedfor national security purposes and the export of certain products, services and technical data;• U.S. export controls, which apply when we engage in international work; and• The Foreign Corrupt Practices Act.Failure to comply with these control regimes can lead to severe penalties, both civil and criminal, and can includedebarment from contracting with the U.S. government.Our contracting agency customers periodically review our compliance with procurement laws andregulations, as well as our performance under the terms of our federal government contracts. If a governmentreview or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties oradministrative sanctions, including:• Termination of contracts;• Forfeiture of profits;• Cost associated with triggering of price reduction clauses;• Suspension of payments;• Fines; and• Suspension or debarment from doing business with federal government agencies.Additionally, the civil False Claims Act provides for potentially substantial civil penalties where, forexample, a contractor presents a false or fraudulent claim to the government for payment or approval. Actionsunder the civil False Claims Act may be brought by the government or by other persons on behalf of thegovernment (who may then share a portion of any recovery).If we fail to comply with these laws and regulations, we may also suffer harm to our reputation, which couldimpair our ability to win awards of contracts in the future or receive renewals of existing contracts. If we aresubject to civil and criminal penalties and administrative sanctions or suffer harm to our reputation, our currentbusiness, future prospects, financial condition or operating results could be materially harmed.The federal government may change its procurement or other practices in a manner adverse to us.The federal government may change its procurement practices or adopt new contracting laws, rules orregulations, such as cost accounting standards. For example, it could change its preference for procurementmethods and/or contract type in a manner that is unfavorable to technology support contractors generally. Anysuch change could potentially place greater pressure on our profit margins, and could materially harm ouroperating results. Additionally, aspects of the federal government’s procurement system, such as the number ofacquisition personnel available to support the workload imposed by an increasing number of protests, couldexacerbate delays in the procurement decision making process, thus delaying our ability to generate revenuesfrom proposals and awards. The federal government could also adopt new socio-economic requirements, whichcould reduce our revenues opportunities. Any new contracting methods could be costly or administrativelydifficult for us to satisfy and, as a result, could cause actual results to differ materially and adversely from thoseanticipated.Many of our federal government customers execute their procurement budgets through multiple awardcontracts under which we are required to compete for post-award orders, or for which we may not be eligibleto compete, potentially limiting our ability to win new contracts and increase revenues.Budgetary pressures and reforms in the procurement process have caused many U.S. federal governmentcustomers to purchase goods and services through multiple award ID/IQ contracts and other multiple award and/15or government wide acquisition contract vehicles. These contract vehicles require that we make sustained post-award efforts to obtain task orders under the relevant contract. There can be no assurance that we will obtainrevenues or otherwise sell successfully under these contract vehicles. Our failure to compete effectively in thisprocurement environment could harm our operating results.Unfavorable federal government audits or results of other investigations could subject us to penalties orsanctions, adversely affect our profitability, harm our reputation and relationships with our customers orimpair our ability to win new contracts.The Defense Contract Audit Agency (DCAA) and other government agencies routinely audit and investigategovernment contracts and contractor systems. These agencies review a contractor’s performance on its contract,cost structure and compliance with applicable laws, regulations and standards. The DCAA also reviews theadequacy of, and a contractor’s compliance with, its internal control systems and policies, including thecontractor’s accounting, purchasing, estimating, compensation and management information systems.Allegations of impropriety or deficient controls could harm our reputation or influence the award of newcontracts. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while suchcosts already reimbursed must be refunded. Recently, U.S. government contractors, including our Company,have seen a trend of increased scrutiny by the DCAA and other U.S. government agencies. For example, amongother matters, the DCAA has begun to focus on the strict adherence by technology support contractors to laborqualification requirements contained in the terms of federal government contracts which we support. The DCAAhas also generally increased its examination of U.S. government contractors that, like our Company, performservices outside the United States, particularly in Southwest Asia. If any of our internal control systems orpolicies is found non-compliant or inadequate, payments may be withheld or suspended under our contracts orwe may be subjected to increased government scrutiny and approval requirements that could delay or adverselyaffect our ability to invoice and receive timely payment on our contracts, perform contracts or compete forcontracts with the U.S. government. As a result, a DCAA audit could materially affect our competitive positionand result in a substantial adjustment to our revenues. DCAA has completed our incurred cost audits through2002 and the majority of the audits for 2003, 2004 and 2005, with no material adjustments. While we believe thatthe vast majority of incurred costs will be approved upon final audit, we do not know the outcome of any futureaudits and adjustments and, if any future audit adjustments exceed our estimates, our profitability could beadversely affected.U.S. government contractors are subject to a greater risk of investigation, criminal prosecution, civil fraud,whistleblower lawsuits and other legal actions and liabilities than companies with solely commercial customers.In addition to increased investigation by the DCAA, contractors that provide support services to U.S. forces inSouthwest Asia have also come under increasing scrutiny by agency inspectors general, other governmentauditors and congressional committees. If a government audit or other investigation uncovers improper or illegalactivities, we may be subject to civil and criminal penalties and administrative sanctions, including terminationof contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doingbusiness with federal government agencies. More generally, increased scrutiny and investigation into businesspractices and into major programs supported by contractors may lead to increased legal costs and may harm ourreputation and profitability if we are among the targeted companies, regardless of the underlying merit of theallegations being investigated.Federal government contracts contain provisions giving government customers a variety of rights that areunfavorable to us, including the ability to terminate a contract at any time for convenience.Federal government contracts contain provisions and are subject to laws and regulations that give thegovernment rights and remedies not typically found in commercial contracts. These provisions may allow thegovernment to:• Terminate existing contracts for convenience, as well as for default;• Reduce orders under, or otherwise modify contracts or subcontracts;16• Cancel multi-year contracts and related orders if funds for contract performance for any subsequentyear become unavailable;• Decline to exercise an option to renew multi-year contracts or issue task orders in connection withmultiple award contracts;• Suspend or debar us from doing business with the federal government or with a government agency;• Prohibit future procurement awards with a particular agency as a result of a finding of anorganizational conflict of interest based upon prior related work performed for the agency that wouldgive a contractor an unfair advantage over competing contractors;• Subject the award of contracts to protest by competitors, which may require the contracting federalagency or department to suspend our performance pending the outcome of the protest and may alsoresult in a requirement to resubmit offers for the contract or in the termination, reduction ormodification of the awarded contract;• Terminate our facility security clearances and thereby prevent us from receiving classified contracts;• Claim rights in products and systems produced by us; and• Control or prohibit the export of our products and services.If the government terminates a contract for convenience, we may recover only our incurred or committedcosts, settlement expenses and profit on work completed prior to the termination. If the government terminates acontract for default, we may not even recover those amounts and instead may be liable for excess costs incurredby the government in procuring undelivered items and services from another source. If one of our governmentcustomers were to unexpectedly terminate, cancel or decline to exercise an option to renew one or more of oursignificant contracts or programs, our revenues and operating results would be materially harmed.We derive significant revenues from contracts awarded through a competitive bidding process. This processcan impose substantial costs upon us and we may lose revenues if we fail to compete effectively, or if there aredelays caused by protests or challenges of contract awards.We derive significant revenues from federal government contracts that are awarded through a competitivebidding process. We expect that a significant portion of our future business will also be awarded throughcompetitive bidding. Competitive bidding presents a number of risks, including:• Incurring expense and delays due to competitor’s protest or challenge of contract awards made to us,including the risk that any such protest or challenge could result in the resubmission of bids onmodified specifications, or in the termination, reduction or modification of the awarded contract, whichmay result in reduced profitability;• Bidding on programs in advance of the completion of their design, this may result in unforeseendifficulties in execution, cost overruns, or, in the case of unsuccessful competition, the loss ofcommitted costs;• Spending substantial cost and managerial time and effort to prepare bids and proposals for contractsthat may not be awarded to us, which may result in reduced profitability;• Failing to accurately estimate the resources and cost structure that will be required to service anycontract we are awarded;• Changes to client bidding practices or government reform of its procurement practices, which may alterthe prescribed contract requirements relating to contract vehicles, contract types and consolidations;and• Changes in policy and goals by the government providing set-aside funds to small business,disadvantaged businesses and other socio-economic requirements in the allocation of contracts.17If we are unable to win particular contracts that are awarded through the competitive bidding process, inaddition to the risk that our operating results may be adversely affected, we may be unable to operate in themarket for services that are provided under those contracts for a number of years. Even if we win a particularcontract through competitive bidding, our profit margins may be depressed as a result of the costs incurredthrough the procurement process. Additionally, the competitive bidding process, and increased use by the federalgovernment of a lowest price/technically acceptable standard for contract awards, may require us to decrease themargin by which we expect our bid price to exceed our costs.Our earnings and profitability may vary based on the mix of type of contracts we perform and may beadversely affected if we do not accurately estimate the expenses, time and resources necessary to satisfy someof our contractual obligations.We enter into three types of federal government contracts for our services: cost-plus, time-and-materials andfixed-price. For our last three fiscal years, we derived revenues from such contracts as follows:Year Ended December 31,2011 2010 2009Time-and-materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.5% 63.7% 68.1%Cost-reimbursable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.6% 20.9% 19.6%Fixed-price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9% 15.4% 12.3%Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%Each of these types of contracts, to varying degrees, involves some risk that we could underestimate our costof fulfilling the contract, which may reduce the profit we earn or lead to a financial loss on the contract.• Under time-and-material contracts, we are reimbursed for labor at negotiated hourly billing rates andfor certain expenses. We assume financial risk on time-and-material contracts because we assume therisk of performing those contracts at negotiated hourly rates.• Under cost-plus contracts, we are reimbursed for allowable costs and paid a fee, which may be fixed orperformance-based. To the extent that the actual costs incurred in performing a cost-plus contract arewithin the contract ceiling and allowable under the terms of the contract and applicable regulations, weare entitled to reimbursement of our costs, plus a profit. However, if our costs exceed the ceiling or arenot allowable under the terms of the contract or applicable regulations, we may not be able to recoverthose costs. In particular, there is increasing focus by the federal government on the extent to whichcontractors are able to receive reimbursement for employee compensation.• Under fixed-price contracts, we perform specific tasks for a fixed price. Compared to cost-pluscontracts, fixed-price contracts generally offer higher margin opportunities, but involve greaterfinancial risk because we bear the impact of cost overruns, which could result in increased costs andexpenses. Because we assume such risk, an increase in the percentage of fixed-price contracts in ourcontract mix, whether caused by a shift by the federal government toward a preference for fixed-pricecontracts or otherwise, could increase the risk that we suffer losses if we underestimate the level ofeffort required to perform the contractual obligations.Our profits could be adversely affected if our costs under any of these contracts exceed the assumptions weused in bidding for the contract. Recently, certain federal government customers have begun to shift away fromtime-and-materials contracts, and such shift, if not managed successfully, could impact margins. Should thegovernment further alter its procurement practices, our contract mix may continue to change, thereby potentiallyincreasing our exposure to these risks.18We face aggressive competition that can impact our ability to obtain contracts and therefore affect our futurerevenues and growth prospects.We operate in highly competitive markets and generally encounter intense competition to win contracts. Wecompete with larger companies that have greater name recognition, financial resources and larger technical staffs.We also compete with smaller, more specialized companies that are able to concentrate their resources onparticular areas. To remain competitive, we must provide superior service and performance on a cost-effectivebasis to our customers. Our competitors may be able to provide our customers with different or greatercapabilities or better contract terms than we can provide, including technical qualifications, past contractexperience, geographic presence, price and the availability of qualified professional personnel. In particular,increased efforts by our competitors to meet federal government requirements for efficiency and cost reductionmay necessitate that we become more competitive with respect to price, and thereby potentially reduce our profitmargins, in order to win or maintain contracts. In addition, our competitors may consolidate or establish teamingor other relationships among themselves or with third parties to increase their ability to address customers’ needs.We may not receive the full amount authorized under our contracts and we may not accurately estimate ourbacklog, which could adversely affect our future revenues and growth prospects.As of December 31, 2011, our estimated contract backlog totaled approximately $4.7 billion, of whichapproximately $1.3 billion was funded. Backlog is our estimate of the remaining future revenues from existingsigned contracts, assuming the exercise of all options relating to such contracts and including executed taskorders issued under ID/IQ contracts. Backlog also includes estimates of revenues for solutions that we believe wewill be asked to provide in the future under the terms of ID/IQ contracts for which we have an established patternof revenues. Our estimates are based on our experience using such vehicles and similar contracts; however, wecannot assure that all, or any, of such estimated contract revenues will be recognized as revenues. The U.S.government’s ability to modify, curtail or terminate our major programs or contracts makes the calculation ofbacklog subject to numerous uncertainties. There can be no assurance that our backlog projections will result inactual revenues in any particular period, or at all, or that any contract included in backlog will be profitable.There is a higher degree of risk in this regard with respect to unfunded backlog, since it contains management’sestimate of amounts expected to be realized on unfunded contract work that may never be realized as revenues. Ifwe fail to realize as revenues those amounts included in our backlog, our future revenues and growth prospectsmay be adversely affected.Covenants in the instruments governing our indebtedness may restrict our financial and operating flexibility.We maintain a credit agreement with a syndicate of lenders led by Bank of America, N.A., as administrativeagent. The credit agreement provides for a revolving credit facility with up to $500.0 million in loancommitments. The maturity date for the credit agreement is October 12, 2016. The terms of the credit agreementpermit prepayment and termination at any time, subject to certain conditions. The credit facility requires theCompany to comply with specified financial covenants, including the maintenance of a certain consolidated totalleverage ratio, senior secured leverage ratio and fixed charge coverage ratio. The credit agreement also containsvarious covenants, including affirmative covenants with respect to certain reporting requirements andmaintaining certain business activities, and negative covenants that, among other things, may limit or imposerestriction on ability to incur liens, incur additional indebtedness, make investments, make acquisitions andundertake certain other actions.On April 13, 2010, we issued an aggregate principal amount of $200.0 million of 7.25% senior unsecurednotes due April 15, 2018. These 7.25% senior unsecured notes are subordinate to our existing and future seniorsecured debt (to the extent of the value of the assets securing such debt), including any indebtedness under ourrevolving credit facility. The indenture governing these notes contains covenants that, subject to importantexceptions and qualifications specified in the indenture, will, among other things, limit our ability to: paydividends and distributions; repurchase equity; prepay subordinated debt or make certain investments; incur19additional debt or issue certain disqualified stock and preferred stock; incur liens on assets; merge or consolidatewith another company or sell all or substantially all assets; allow to exist certain restrictions on the ability of theguarantors to transfer assets; and enter into sale and lease-back transactions.As a result of such covenants and restrictions in the instruments governing our indebtedness, we will belimited in how we conduct our business and we may be unable to raise additional debt or equity financing to takeadvantage of new business opportunities. In addition, our ability to satisfy the financial ratios required by ourinstruments of indebtedness can be affected by events beyond our control and we cannot assure you that we willmeet these ratios. We cannot assure you that we will be able to maintain compliance with these covenants in thefuture and, if we fail to do so, we may be in default under our revolving credit facility or the indenture, and wemay be prohibited from undertaking actions that are necessary or desirable to maintain and expand our business.Default under our revolving credit facility could allow the lenders to declare all amounts outstanding to beimmediately due and payable. We have pledged substantially all of our assets to secure the debt under ourrevolving credit facility. If the lenders declare amounts outstanding under the revolving credit facility to be due,the lenders could proceed against those assets. Any event of default, therefore, could have a material adverseeffect on our business if the creditors determine to exercise their rights.Default under the indenture governing our 7.25% senior unsecured notes will allow either the trustee or theholders of at least 25% in principal amount of the then outstanding 7.25% senior unsecured notes to accelerate, orin certain cases, will automatically cause the acceleration of, the amounts due under the 7.25% senior unsecurednotes. Any event of default, therefore, could have a material adverse effect on our business if the amounts due areaccelerated.Our level of indebtedness could materially adversely affect our ability to generate sufficient cash to fulfill ourobligations under our outstanding indebtedness, our ability to react to changes in our business and our abilityto incur additional indebtedness to fund future needs.Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay,when due, the principal of, interest on or other amounts due in respect of our indebtedness. Our indebtedness,combined with our other financial obligations and contractual commitments, could:• make it more difficult for us to satisfy our obligations with respect to our indebtedness, including our7.25% senior unsecured notes and indebtedness under our credit agreement, and any failure to complywith the obligations under any of our debt instruments, including restrictive covenants, could result inan event of default under the indenture governing the notes, our revolving credit facility or anyagreements governing other indebtedness;• require us to dedicate a substantial portion of our cash flow from operations to payments on ourindebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions,research and development and other corporate purposes;• increase our vulnerability to adverse economic and industry conditions, which could place us at acompetitive disadvantage compared to competitors that have relatively less indebtedness;• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which weoperate;• limit the rights of the holders of our 7.25% senior unsecured notes to receive payments under the notesif secured creditors have not been paid;• limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, forworking capital, capital expenditures, acquisitions, research and development and other corporatepurposes; and20• prevent us from raising the funds necessary to repurchase all of our 7.25% senior unsecured notestendered to us upon the occurrence of certain changes of control, which would constitute a defaultunder the indenture governing the notes.Subject to the restrictions in our revolving credit facility and the indenture governing our senior notes, wemay incur significant additional indebtedness. If we incur a substantial amount of additional indebtedness, therelated risks that we face could become more significant. Additionally, the terms of any future debt that we mayincur may impose requirements or restrictions that further affect our financial and operating flexibility or subjectus to other events of default.Acquisitions could result in operating difficulties, dilution or other adverse consequences to our business.One of our key operating strategies is to selectively pursue acquisitions. We have made a number ofacquisitions in the past and we expect that a significant portion of our future growth will continue to come fromsuch transactions. We evaluate potential acquisitions on an ongoing basis. Our acquisitions pose many risks,including:• We may not be able to identify suitable acquisition candidates at prices we consider attractive;• We may not be able to compete successfully for identified acquisition candidates, complete futureacquisitions or accurately estimate the financial effect of acquisitions on our business;• Future acquisitions may require us to issue common stock or spend significant cash, resulting indilution of ownership or additional leverage;• We may have difficulty retaining an acquired company’s key employees or customers;• We may have difficulty integrating acquired businesses, resulting in unforeseen difficulties, such asincompatible accounting, information management or other control systems;• Acquisitions may disrupt our business or distract our management from other responsibilities; and• As a result of an acquisition, we may need to record write-downs from future impairments of intangibleassets, which could reduce our future reported earnings.In connection with any acquisition that we make, there may be liabilities that we fail to discover or that weinadequately assess. Acquired entities may not operate profitably or result in improved operating performance.Additionally, we may not realize anticipated synergies. If our acquisitions perform poorly, our business andfinancial results could be adversely affected.We have substantial investments in recorded goodwill and changes in future business conditions could causethese investments to become impaired, requiring substantial write-downs that would reduce our operatingincome and impact our financial position.As of December 31, 2011, our goodwill was $808.5 million. The amount of our recorded goodwill maysubstantially increase in the future as a result of any acquisitions that we make. We evaluate the recoverability ofrecorded goodwill amounts annually, or when evidence of potential impairment exists. The annual impairmenttest is based on several factors requiring judgment. Principally, a decrease in expected reporting unit cash flowsor changes in market conditions may indicate potential impairment of recorded goodwill. If there is animpairment, we would be required to write down the recorded amount of goodwill, which would be reflected as acharge against operating income. During the second quarter, we completed our annual goodwill impairment test.Based on the results of step one of this test, no impairment losses were identified and performance of step twowas not required.21If we fail to recruit and retain skilled employees or employees with the necessary security clearances, we mightnot be able to perform under our contracts or win new business and our growth may be limited.To be competitive, we must have employees who have advanced information technology and technicalservices skills and who work well with our customers in a government or defense-related environment. Often,these employees must have some of the highest security clearances in the United States. These employees are ingreat demand and are likely to remain a limited resource in the foreseeable future. Recruiting, training andretention costs can place significant demands on our resources. If we are unable to recruit and retain a sufficientnumber of these employees, our ability to maintain and grow our business could be negatively impacted. If weare required to engage larger numbers of contracted personnel, our profit margins could be adversely affected. Inaddition, some of our contracts contain provisions requiring us to commit to staff a program with certainpersonnel the customer considers key to our successful performance under the contract. In the event we areunable to provide these key personnel or acceptable substitutions, the customer may terminate the contract andwe may not be able to recover certain incurred costs.Failure to maintain strong relationships with other contractors could result in a decline in our revenues.For the years ended December 31, 2011 and 2010, we derived 14.4% and 24.1% of our revenues,respectively, from contracts in which we acted as a subcontractor to other contractors. Additionally, where we arenamed as a prime contractor, we may sometimes enlist other companies to perform some services under thecontract as subcontractors. We expect to continue to depend on such relationships with other contractors for aportion of our revenues for the foreseeable future. Our business, prospects, financial condition or operatingresults could be harmed if other contractors eliminate or reduce their contracts or joint venture relationships withus because they choose to establish relationships with our competitors; they choose to directly offer services thatcompete with our business; we choose to directly compete with them for services; the government terminates orreduces these other contractors’ programs; or the government does not award them new contracts.If our subcontractors or joint venture partners fail to perform their contractual obligations, our performanceand reputation as a prime contractor and our ability to obtain future business could suffer.As a prime contractor, we often rely significantly upon other companies as subcontractors to perform workwe are obligated to perform for our customers. If one or more of our subcontractors fail to perform satisfactorilythe agreed-upon services on a timely basis, or violate government contracting policies, laws or regulations, ourability to perform our obligations or meet our customers’ expectations as a prime contractor may becompromised. In some cases, we have limited involvement in the work performed by the subcontractors but arenevertheless responsible for such work. In extreme cases, performance or other deficiencies on the part of oursubcontractors could result in a customer terminating our contract for default. A default termination could exposeus to a liability for the agency’s costs of reprocurement, damage our reputation and hurt our ability to competefor future contracts and task orders.Additionally, we often enter into joint ventures so that we can jointly bid and perform on a particularproject. The success of these and other joint ventures depends, in large part, on the satisfactory performance ofthe contractual obligations by our joint venture partners. If our partners do not meet their obligations, the jointventures may be unable to adequately perform and deliver their contracted services. Under these circumstances,we may be required to make additional investments and provide additional services to ensure the adequateperformance and delivery of the contracted services. These additional obligations could result in reduced profitsor, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputationin the industries we serve.Our overall profit margins on our contracts may decrease and our results of operations could be adverselyaffected if materials and subcontract revenues grow at a faster rate than labor-related revenues.Our revenues are generated both from the efforts of our employees (labor-related revenues) and from thereceipt of payments for the cost of materials and subcontracts we use in connection with performing our services22(materials and subcontract revenues). Generally, our materials and subcontract revenues have lower profitmargins than our labor-related revenues. If our materials and subcontract revenues grow at a faster rate thanlabor-related revenues, our overall profit margins may decrease and our profitability could be adversely affected.Our business operations involve considerable risks and hazards. An accident or incident involving ouremployees or third parties could harm our reputation, affect our ability to compete for business, and if notadequately insured or indemnified, could adversely affect our results of operations and financial condition.Our business involves providing services that require some of our employees to operate in countries thatmay be experiencing political unrest, war or terrorism. As a result, during the course of such deployments we areexposed to liabilities arising from accidents or incidents involving our employees or third parties. Any of thesetypes of accidents or incidents could involve significant potential injury or other claims by employees and/orthird parties. It is also possible that we will encounter unexpected costs in connection with additional risksinherent in sending our employees to dangerous locations, such as increased insurance costs, as well as therepatriation of our employees or executives for reasons beyond our control.We maintain insurance policies that mitigate risk and potential liabilities related to our operations. Ourinsurance coverage may not be adequate to cover those claims or liabilities, and we may be forced to bearsubstantial costs from an accident or incident. Substantial claims in excess of our related insurance coveragecould adversely affect our operating performance and may result in additional expenses and possible loss ofrevenues.Furthermore, any accident or incident for which we are liable, even if fully insured, may result in negativepublicity which could adversely affect our reputation among our customers and the public, which could result inus losing existing and future contracts or make it more difficult to compete effectively for future contracts. Thiscould adversely affect our operating performance and may result in additional expenses and possible loss ofrevenues.Our employees or subcontractors may engage in misconduct or other improper activities, which could causeus to lose customers or affect our ability to contract with the federal government.Because we are a government contractor, should an employee or subcontractor commit fraud or should othermisconduct occur, such occurrences could have an adverse impact on our business and reputation. Misconduct byemployees, subcontractors or joint venture partners could involve intentional failures to comply with federal lawsincluding: federal government procurement regulations; requirements for handling of sensitive or classifiedinformation; the terms of our contracts; or proper time-keeping practices. These actions could lead to civil,criminal and/or administrative penalties (including fines, imprisonment, suspension and/or debarment fromperforming federal government contracts) and harm our reputation. The precautions we take to prevent and detectsuch activity may not be effective in controlling unknown or unmanaged risks or losses.We may be liable for systems and service failures.We create, implement and maintain information technology and technical services solutions that are oftencritical to our customers’ operations, including those of federal, state and local governments. We haveexperienced and may in the future experience some systems and service failures, schedule or delivery delays andother problems in connection with our work. If our solutions, services, products or other applications havesignificant defects or errors, are subject to delivery delays or fail to meet our customers’ expectations, we may:• Lose revenues due to adverse customer reaction;• Be required to provide additional services to a customer at no charge;• Receive negative publicity that could damage our reputation and adversely affect our ability to attractor retain customers; and• Suffer claims for substantial damages against us.23In addition to any costs resulting from product warranties, contract performance or required correctiveaction, these failures may result in increased costs or loss of revenues if they result in customers postponingsubsequently scheduled work, canceling contracts or failing to renew contracts.While many of our contracts with the federal government limit our liability for damages that may arise fromnegligence in rendering services to our customers, we cannot be sure that these contractual provisions willprotect us from liability for damages if we are sued. Furthermore, our errors and omissions and product liabilityinsurance coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one ormore large claims. In addition, the insurer may disclaim coverage as to some types of future claims. Thesuccessful assertion of any large claim against us could seriously harm our business. Even if unsuccessful, theseclaims could result in significant legal and other costs may be a distraction to our management and/or may harmour reputation.We may be unable to adequately maintain our systems and safeguard the security of our data, which mayadversely impact our ability to operate our business and cause reputational harm and financial loss.We rely on secure and efficient processing, storage and transmission of customer and company data,including personally identifiable information and classified and other sensitive customer information. Our abilityto effectively operate our business depends upon our ability and the ability of certain third parties, includingvendors and business partners, to access our computer systems to perform necessary business functions. Ourbusiness and operations also depend upon our ability to safeguard confidential and proprietary informationbelonging to us, our employees, and our customers. Our systems may be vulnerable to unauthorized access andhackers, computer viruses, stolen or lost hardware and other scenarios in which our data may be vulnerable to abreach. Such incidents could result in reputational harm to us, which could affect our business and results ofoperations.Security breaches in customer systems could adversely affect our business.Many of the programs we support and systems we develop, install and maintain involve managing andprotecting information involved in intelligence, national security and other classified or sensitive customerfunctions. While we have programs designed to comply with relevant security laws, regulations and restrictions,a security breach in one of these systems could cause serious harm to our business, damage our reputation andprevent us from being eligible for further work on critical systems for our current customers or for other federalgovernment customers generally. Losses that we could incur from such a security breach could exceed the policylimits that we have for errors and omissions and product liability insurance coverage. Damage to our reputationor limitations on our eligibility for additional work resulting from a security breach in one of the systems wedevelop, install and maintain could materially reduce our revenues.Our business depends upon obtaining and maintaining required security clearances.Many of our federal government contracts require our employees to maintain various levels of securityclearances and we are required to maintain certain facility security clearances complying with the Department ofDefense and intelligence community requirements. Obtaining and maintaining security clearances for employeesinvolves a lengthy process and it is difficult to identify, recruit and retain employees who already hold securityclearances. If our employees are unable to obtain or retain security clearances or if our employees who holdsecurity clearances terminate employment with us, the customer whose work requires cleared employees couldterminate the contract or decide not to renew it upon its expiration. In addition, we expect that many of thecontracts on which we will bid will require us to demonstrate our ability to obtain facility security clearances andperform work with employees who hold specified types of security clearances. To the extent we are not able toobtain facility security clearances or engage employees with the required security clearances for a particularcontract, we may not be able to bid on or win new contracts, or effectively re-bid on expiring contracts.24We face risks associated with our international business.Our business operations are subject to a variety of risks associated with conducting business internationally,including:• Changes in or interpretations of foreign laws or policies that may adversely affect the performance ofour services;• Political instability in foreign countries;• Imposition of inconsistent laws or regulations;• Conducting business in places where laws, business practices and customs are unfamiliar or unknown;• Imposition of limitations on or increase of withholding and other taxes on payments by foreignsubsidiaries or joint ventures; and• Compliance with a variety of U.S. laws, including the Foreign Corrupt Practices Act and U.S. exportcontrol regulations, by us or subcontractors.Although such risks have not significantly impacted our business to date, we do not know the impact thatthese regulatory, geopolitical and other factors could have on our business in the future.Risks Related to Our StockOur quarterly operating results may fluctuate.Our quarterly revenues and operating results may fluctuate as a result of a number of factors, many of whichare outside of our control. For these reasons, comparing our operating results on a period-to-period basis may beof limited significance in some cases, and as such, you should not rely on our past results as an indication of ourfuture performance. While our financial results may be negatively affected by any of the risk factors identified inthis section of our Form 10-K, a number of factors could cause our revenues, cash flows and operating results tovary from quarter-to-quarter, including:• Timing of award or performance incentive fee notices;• Fluctuations in revenues earned on fixed-price contracts and contracts with a performance-based feestructure;• Commencement, completion or termination of contracts during any particular quarter;• Reallocation of funds to customers due to priority;• Timing of significant bid and proposal costs;• Variable purchasing patterns under government contracts, blanket purchase agreements and ID/IQcontracts;• Seasonal or quarterly fluctuations in our workdays and staff utilization rates;• Strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs and jointventures;• Changes in Presidential administrations and senior federal government officials that affect the timingof technology procurement;• Changes in federal government policy or budgetary measures that adversely affect governmentcontracts in general; and• Changes in the volume of purchase requests from customers for equipment and materials.Because a relatively large amount of our expenses are fixed, cash flows from our operations may varysignificantly as a result of changes in the volume of services provided under existing contracts and the number of25contracts that are commenced, completed or terminated during any quarter. We incur significant operatingexpenses during the start-up and early stages of large contracts and typically we do not receive correspondingpayments 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.In May 2011, our Board of Directors approved the initiation of a regular cash dividend program. In 2011,we paid semi-annual cash dividends. For 2012, we anticipate paying quarterly dividends. Any future payment ofdividends, including the timing and amount of any such dividends, however, will be at the discretion of ourBoard of Directors and will depend upon our earnings, liquidity, financial condition and such other factors as ourBoard of Directors considers relevant. A change in our dividend policy could have an adverse effect on themarket price of our common stock.Mr. Pedersen, our Chairman and Chief Executive Officer, effectively controls our Company, and his interestsmay not be aligned with those of other stockholders.As of December 31, 2011, Mr. Pedersen owned approximately 35.8% of our total outstanding shares ofcommon stock. Holders of our Class B common stock are entitled to ten votes per share, while holders of ourClass A common stock are entitled to only one vote per share. Mr. Pedersen beneficially owned 13,192,845shares of Class B common stock as of December 31, 2011, thus he controlled approximately 84.8% of thecombined voting power of our stock as of December 31, 2011. Accordingly, Mr. Pedersen controls the vote onall matters submitted to a vote of our stockholders. As long as Mr. Pedersen beneficially owns a majority of thecombined voting power of our common stock, he will have the ability, without the consent of our publicstockholders, 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 anactual or a potential change of control of the Company, regardless of whether a premium is offered over then-current market prices. Mr. Pedersen will be able to cause a change of control of the Company. Mr. Pedersen’svoting control could adversely affect the trading price of our common stock if investors perceive disadvantagesin 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 theSecurities Act of 1933, thereby permitting him to freely sell or transfer the shares of common stock that he owns,which could have an impact on the trading price of our stock.Provisions in our charter documents and Delaware law may inhibit potential acquisition bids that you andother stockholders may consider favorable, and the market price of our Class A common stock may be loweras a result.There are provisions in our certificate of incorporation and bylaws that make it more difficult for a thirdparty to acquire, or attempt to acquire, control of our Company, even if a change of control were consideredfavorable by you and other stockholders. Among the provisions that could have an anti-takeover effect, areprovisions relating to the following:• The high vote nature of our Class B common stock;• The ability of the Board of Directors to issue preferred stock;• The inability of Stockholders to take action by written consent; and• The advance notice requirements for director nominations or other proposals submitted by ourstockholders.26Item 1B. Unresolved SEC Staff CommentsWe have not received any written comments from the SEC staff regarding our periodic or current reportsunder the Exchange Act that remain unresolved.Item 2. PropertiesWe lease our office facilities and we do not own any facilities or real estate materially important to ouroperations. Our facilities are leased in close proximity to our customers. Since 1992, we have leased ourcorporate headquarters office building in Fairfax, Virginia. The lease on this facility expires in March 2020. Asof December 31, 2011, we leased 32 additional operating facilities throughout the metropolitan Washington, D.C.area and 46 facilities in other parts of the United States. We also have employees working at customer sitesthroughout the United States and in other countries.We believe our current facilities are adequate to meet our current needs. We do not anticipate anysignificant difficulty in renewing our leases or finding alternative space to lease upon the expiration of our leasesand to support our future growth. Lease expiration dates range from years 2012 through 2024.The following table provides information concerning certain leased properties.Lease Properties as ofDecember 31, 2011ApproximateSquare Footage General UsageChantilly, VA 182,000 General OfficeHerndon, VA 139,000 General OfficeHanover, MD 126,000 General Office and WarehouseFayetteville, NC 108,000 General Office and WarehouseStafford, VA 100,000 General Office and WarehouseFalls Church/Vienna, VA 96,000 General OfficeArlington, VA 90,000 General OfficeFairfax, VA 84,000 General OfficeBelCamp, MD 63,000 General OfficeSpringfield, VA 55,000 General Office and WarehouseLorton, VA 51,000 General Office and WarehouseLexington Park, MD 43,000 General OfficeHuntsville, AL 38,000 General Office and LabWarren, MI 38,000 General Office and WarehouseMiami, FL 29,000 General Office and WarehouseFairmont, WV 25,000 General OfficeSarasota, FL 20,000 General OfficeForeign Locations 4,000 General OfficeOther Locations 363,000 General Office and WarehouseItem 3. Legal ProceedingsWe are subject to certain legal proceedings, government audits, investigations, claims and disputes that arisein the ordinary course of our business. Like most large government defense contractors, our contract costs areaudited and reviewed on a continual basis by an in-house staff of auditors from the DCAA. In addition to theseroutine audits, we are subject from time-to-time to audits and investigations by other agencies of the federalgovernment. These audits and investigations are conducted to determine if our performance and administration ofour government contracts are compliant with contractual requirements and applicable federal statutes andregulations. An audit or investigation may result in a finding that our performance, systems and administration iscompliant 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 doingbusiness with the federal government or a particular agency or civil or criminal proceedings seeking penaltiesand/or fines. Audits and investigations conducted by the federal government frequently span several years.27Although we cannot predict the outcome of these and other legal proceedings, investigations, claims anddisputes, 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, financialcondition or operating results.Item 4.Mine Safety DisclosuresNot applicable.28PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecuritiesMarket InformationOur Class A common stock has been quoted on the Nasdaq Stock Market under the symbol “MANT” sinceour initial public offering on February 7, 2002. The following table sets forth, for the periods indicated, the highand low prices of our shares of common stock, as reported on the Nasdaq Stock Market.2011 High LowFirst Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $44.57 $38.76Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45.53 $41.45Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46.26 $29.33Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38.19 $29.792010 High LowFirst Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51.83 $43.75Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51.00 $41.95Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42.63 $34.69Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42.20 $38.56There is no established public market for our Class B common stock.As of February 21, 2012, there were 52 holders of record of our Class A common stock and 3 holders ofrecord of our Class B common stock. The number of holders of record of our Class A common stock is notrepresentative of the number of beneficial holders because many of the shares are held by depositories, brokers ornominees.Dividend PolicyIn May 2011, our Board of Directors approved the initiation of a regular cash dividend program. Duringfiscal year 2011, we declared and paid two semi-annual dividends, each in the amount of $0.42 per share, on allissued and outstanding shares of common stock. For 2012, we anticipate paying quarterly dividends, each in theamount of $0.21 per share. While we expect to continue the regular cash dividend program, any future dividendsdeclared will be at the discretion of our Board of Directors and will depend, among other factors, upon our resultsof operations, financial condition and cash requirements, as well as such other factors our Board or Directorsdeems relevant.Recent Sales of Unregistered SecuritiesWe did not issue or sell any securities in fiscal year 2011 that were not registered under the Securities Act of1933. The issuance of shares to the Employee Stock Ownership Plan did not constitute sales within the meaningof the Securities Act.Equity Compensation Plan InformationInformation regarding our equity compensation plans and the securities authorized for issuance thereunderis incorporated by reference in Item 12.29Purchase of Equity SecuritiesThe following table provides information on a monthly basis for the year ended December 31, 2011, withrespect to the Company purchase of equity securities:PeriodTotal Number ofSharesPurchased(1)Average Price PaidPer ShareTotal Number ofShares Purchasedas Part of PubliclyAnnounced Plansor ProgramsMaximum Number(or ApproximateDollar Value) ofShares that MayYet be PurchasedUnder the Plans orProgramsJanuary 1 to January 31, 2011 . . . . . . . . — $ — — —February 1 to February 28, 2011 . . . . . . — $ — — —March 1 to March 31, 2011 . . . . . . . . . . 1,073 $ 41.45 — —April 1 to April 30, 2011 . . . . . . . . . . . . — $ — — —May 1 to May 31, 2011 . . . . . . . . . . . . . — $ — — —June 1 to June 30, 2011 . . . . . . . . . . . . . — $ — — —July 1 to July 31, 2011 . . . . . . . . . . . . . . — $ — — —August 1 to August 31, 2011 . . . . . . . . . — $ — — —September 1 to September 30, 2011 . . . . — $ — — —October 1 to October 31, 2011 . . . . . . . . — $ — — —November 1 to November 30, 2011 . . . . — $ — — —December 1 to December 31, 2011 . . . . — $ — — —(1) As allowed under the terms of our 2011 Management Incentive Plan, ManTech accepted shares of itscommon stock in the month ended March 31, 2011 from employees for tax withholdings in connection withthe vesting of restricted stock. Such shares of common stock are settled at cost and held as treasury shares tobe used for general corporate purposes.Performance GraphThe stock performance graph compares ManTech common stock to Nasdaq Stock Market (U.S.) Index,Standard & Poor’s MidCap 400 Index, the Russell 2000 Index and our Peer Group Index. Our peer groupconsists of CACI International Inc.; Dynamics Research Corporation; NCI, Inc.; and SAIC. The period measuredis December 31, 2006 to December 31, 2011. The graph assumes an investment of $100 for each of the groupswith reinvestment of all dividends.Comparison of 5 Year Cumulative Total ReturnAssumes Initial Investment of $100December 20110.0050.00100.00150.00200.00250.00Mantech International Corporation S&P Midcap 400 Index NASDAQ Composite-Total Returns Russell 2000 Index Peer Group2006 2007 2008 2009 2010 201130Item 6. Selected Financial DataThe selected financial data presented below for each of the five years ended December 31, 2011 is derivedfrom our audited consolidated financial statements. The selected financial data presented below should be read inconjunction with our consolidated financial statements, the notes to our consolidated financial statements andItem 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”Year Ended December 31,2011 (a) 2010 (b) 2009 (c) 2008 (d) 2007 (e)(in thousands, except per share amounts)Statement of Income Data:Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,869,982 $2,604,038 $2,020,334 $1,870,879 $1,448,098Cost of services . . . . . . . . . . . . . . . . . . . . . . . 2,453,679 2,208,631 1,668,763 1,565,198 1,214,150General and administrative expenses . . . . . . 188,949 180,267 172,492 152,323 120,244Operating income 227,354 215,140 179,079 153,358 113,704Interest expense . . . . . . . . . . . . . . . . . . . . . . . (15,791) (12,567) (1,141) (3,978) (5,103)Interest income . . . . . . . . . . . . . . . . . . . . . . . 332 361 215 812 1,261Other income (expense), net . . . . . . . . . . . . . 3,607 (483) 355 (233) 263Income from continuing operations beforeincome taxes . . . . . . . . . . . . . . . . . . . . . . . 215,502 202,451 178,508 149,959 110,125Provision for income taxes . . . . . . . . . . . . . . (82,196) (77,355) (66,744) (59,667) (42,798)Income from continuing operations . . . . . . 133,306 125,096 111,764 90,292 67,327(Loss) gain from discontinued operations,net of taxes . . . . . . . . . . . . . . . . . . . . . . . . — — — — (458)Gain on disposal of discontinued operation,net of taxes (sold to CEO) . . . . . . . . . . . . . — — — — 338Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,306 $ 125,096 $ 111,764 $ 90,292 $ 67,207Basic earnings per share from continuingoperations—Class A and B (f) . . . . . . . . . $ 3.64 $ 3.45 $ 3.13 $ 2.58 $ 1.97Diluted earnings per share from continuingoperations—Class A and B (f) . . . . . . . . . $ 3.63 $ 3.43 $ 3.11 $ 2.55 $ 1.95Balance Sheet Data:Cash and cash equivalents . . . . . . . . . . . . . . . $ 114,483 $ 84,829 $ 86,190 $ 4,375 $ 8,048Working capital . . . . . . . . . . . . . . . . . . . . . . . $ 300,366 $ 282,496 $ 276,087 $ 140,744 $ 68,409Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $1,760,206 $1,590,477 $1,100,747 $1,021,712 $ 937,503Long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 $ 200,000 $ — $ — $ 39,000Total stockholders’ equity . . . . . . . . . . . . . . . $1,089,257 $ 966,343 $ 817,465 $ 680,536 $ 551,305Statement of Cash Flows Data:Cash flow from operating activities . . . . . . . $ 221,355 $ 171,445 $ 132,247 $ 127,266 $ 63,324Cash flow from investing activities . . . . . . . . $ (165,475) $ (382,161) $ (20,014) $ (39,162) $ (275,286)Cash flow from financing activities . . . . . . . $ (26,226) $ 209,355 $ (30,418) $ (91,777) $ 178,500(a) On November 15, 2011, we acquired Worldwide Information Network Systems, Inc. (WINS) for $90.0million. WINS added $8.5 million in revenues to our 2011 results. For further information on acquisitionssee Note 3 to our consolidated financial statements in Item 8.On June 15, 2011 and December 8, 2011, we paid semi-annual dividends of $0.42 per share on all issuedand outstanding shares of common stock. Dividend payments totaled $30.8 million in 2011.On April 8, 2011, we received approximately $3.2 million in proceeds, with an additional $0.5 million heldin escrow to be distributed no later than December 15, 2012, for the sale of our investment of less than 5%31in NetWitness Corporation. The sale of our investment resulted in a pre-tax gain of approximately $3.7million, which was recorded in other income in the Company’s statement of income for the year endedDecember 31, 2011. For further information on the sale of our investment see Note 14 to our consolidatedfinancial statements in Item 8.On February 11, 2011, we acquired TranTech, Inc. (TranTech) for $21.5 million. TranTech added $12.5million in revenues to our 2011 results. For further information on acquisitions see Note 3 to ourconsolidated financial statements in Item 8.(b) On December 23, 2010, we acquired MTCSC, Inc. (MTCSC) for $76.7 million. MTCSC added $0.8 millionin revenues to our 2010 results. For further information on acquisitions see Note 3 to our consolidatedfinancial statements in Item 8.On October 8, 2010, we acquired QinetiQ North America’s (QNA) Securities and Intelligence Solution(S&IS) business for $60.0 million. S&IS added $10.5 million in revenues to our 2010 results. For furtherinformation on acquisitions see Note 3 to our consolidated financial statements in Item 8.Effective April 13, 2010, we issued $200.0 million of 7.25% senior unsecured notes due 2018. The proceedsfrom the issuance are reflected in the cash flow from financing activities.On January 15, 2010, we acquired Sensor Technologies Inc. (STI) for $241.4 million, which included afavorable $0.6 million working capital adjustment. STI added $518.0 million in revenues to our 2010results. For further information on acquisitions see Note 3 to our consolidated financial statements in Item 8.(c) On March 13, 2009, we acquired DDK Technologies Group (DDK) for $14.0 million. DDK added $7.6million in revenues to our 2009 results. For further information on acquisitions see Note 3 to ourconsolidated financial statements in Item 8.(d) On November 28, 2008, we acquired EWA Services, Inc. (EWA) for $12.4 million, which includes a $0.4million working capital adjustment. EWA added $1.8 million in revenues to our 2008 results.On August 29, 2008, we acquired Emerging Technologies Group, USA, Inc. (ETG) for $25.1 million, whichincludes $0.1 million in transaction fees. ETG added $3.4 million in revenues to our 2008 results.(e) On December 18, 2007, we acquired McDonald Bradley, Inc. (MBI) for $78.9 million, which includes $0.4million in transaction fees. MBI added $1.2 million in revenues to our 2007 results.On May 7, 2007, were acquired SRS Technologies (SRS) for $199.1 million, which includes $1.2 million intransaction fees. SRS added $139.1 million in revenues to our 2007 results.On February 23, 2007, we sold our MSM Security Services subsidiary business (MSM) to MSM SecurityServices Holdings, LLC for $3.0 million in cash. The sale resulted in a pre-tax gain of $0.6 million. MSMSecurity Services Holdings, LLC was solely owned by George J. Pedersen, our Chairman and ChiefExecutive Officer (CEO).In January 2007, Mr. Pedersen received a distribution of 609,296 shares of Class B common stock, whichhad been held by the ManTech International Corporation Supplemental Executive Retirement Plan for thebenefit of George J. Pedersen. We recognize an $8.6 million tax benefit on the distribution from the trust.The tax benefit was recorded to additional paid-in-capital.(f) The holders of each share of Class A common stock are entitled to one vote per share and holders of eachshare of Class B common stock are entitled to ten votes per share. For more information on earnings pershare including the two class method, see Note 4 to our consolidated financial statements in Item 8.32Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion of our financial condition and results of operations should be read together withthe consolidated financial statements and the notes to those statements included in Item 8 of this document. Thisdiscussion contains forward-looking statements that involve risks and uncertainties. For a description of theseforward-looking statements, refer to Part I—“Forward-Looking Statements.” A description of factors that couldcause actual results to differ materially from the results we anticipate include, but are not limited to, thosediscussed in Item 1A—“Risk Factors,” as well as discussed elsewhere in this Annual Report.OverviewManTech is a leading provider of innovative technologies and solutions for mission-critical national securityprograms for the intelligence community; Departments of Defense, State, Homeland Security, Energy andJustice, including the Federal Bureau of Investigations (FBI); the space community; and other U.S. federalgovernment customers. We combine deep domain understanding and technical capability to delivercomprehensive IT, systems engineering, technical and other services and solutions primarily in support ofmission critical national security programs for the intelligence community and DoD. Our broad set of services isgenerally deployed in custom combinations to best address the requirements of our customers’ long-termprograms. They generally include the following solution sets that are aligned with the long-term needs of ournational security clients: command, control, communications, computers, intelligence, surveillance andreconnaissance (C4ISR) lifecycle support; cyber security; global logistics support; intelligence/counter-intelligence support, information technology modernization and sustainment; systems engineering; and test andevaluation. ManTech supports major national missions, such as military readiness, terrorist threat detection,information security and border protection.We derive revenues primarily from contracts with U.S. government agencies that are focused on nationalsecurity and as a result, funding for our programs is generally linked to trends in U.S. government spending inthe areas of defense, intelligence, homeland security and other federal agencies. As it relates to the evolvingterrorist threats and world events, the U.S. government has continued to increase its overall defense, intelligenceand homeland security budgets. However, this trend may not continue due to the mounting deficit of the U.S.government and public pressure to reduce U.S. government spending. See Item 1A Risk Factors for moreinformation.For the years ended December 31, 2011, 2010 and 2009, 96.6%, 95.8% and 95.0%, respectively, of ourrevenues were derived from our customers in the intelligence community and the Department of Defense. Thesecustomers include the Office of the Secretary of Defense; the Department of State; the Department of HomelandSecurity; various intelligence agencies; federal intelligence and terrorism task forces; the U.S. Army, Navy, AirForce and Marine Corps; and joint military commands. We also provide solutions to federal government civilianagencies, including National Aeronautics and Space Administration and Patent and Trademark Office, as well asto state and local governments and commercial customers. The following table shows revenues from each type ofcustomer as a percentage of total revenues for the periods presented.Year Ended December 31,2011 2010 2009Department of Defense and intelligence agencies . . . . . . . . . . . . . . . . . . . . . 96.6% 95.8% 95.0%Federal civilian agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 2.9% 3.2%State agencies, international agencies and commercial entities . . . . . . . . . . . 0.8% 1.3% 1.8%Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%We provide our services and solutions under three types of contracts: time-and-materials; cost-reimbursable;and fixed-price. Our contract mix varies from year-to-year due to numerous factors, including our businessstrategies and federal government procurement objectives. Recently, our customers have increasingly procured33our services under cost-reimbursable contracts, rather than time-and-material contracts. We expect this trend tocontinue during 2012. The following table shows revenues from each of these types of contracts as a percentageof total revenues for the periods presented.Year Ended December 31,2011 2010 2009Time-and-materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.5% 63.7% 68.1%Cost-reimbursable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.6% 20.9% 19.6%Fixed-price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9% 15.4% 12.3%Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%Time-and-materials contracts—Under time-and-materials contracts, we are reimbursed for labor at fixedhourly rates and generally reimbursed separately for allowable materials, costs and expenses. To the extent thatour actual labor costs under a time-and-materials contract are higher or lower than the billing rates under thecontract, our profit under the contract may be either greater or less than we anticipated or we may suffer a lossunder the contract. We recognize revenues under time-and-materials contracts by multiplying the number ofdirect labor hours expended by the contract billing rates and adding the effect of other billable direct costs. Ingeneral, we realize a higher profit margin on work performed under time-and-materials contracts than cost-reimbursable contracts.Cost-reimbursable contracts—Under cost-reimbursable contracts, we are reimbursed for costs that aredetermined to be reasonable, allowable and allocable to the contract and paid a fee representing the profit marginnegotiated between us and the contracting agency, which may be fixed or performance based. Under cost-reimbursable contracts we recognize revenues and an estimate of applicable fees earned as costs are incurred. Weconsider fixed fees under cost-reimbursable contracts to be earned in proportion to the allowable costs incurred inperformance of the contract. For performance based fees under cost-reimbursable contracts, we recognize therelevant portion of the expected fee to be awarded by the client at the time such fee can be reasonably estimated,based on factors such as our prior award experience and communications with the client regarding performance.For cost-reimbursable contracts with performance-based fee incentives that are subject to the provisions ofSecurities and Exchange Commission (SEC) Topic 13, Revenue Recognition, we recognize the relevant portionof the fee upon customer approval. In general, cost-reimbursable contracts are the least profitable of ourgovernment contracts and lowest risk of financial loss.Fixed-price contracts—Under fixed-price contracts, we perform specific tasks for a fixed price. Compared tocost-reimbursable and time-and-materials contracts, fixed-price contracts generally offer higher profit marginopportunities but involve greater financial risk because we bear the impact of cost overruns in return for the fullbenefit of any cost savings. We generally do not undertake complex, high-risk work, such as long-term softwaredevelopment, under fixed price terms. Fixed-price contracts may include either a product delivery or specificservice performance over a defined period. Revenues on fixed-price contracts that provide for the Company torender services throughout a period is recognized as earned according to contract terms as the service is provided ona proportionate performance basis. For fixed-price contracts that provide for the delivery of a specific product withrelated customer acceptance provisions, revenues are recognized as those products are delivered and accepted.We derive a majority of our revenues from contracts directly with the U.S. government or as a subcontractorto other providers of services to the U.S. government. The following table shows our revenues as primecontractor and as subcontractor as a percentage of our total revenues for the following periods:Year Ended December 31,2011 2010 2009Prime contract revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.6% 75.9% 64.8%Subcontract revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.4% 24.1% 35.2%Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%34Several years ago, management decided to pursue a prime position on contracts by bidding as a prime andthrough the acquisition of companies holding a prime position on desired contract vehicles. As a result, our primecontract revenues as a percentage of our total revenues has continued to increase since 2008. The primary driverof our increase in prime contract revenues in 2010 and 2011 is due to the Strategic Services Sourcing (S3)vehicle acquired with our acquisition of STI.RevenuesSubstantially all of our revenues are derived from services and solutions provided to the federal governmentor to prime contractors supporting the federal government, including services provided by our employees, oursubcontractors and through solutions that include third-party hardware and software that we purchase andintegrate as a part of our overall solutions. These requirements may vary from period-to-period depending onspecific contract and client requirements. Since we earn higher profits from labor services that our employeesprovide compared with subcontracted efforts and other reimbursable items such as hardware and softwarepurchases for clients, we seek to optimize our labor services on all of our engagements.Cost of ServicesCost of services primarily includes direct costs incurred to provide our services and solutions to customers.The most significant portion of these costs are direct labor costs, including salaries and wages, plus associatedfringe benefits of our employees directly serving customers, in addition to the related management, facilities andinfrastructure costs. Cost of services also includes other direct costs, such as the costs of subcontractors andoutside consultants and third-party materials, including hardware or software that we purchase and provide to thecustomer as part of an integrated solution. Since we earn higher profits on our own labor services, we expect theratio of cost of services as a percent of revenues to decline when our labor services mix increases relative tosubcontracted labor or third-party materials. Conversely, as subcontracted labor or third-party material purchasesfor customers increase relative to our own labor services, we expect the ratio of cost of services as a percent ofrevenues to increase. Changes in the mix of services and equipment provided under our contracts can result invariability in our contract margins. As a result of our increasing percentage of work in which we are the primecontractor, our use of subcontractors has continued to increase in both 2010 and 2011.General and Administrative ExpensesGeneral and administrative expenses include the salaries and wages, plus associated fringe benefits of ouremployees not performing work directly for clients, and associated facilities costs. Among the functions coveredby these costs are corporate business development, bid and proposal, contracts administration, finance andaccounting, legal, corporate governance and executive and senior management. In addition, we included stock-based compensation, as well as depreciation and amortization expense related to the general and administrativefunction. Depreciation and amortization expenses include the depreciation of computers, furniture and otherequipment, the amortization of third party software we use internally, leasehold improvements and intangibleassets. Intangible assets include customer relationships and contract backlogs acquired in business combinations,and are amortized over their estimated useful lives.Interest ExpenseInterest expense is primarily related to interest expense incurred or accrued under our outstandingborrowings, our 7.25% senior secured notes and deferred financing charges.Interest IncomeInterest income is primarily from cash on hand and notes receivable.35Results of OperationsYear Ended December 31, 2011 Compared to Year Ended December 31, 2010Consolidated Statements of IncomeThe following table sets forth certain items from our consolidated statements of income and the relativepercentages that certain items of expense and earnings bear to revenues as well as the year-over-year changefrom December 31, 2010 to December 31, 2011.Year Ended December 31, Year-to-Year Change2011 2010 2011 2010 2010 to 2011Dollars Percentages Dollars Percent(dollars in thousands)REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,869,982 $2,604,038 100.0%100.0%$265,944 10.2%Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . 2,453,679 2,208,631 85.5% 84.8% 245,048 11.1%General and administrative expenses . . . . . . . . . 188,949 180,267 6.6% 6.9% 8,682 4.8%OPERATING INCOME . . . . . . . . . . . . . . . . . . 227,354 215,140 7.9% 8.3% 12,214 5.7%Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (15,791) (12,567) 0.5% 0.5% (3,224) 25.7%Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 361 —% —% (29) (8.0)%Other income (expense), net . . . . . . . . . . . . . . . . 3,607 (483) 0.1% —% 4,090 846.8%INCOME FROM OPERATIONS BEFOREINCOME TAXES . . . . . . . . . . . . . . . . . . . . . 215,502 202,451 7.5% 7.8% 13,051 6.4%Provision for income taxes . . . . . . . . . . . . . . . . . (82,196) (77,355) 2.9% 3.0% (4,841) 6.3%NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,306 $ 125,096 4.6% 4.8%$ 8,210 6.6%RevenuesRevenues increased 10.2% to $2.87 billion for the year ended December 31, 2011, compared to $2.60billion for the same period in 2010. Revenue growth of $176.8 million came from organic growth due to contractawards and expansion on prime positions in our C4ISR support business, including the S3 contract vehicle. Ouracquisitions of S&IS, MTCSC, TranTech and WINS contributed revenue growth of $128.8 million. Theseincreases were partially offset by a decrease in our global logistic services contracts.We expect growth in revenues in 2012 as a result of our recent acquisitions and recent and anticipatedcontract awards in the areas of C4ISR and cyber security. However we recognize that the government hasexpressed its intention to decrease its budgets related to professional and technical services contracts in thecoming years. Additionally, U.S. combat troops withdrew from Iraq at the end of 2011 and the United StatesSecretary of Defense has announced the planned withdrawal of U.S. combat troops from Afghanistan in 2013.Cost of servicesCost of services increased 11.1% to $2.45 billion for the year ended December 31, 2011, compared to $2.21billion for the same period in 2010. The increase in cost of services was primarily due to our acquisitions andcontinued organic growth. As a percentage of revenues, cost of services increased to 85.5% for the year 2011 ascompared to 84.8% for the same period in 2010. Direct labor costs, which include applicable fringe benefits andoverhead, increased 8.2% for the year ended December 31, 2011 over the same period in 2010, primarily due toour acquisitions. As a percentage of revenues, direct labor costs decreased to 34.2% for the year endedDecember 31, 2011, as compared to 34.8% for the same period in 2010. Other direct costs, which includesubcontractors and third party equipment and materials used in the performance of our contracts, increased by13.1% for the year ended December 31, 2011 over the same period in 2010. As a percentage of revenues, otherdirect costs increased from 50.0% for the year ended December 31, 2010 to 51.3% for the same period in 2011.The increase in other direct costs as a percentage of revenues is primarily due to increasing subcontractor costs36related to our increasing position as a prime on contracts. We expect cost of services in fiscal year 2012 toincrease consistent with our growth in revenue. As a percentage of sales, we expect cost of services to increase in2012 primarily due to our continued trend towards cost reimbursable type contracts, which tend to have lowerprofit margins, and continued high percentage of subcontractors.General and administrative expensesGeneral and administrative expenses increased 4.8% to $188.9 million for the year ended December 31, 2011,compared to $180.3 million for the same period in 2010. The increase was primarily due to our acquisitions, higherbid and proposal expenses driven by a few large proposals, higher expenses for non-recurring legal services relatedto a case in which the Company is the plaintiff and stock-based compensation expenses increased due to higherforfeitures in 2010 resulting from the resignation of the Company’s former Chief Operating Officer. As apercentage of revenues, general and administrative expenses decreased to 6.6% from 6.9% for the years endedDecember 31, 2011 and 2010, respectively due to the leveraging of our general and administrative expense over alarger base. We expect general and administrative expenses as a percentage of revenues in 2012 to remain relativelyconsistent with 2011.Interest expenseInterest expense increased to $15.8 million for the year ended December 31, 2011, compared to $12.6million for the same period in 2010. The increase in interest expense is primarily related to our 7.25% seniorunsecured notes being outstanding for all of 2011 as compared to nine months of 2010. We incurred $15.0million of interest expense for the year ended December 31, 2011 related to our 7.25% senior unsecured notesissued in April 2010. In 2012, we expect our interest expense to vary depending on our cash on hand balancesand the use of our credit facility for future acquisitions.Interest incomeInterest income decreased to $0.3 million for the year ended December 31, 2011, compared to $0.4 millionfor the same period in 2010.Other income (expense), netOther income was $3.6 million for the year ended December 31, 2011, compared to other expense of $0.5million for the same period in 2010. The increase was due to the sale of our investment in NetWitnessCorporation, which resulted in a gain of $3.7 million for the year ended December 31, 2011.Provision for income taxesThe provision for income taxes increased to $82.2 million for the year ended December 31, 2011, comparedto $77.4 million for the same period in 2010. Our effective income tax rates were 38.1% and 38.2% for the yearsended December 31, 2011 and 2010, respectively.Net incomeNet income increased 6.6% to $133.3 million for the year ended December 31, 2011, compared to $125.1million for the same period in 2010. The increase was due to higher revenues, which are primarily driven by ouracquisitions, as well as a gain we recorded due to the sale of an investment.37Year Ended December 31, 2010 Compared to Year Ended December 31, 2009Consolidated Statements of IncomeThe following table sets forth certain items from our consolidated statements of income and the relativepercentages that certain items of expense and earnings bear to revenues as well as the year-over-year changefrom December 31, 2009 to December 31, 2010.Year Ended December 31, Year-to-Year Change2010 2009 2010 2009 2009 to 2010Dollars Percentages Dollars Percent(dollars in thousands)REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,604,038 $2,020,334 100.0%100.0%$583,704 28.9 %Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . 2,208,631 1,668,763 84.8% 82.6% 539,868 32.4 %General and administrative expenses . . . . . . . . . 180,267 172,492 6.9% 8.5% 7,775 4.5 %OPERATING INCOME . . . . . . . . . . . . . . . . . 215,140 179,079 8.3% 8.9% 36,061 20.1 %Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . (12,567) (1,141) 0.5% 0.1% (11,426) 1,001.4%Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 361 215 —% —% 146 67.9 %Other income (expense), net . . . . . . . . . . . . . . . . (483) 355 —% —% (838) (236.1)%INCOME FROM OPERATIONS BEFOREINCOME TAXES . . . . . . . . . . . . . . . . . . . . . 202,451 178,508 7.8% 8.8% 23,943 13.4 %Provision for income taxes . . . . . . . . . . . . . . . . . (77,355) (66,744) 3.0% 3.3% (10,611) 15.9 %NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,096 $ 111,764 4.8% 5.5%$ 13,332 11.9 %RevenuesRevenues increased 28.9% to $2.60 billion for the year ended December 31, 2010, compared to $2.02billion for the same period in 2009. The increase was primarily due to our acquisitions of STI onJanuary 15, 2010. C4ISR services contributed revenue growth of $576.4 million, including $518.0 million fromcontracts obtained through the acquisition of STI. Revenue growth of $50.6 million came from our cyber securityrelated contracts. These increases were partially offset by a decrease due to lower procurement of materials onour contracts for installation, sustainment and repair of communication systems and heavily armored vehiclesdesigned to counter or clear mines and improvised explosive devices (IED), such as the Route Clearance familyof vehicles supporting U.S. Army Tank-Automotive Armament Command.Cost of servicesCost of services increased 32.4% to $2.21 billion for the year ended December 31, 2010, compared to $1.67billion for the same period in 2009. The increase in cost of services was primarily due to our acquisition of STI.As a percentage of revenues, cost of services increased to 84.8% for the year 2010 as compared to 82.6% for thesame period in 2009. Direct labor costs, which include applicable fringe benefits and overhead, increased 15.9%over the period in 2009 primarily due to growth in staff supporting global logistics, supply chain managementand Intelligence, Surveillance Reconnaissance programs, as well as our acquisitions. As a percentage ofrevenues, direct labor costs decreased to 34.8% for the year ended December 31, 2010, as compared to 38.7% forthe same period in 2009. The decrease in direct labor as a percentage of revenues was primarily due to therelative mix of direct labor and other direct costs. Other direct costs, which include subcontractors and third partyequipment and materials used in the performance of our contracts, increased by 46.9% over the same period in2009. The increase in other direct costs was primarily due to subcontractors related to STI contracts. As apercentage of revenues, other direct costs increased from 43.9% for the year ended December 31, 2009 to 50.0%for the same period in 2010. The increase of other direct costs as a percentage of revenues was primarily due tothe relative mix of direct labor and other direct costs.38General and administrative expensesGeneral and administrative expenses increased 4.5% to $180.3 million for the year ended December 31, 2010,compared to $172.5 million for the same period in 2009. The increase was primarily due to the amortization ofintangible assets from our acquisitions. As a percentage of revenues, general and administrative expenses decreasedto 6.9% from 8.5% for the years ended December 31, 2010 and 2009, respectively, due to the leveraging of ourgeneral and administrative expense over a larger base.Interest expenseInterest expense increased to $12.6 million for the year ended December 31, 2010, compared to $1.1 millionfor the same period in 2009. We incurred $10.7 million of interest expense for the year ended December 31, 2010related to our 7.25% senior unsecured notes issued in April 2010. We utilized proceeds from the note issuance topay off all outstanding borrowings under our revolving credit facility. Borrowings under our revolving creditfacility were used to finance the acquisition of STI. The interest rate on the 7.25% senior unsecured notes ishigher than interest currently available to us under our revolving credit facility.Interest incomeInterest income increased to $0.4 million for the year ended December 31, 2010, compared to $0.2 millionfor the same period in 2009. There was increased average cash on hand, which generated interest income duringthe period.Provision for income taxesThe provision for income taxes increased to $77.4 million for the year ended December 31, 2010, comparedto $66.7 million for the same period in 2009. Our effective income tax rates were 38.2% and 37.4% for the yearsended December 31, 2010 and 2009, respectively. The increase in our effective tax rate from December 31, 2009was primarily due to increased state income taxes as a result of the STI acquisition.Net incomeNet income increased 11.9% to $125.1 million for the year ended December 31, 2010, compared to $111.8million for the same period in 2009. The increase was due to higher revenues, which are primarily driven by ouracquisitions.BacklogFor the years ended December 31, 2011, 2010 and 2009 our backlog was $4.7 billion, $4.9 billion and $3.8billion, respectively, of which $1.3 billion, $1.6 billion and $1.1 billion, respectively, was funded backlog.Backlog represents estimates that we calculate on a consistent basis. For additional information on how wecompute backlog, see “Backlog” in Item 1.Significant wins for the year ended December 31, 2011 include contracts from:• The U.S. Army’s Tank-automotive and Armaments Command (TACOM) to continue providinglogistics sustainment and support for the U.S. Military’s Mine Resistant Ambush Protected(MRAP) Family of Vehicles.• The Department of Defense AMBIANCE program, to provide full spectrum system integrationservices that support its analytic modernization efforts.• The Naval Air Warfare Center Aircraft Division (NAWCAD) with a full range of research anddevelopment, design, integration and implementation support for the National Capital Region’sfixed, deployable and mobile systems and provide the Special Communications Requirements(SCR) Division with services essential to meet quick-reaction mission functions.39• The Space and Naval Warfare Systems Center Atlantic multiple award contract to providescientific engineering and administrative support services to the Defense Advanced ResearchProject Agency (DARPA) Tactical Technology Office.• The Department of Justice (DOJ) Information Technology Support Services (ITSS-4) multipleaward ID/IQ contract, to provide a wide range of lifecycle IT-related tasks and processes,including systems development, IT planning, systems engineering, systems development andtesting, systems programming and integration, systems conversions, interoperability verificationand testing, cyber security, technology infusion, continuity of operations and other technologyservices for all DOJ components.• The Office of the Secretary of Defense (OSD), Director Developmental Test and Evaluationmultiple award contract to provide engineering and test and evaluation (T&E) services.Effects of InflationInflation and uncertainties in the macroeconomic environment, such as conditions in the financial markets,could impact our labor rates beyond the predetermined escalation factors. However, we generally have been ableto price our contracts in a manner to accommodate the rates of inflation experienced in recent years. Under ourtime-and-materials contracts, labor rates are usually adjusted annually by predetermined escalation factors. Ourcost-reimbursable contracts automatically adjust for changes in cost. Under our fixed-price contracts, we includea predetermined escalation factor, but generally, we have not been adversely affected by near-term inflation.Purchases of equipments and materials directly for contracts are usually cost-reimbursable.Liquidity and Capital ResourcesHistorically, our primary liquidity needs are the financing of acquisitions, working capital and capitalexpenditures. Our primary sources of liquidity are cash provided by operations and our revolving credit facility.On December 31, 2011, the Company’s cash and cash equivalents balance was $114.5 million. AtDecember 31, 2011, there was no outstanding balance under our revolving credit facility. At December 31, 2011,we were contingently liable under letters of credit totaling $1.2 million, which reduces our ability to borrowunder our revolving credit facility. The maximum available borrowings under our revolving credit facility atDecember 31, 2011 was $498.8 million. At December 31, 2011, we had $200.0 million outstanding of our 7.25%senior unsecured notes.Generally, cash provided by operating activities is adequate to fund our operations. Due to fluctuations inour cash flows and the growth in our operations, it is necessary from time-to-time to increase borrowings underour revolving credit facility to meet cash demands.Cash flows from operating activitiesYear Ended December 31,2011 2010 2009(in thousands)Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221,355 $171,445 $132,247Our operating cash flow is primarily affected by the overall profitability of our contracts, our ability toinvoice and collect from our clients in a timely manner and our ability to manage our vendor payments. We billmost of our clients and prime contractors monthly after services are rendered. Increased cash flow fromoperations during the year ended December 31, 2011 compared to the same period in 2010 was due to increasedreceivables, depreciation expense and billing in excess of revenue earned primarily related to a contract to40provide mobile telecommunication services in Afghanistan, and net income, partially offset by the timing ofvendor payables and decreased deferred income taxes. Our accounts receivable days sales outstanding (DSO)ratio, based on fourth quarter sales, was 71 and 67 at December 31, 2011 and 2010, respectively. The increase inour DSO ratio was primarily due to a delay in payment on our largest contract related to new contract auditprocedures on invoices by DCAA. Increased cash flows from operations for the year ended December 31, 2010compared to the same period for 2009 was a result of the timing of vendor payments and accrued salaries,increased net income and amortization expense, partially offset by the timing of receivables.Cash flows from investing activitiesYear Ended December 31,2011 2010 2009(in thousands)Net cash flow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(165,475) $(382,161) $(20,014)Our cash flow from investing activities consists primarily of business acquisitions, expenditures forequipment, leasehold improvements and software. Increased cash outflows in 2011 for purchases of property andequipment of $54.5 million were primarily related to a mobile telecommunication network built for use on one ofour contracts in Afghanistan and the acquisition of WINS for $87.1 million and TranTech for $20.2 million,partially offset by approximately $3.2 million in cash proceeds from the sale of an investment. Cash outflows in2010 were primarily due to the acquisitions of STI, S&IS and MTCSC as well as capital expenditures for $13.3million. Cash outflows in 2009 were primarily due to the acquisition of DDK and capital expenditures for $6.2million.Cash flows from financing activitiesYear Ended December 31,2011 2010 2009(in thousands)Net cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(26,226) $209,355 $(30,418)Cash outflow from financing activities during 2011 resulted primarily from the dividends paid of $30.8million and debt issuance costs of $3.9 million for our new revolving credit facility, offset by the proceeds fromthe exercise of stock options for $8.2 million. Cash flow from financing during 2010 resulted primarily from theissuance of 7.25% senior unsecured notes for $200.0 million and the proceeds from the exercise of stock optionsfor $13.8 million, offset by debt issuance costs for $5.0 million. The proceeds from our notes issuance wereutilized to payoff outstanding amounts under our revolving credit facility. Cash outflow from financing during2009 resulted primarily from the payments under our revolving credit facility of $44.1 million partially offset bythe proceeds from the exercise of stock options of $12.6 million.Revolving Credit FacilityOn October 12, 2011, we entered into a new credit agreement with a syndicate of lenders led by Bank ofAmerica, N.A., as Administrative Agent. The credit agreement provides for a $500.0 million revolving creditfacility, with a $25.0 million letter of credit sublimit and a $30.0 million swing line loan sublimit. The creditagreement also contains an accordion feature that permits the Company to arrange with the lenders for theprovision of up to $250.0 million in additional commitments.Borrowings under our revolving credit facility are collateralized by substantially all the assets of ManTechand its Material Subsidiaries (as defined in the credit agreement) and bear interest at one of the followingvariable rates as selected by the Company at the time of the borrowing: a London Interbank Offered Rate41(LIBOR) based rate plus market spreads (initially 1.50%, then 1.25% to 2.25% based on the Company’sconsolidated total leverage ratio) or the lender’s base rate plus market spreads (initially 0.50%, then 0.25% to1.25% based on the Company’s consolidated total leverage ratio). The maturity date for the credit agreement isOctober 12, 2016.The terms of the credit agreement permit prepayment and termination of the loan commitments at any time,subject to certain conditions. The revolving credit facility requires the Company to comply with specifiedfinancial covenants, including the maintenance of a certain consolidated total leverage ratio, senior securedleverage ratio and fixed charge coverage ratio. The credit agreement also contains various covenants, includingaffirmative 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.On October 12, 2011, in connection with the entry of the Company into the new credit agreement, weterminated the commitments under our prior credit agreement, dated April 30, 2007.At December 31, 2011 and 2010, there was no outstanding balance under our revolving credit facility.7.25% Senior Unsecured NotesEffective April 13, 2010, the Company issued $200.0 million of 7.25% senior unsecured notes in a privateplacement that were resold inside the United States to qualified institutional buyers in reliance on Rule 144Aunder the Securities Act of 1933, and outside the United States to non-U.S. persons in reliance on Regulation Sunder the Securities Act of 1933.Pursuant to the terms of the registration rights agreement entered into in connection with the issuance of the7.25% senior unsecured notes, on August 19, 2010, ManTech completed the exchange of $200.0 million inaggregate principal amount of 7.25% senior unsecured notes due 2018 that are registered under the Securities Act of1933, as amended, for all of the then outstanding unregistered 7.25% senior unsecured notes due April 15, 2018.As of December 31, 2011 and 2010, the Company was in compliance with all covenants required by theindenture.Capital ResourcesWe believe the capital resources available to us from cash on hand of $114.5 million at December 31, 2011and up to $500.0 million in loan commitments under our revolving credit facility, and cash from our operationsare adequate to fund our ongoing operations and to support the internal growth we expect to achieve for at leastthe next year. We anticipate financing our external growth from acquisitions and our longer-term internal growththrough one or more of the following sources: cash from operations; use of our revolving facility; additionalsenior unsecured notes; and additional borrowing or issuance of equity.Short-Term BorrowingsFrom time to time, we borrow funds against our revolving credit facility for working capital requirementsand funding of operations, as well as acquisitions. Borrowings under our revolving credit facility bear interest atone of the following rates as selected by the Company at the time of the borrowing: a LIBOR based rate plusmarket spreads (initially 1.50%, then 1.25% to 2.25% based on the Company’s consolidated total leverage ratio)or the lender’s base rate plus market spreads (initially 0.50%, then 0.25% to 1.25% based on the Company’sconsolidated total leverage ratio). In April of 2010, we used the proceeds from the issuance of the 7.25% seniorunsecured notes to repay all outstanding borrowings under our revolving credit facility. Since then, we have notdrawn any funds against the revolving credit facility. In the next year we may use, as needed, our revolving creditfacility in order to fund our ongoing operations and support our organic growth and external growth fromacquisitions.42The following table summarizes the activity under our revolving credit facility for the years endedDecember 31, 2011, 2010 and 2009:Year Ended December 31,2011 2010 2009(in thousands)Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $287,700 $529,125Repayment of borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . $— $287,700 $573,225Cash ManagementTo the extent possible, we invest our available cash in short-term, investment grade securities in accordancewith our investment policy. Under our investment policy, we manage our investments, in accordance with thepriorities of maintaining the safety of our principal, maintaining the liquidity of our investments, maximizing theyield on our investments and investing our cash to the fullest extent possible. Our investment policy provides thatno investment security can have a final maturity that exceeds six months, and that the weighted average maturityof the portfolio cannot exceed 60 days. Cash and cash equivalents include cash on hand, amounts due from banksand short-term investments with maturity dates of three months or less at the date of purchase.DividendIn May 2011, our Board of Directors approved the initiation of a regular cash dividend program. OnMay 16, 2011, our Board of Directors declared an initial dividend in the amount of $0.42 per share on all issuedand outstanding shares of common stock. As a result, dividends in the amount of $15.4 million were paid to ourstockholders on June 15, 2011. On November 1, 2011, our Board of Directors declared a dividend payment in theamount of $0.42 per share on all issued and outstanding shares of common stock. As a result, dividends in theamount of $15.5 million were paid to our shareholders on December 8, 2011. For 2012, we anticipate payingquarterly dividends, each in the amount of $0.21 per share. While we expect to continue the regular cashdividend program, any future dividends declared will be at the discretion of our Board of Directors and willdepend, among other factors, upon our results of operations, financial condition and cash requirements, as well assuch other factors our Board or Directors deems relevant.Off-Balance Sheet ArrangementsNone.Contractual ObligationsOur contractual obligations as of December 31, 2011 are as follows (in thousands):Payments Due By PeriodContractual Obligations TotalLess than1 Year1-3Years3-5YearsMore than5 YearsDebt obligations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000 $ — $ — $ — $200,000Interest on fixed rate debt (1) . . . . . . . . . . . . . . . . . . . . . . . 94,250 14,500 29,000 29,000 21,750Operating lease obligations (2) . . . . . . . . . . . . . . . . . . . . . 227,833 30,545 49,773 40,061 107,454Other long-term liabilities (3) . . . . . . . . . . . . . . . . . . . . . . 7,871 234 3,682 1,276 2,679Accrued defined benefit obligations (4) . . . . . . . . . . . . . . . 1,532 152 294 276 810Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $531,486 $45,431 $82,749 $70,613 $332,693(1) See Note 8 to our consolidated financial statements in Item 8 for additional information regarding debt andrelated matters.43(2) Operating lease obligations have been reduced for the related amount disclosed in other long-term liabilitiesas deferred rent (see below). See Note 9 to our consolidated financial statements in Item 8 for additionalinformation regarding operating leases.(3) Other long-term liabilities at December 31, 2011 included approximately $5.9 million of deferred rentliabilities resulting from recording rent expenses on a straight-line basis over the life of the respective lease.Also included in other long-term liabilities is a gross unrecognized tax benefit liability of $1.4 million.(4) Accrued defined benefit obligation includes approximately $1.5 million of unfunded pension obligationsrelated to nonqualified supplemental defined benefit pension plans for certain retired employees of anacquired company. The amounts above are subject to change based on actuarial as well as the vital status ofparticipants. This obligation is included in the accrued retirement amount on our consolidated balancesheets. In addition, the accrued retirement amount on our consolidated balance sheets includes amounts forone non-qualified deferred compensation plan for certain highly compensated employees. The fundsdeferred by the employees are invested and these investment assets are maintained in rabbi trusts. The rabbitrusts’ assets are reflected in the Employee Supplemental Savings Plan Assets on our consolidated balancesheets. Because these liabilities will be satisfied by assets held in rabbi trusts, the amounts have beenexcluded from the above table.Critical Accounting Estimates and PoliciesCritical accounting policies are defined as those that are reflective of significant judgments anduncertainties, 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 ofoperations. The discussion and analysis of our financial condition and results of operations are based on ourconsolidated financial statements, which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these consolidated financial statements requiresmanagement to make estimates and judgments that affect the reported amount of assets, liabilities, revenues andexpenses. Actual results may differ from these estimates under different assumptions or conditions. Oursignificant accounting policies, including the critical policies listed below, are more fully described in the notesto our consolidated financial statements included in this report.Revenue Recognition and Cost EstimationWe recognize revenues when persuasive evidence of an arrangement exists, services have been rendered,the contract price is fixed or determinable and collectability is reasonably assured. We have a standard internalprocess that we use to determine whether all required criteria for revenue recognition have been met.Our revenues consist primarily of services provided by our employees and the pass through of costs formaterials and subcontract efforts under contracts with our customers. Cost of services consists primarily ofcompensation expenses for program personnel, the fringe benefits associated with this compensation and otherdirect expenses incurred to complete programs, including cost of materials and subcontract efforts.We derive the majority of our revenues from cost-plus-fixed-fee, cost-plus-award-fee, firm-fixed-price ortime-and-materials contracts. Revenues for cost-reimbursable contracts are recorded as reimbursable costs areincurred, including an estimated share of the applicable contractual fees earned. For performance-based feesunder cost-reimbursable contracts, that are subject to the provisions of ASC 605-35, Construction-Type andCertain Production-Type Contracts, we recognize the relevant portion of the expected fee to be awarded by theclient at the time such fee can be reasonably estimated, based on factors such as our prior award experience andcommunications with the client regarding performance. For cost-reimbursable contracts with performance-basedfee incentives that are subject to the provisions of SEC Topic 13, Revenue Recognition, we recognize therelevant portion of the fee upon customer approval. For time-and-materials contracts, revenues are recognized tothe extent of billable rates times hours delivered plus materials and other reimbursable costs incurred. For long-44term fixed-price production contracts, revenues are recognized at a rate per unit as the units are delivered or byother methods to measure services provided. Revenues from other long-term fixed-price contracts are recognizedratably over the contract period or by other appropriate methods to measure services provided. Contract costs areexpensed as incurred except for certain limited long-term contracts noted below. For long-term contracts,specifically described in the scope section of ASC 605-35, we apply the percentage of completion method. Underthe percentage of completion method, income is recognized at a consistent profit margin over the period ofperformance based on estimated profit margins at completion of the contract. This method of accounting requiresestimating the total revenues and total contract cost at completion of the contract. During the performance oflong-term contracts, these estimates are periodically reviewed and revisions are made as required using thecumulative catch-up method of accounting. The impact on revenues and contract profit as a result of theserevisions is included in the periods in which the revisions are made. This method can result in the deferral ofcosts or the deferral of profit on these contracts. Because we assume the risk of performing a fixed-price contractat a set price, the failure to accurately estimate ultimate costs or to control costs during performance of the workcould result, and in some instances has resulted, in reduced profits or losses for such contracts. Both theindividual changes in contract estimates and aggregate net changes in contract estimates recognized using thecumulative catch-up method of accounting were not material to the consolidated statement of operations for allperiods presented. Estimated losses on contracts at completion are recognized when identified. In certaincircumstances, revenues are recognized when contract amendments have not been finalized.Accounting for Business Combinations and GoodwillThe purchase price of an acquired business is allocated to the tangible assets, financial assets and separatelyrecognized intangible assets acquired less liabilities assumed based upon their respective fair values, with theexcess recorded as goodwill. Such fair value assessments require judgments and estimates that can be affected bycontract performance and other factors over time, which may cause final amounts to differ materially fromoriginal estimates.We review goodwill at least annually for impairment. We have elected to perform this review annuallyduring the second quarter of each calendar year. No adjustments were necessary as a result of this review duringthe quarter end June 30, 2011.Whenever events and changes in circumstances indicate that the carrying amount of long-lived asset maynot be fully recoverable, we evaluate the probability that future undiscounted net cash flows, without interestcharges, will be less than carrying amount of assets. If any impairment were indicated as a result of this review,we recognize a loss based on the amount by which that 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 ofthe Company’s recorded goodwill, differences in assumptions may have a material effect on the results of theCompany’s impairment analysis.Accounting Standards UpdatesIn September 2011, Accounting Standards Update No. 2011-08, Intangibles—Goodwill and Other (Topic350): Testing Goodwill for Impairment, was issued. The amendments in this Update will allow an entity to firstassess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwillimpairment test. Under these amendments, an entity would not be required to calculate the fair value of areporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not thatits fair value is less than its carrying amount. The amendments include a number of events and circumstances foran entity to consider in conducting the qualitative assessment. The amendments in this Update apply to allentities, both public and nonpublic, that have goodwill reported in their financial statements. The amendmentsare effective for annual and interim goodwill impairment tests performed for fiscal years beginning afterDecember 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests45performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annualor interim period have not yet been issued or, for nonpublic entities, have not yet been made available forissuance. The adoption of Accounting Standards Update No. 2011-08 is not expected to have a significant impacton the Company’s results of operations or financial position.In June 2011, Accounting Standard Update No. 2011-05, Comprehensive Income (Topic 220): Presentationof Comprehensive Income, was issued. Under the amendments to Topic 220, Comprehensive Income, in thisUpdate, an entity has the option to present the total of comprehensive income, the components of net income, andthe components of other comprehensive income either in a single continuous statement of comprehensive incomeor in two separate but consecutive statements. In both choices, an entity is required to present each component ofnet income along with total net income, each component of other comprehensive income along with a total forother comprehensive income and a total amount for comprehensive income. This Update eliminates the option topresent the components of other comprehensive income as part of the statement of changes in stockholders’equity. The amendments in this Update do not change the items that must be reported in other comprehensiveincome or when an item of other comprehensive income must be reclassified to net income. All entities thatreport items of other comprehensive income, in any period presented, will be affected by the changes in thisUpdate. The amendments in this Update should be applied retrospectively. For public entities, the amendmentsare effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Earlyadoption is permitted, because compliance with the amendments is already permitted. The amendments do notrequire any transition disclosures. We currently comply with Accounting Standard Update No. 2011-05.In June 2011, Accounting Standard Update No. 2011-04, Fair Value Measurement (Topic 820): Amendmentsto Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, was issued.The amendments in this Update explain how to measure fair value. They do not require additional fair valuemeasurements and are not intended to establish valuation standards or affect valuation practices outside of financialreporting. The amendments in this Update apply to all reporting entities that are required or permitted to measure ordisclose the fair value of an asset, a liability or an instrument classified in a reporting entity’s shareholders’ equity inthe financial statements. The amendments in this Update result in common fair value measurement and disclosurerequirements in U.S. generally accepted accounting principles (GAAP) and International Financial ReportingStandards (IFRS). Consequently, the amendments change the wording used to describe many of the requirements inU.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of therequirements, the Financial Accounting Standards Board (FASB) does not intend for the amendments in this Updateto result in a change in the application of the requirements in Topic 820. Some of the amendments clarify theFASB’s intent about the application of existing fair value measurement requirements. Other amendments change aparticular principle or requirement for measuring fair value or for disclosing information about fair valuemeasurements. The amendments in this Update are to be applied prospectively. For public entities, the amendmentsare effective during interim and annual periods beginning after December 15, 2011. Early application by publicentities is not permitted. The adoption of Accounting Standards Update No. 2011-04 is not expected to have animpact on the Company’s results of operations or financial position.Item 7A. Quantitative and Qualitative Disclosures about Market RiskOur exposure to market risk relates to changes in interest rates for borrowings under our revolving creditfacility. At December 31, 2011, we had no outstanding balance on our revolving credit facility. Borrowings underour revolving credit facility bear interest at variable rates. A hypothetical 10% increase in interest rates would haveno affect on our annual interest expense for the year ended December 31, 2011.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 withan investment policy. Under this policy, no investment security can have a maturity exceeding six months and theweighted average maturity of the portfolio cannot exceed 60 days.46Item 8. Financial Statements and Supplementary DataIndex to Consolidated Financial Statements Page(s)Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Consolidated Balance Sheets as of December 31, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009 . . . . . . . . . . 50Consolidated Statements of Comprehensive Income for the years ended December 31, 2011, 2010 and2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011,2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009 . . . . . . . 53Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5447REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofManTech International CorporationFairfax, VirginiaWe have audited the accompanying consolidated balance sheets of ManTech International Corporation andsubsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements ofincome, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in theperiod ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index atItem 15. These financial statements and financial statement schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on the financial statements and financial statementschedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financialposition of ManTech International Corporation and subsidiaries as of December 31, 2011 and 2010, and theresults of their operations and their cash flows for each of the three years in the period ended December 31, 2011,in conformity with accounting principles generally accepted in the United States of America. Also, in ouropinion, such financial statement schedule, when considered in relation to the basic consolidated financialstatements taken as a whole, presents fairly, in all material respects, the information set forth therein.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the Company’s internal control over financial reporting as of December 31, 2011, based on thecriteria established in Internal Control-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated February 24, 2012 expressed an unqualifiedopinion on the Company’s internal control over financial reporting./s/ DELOITTE & TOUCHE LLPMcLean, VirginiaFebruary 24, 201248MANTECH INTERNATIONAL CORPORATIONCONSOLIDATED BALANCE SHEETS(Dollars in Thousands, Except Share Amounts)December 31,2011 2010ASSETSCURRENT ASSETS:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114,483 $ 84,829Receivables—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540,468 528,765Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,115 16,642Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688,066 630,236Property and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,435 27,086Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808,455 729,558Other intangibles—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,764 168,487Employee supplemental savings plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,026 24,415Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,460 10,695TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,760,206 $1,590,477LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 280,277 $ 272,047Accrued salaries and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,467 64,575Billings in excess of revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,956 11,118Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387,700 347,740Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,000Accrued retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,155 25,789Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,871 7,495Deferred income taxes—non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,223 43,110TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670,949 624,134COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .STOCKHOLDERS’ EQUITY:Common stock, Class A—$0.01 par value; 150,000,000 shares authorized;23,882,331 and 23,396,549 shares issued at December 31, 2011 and 2010;23,638,218 and 23,153,509 shares outstanding at December 31, 2011 and2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 234Common stock, Class B—$0.01 par value; 50,000,000 shares authorized;13,192,845 and 13,275,345 shares issued and outstanding at December 31,2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 133Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406,083 385,407Treasury stock, 244,113 and 243,040 shares at cost at December 31, 2011 and2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,158) (9,114)Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692,272 589,838Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311) (155)TOTAL STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,089,257 966,343TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . $1,760,206 $1,590,477See notes to consolidated financial statements.49MANTECH INTERNATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF INCOME(In Thousands, Except Per Share Amounts)Year Ended December 31,2011 2010 2009REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,869,982 $2,604,038 $2,020,334Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,453,679 2,208,631 1,668,763General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 188,949 180,267 172,492OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,354 215,140 179,079Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,791) (12,567) (1,141)Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 361 215Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,607 (483) 355INCOME FROM OPERATIONS BEFORE INCOME TAXES . . . . 215,502 202,451 178,508Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,196) (77,355) (66,744)NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,306 $ 125,096 $ 111,764BASIC EARNINGS PER SHARE:Class A basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.64 $ 3.45 $ 3.13Weighted average common shares outstanding . . . . . . . . . . . . . . . . 23,415 22,847 21,980Class B basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.64 $ 3.45 $ 3.13Weighted average common shares outstanding . . . . . . . . . . . . . . . . 13,233 13,367 13,707DILUTED EARNINGS PER SHARE:Class A diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $ 3.63 $ 3.43 $ 3.11Weighted average common shares outstanding . . . . . . . . . . . . . . . . 23,530 23,054 22,278Class B diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $ 3.63 $ 3.43 $ 3.11Weighted average common shares outstanding . . . . . . . . . . . . . . . . 13,233 13,367 13,707See notes to consolidated financial statements.50MANTECH INTERNATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands)Year Ended December 31,2011 2010 2009NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,306 $125,096 $111,764OTHER COMPREHENSIVE INCOME (LOSS):Translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80) (70) (32)Actuarial gain (loss) on defined benefit pension plans, net of tax . . . . . . . (76) 87 —Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . (156) 17 (32)COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,150 $125,113 $111,732See notes to consolidated financial statements.51MANTECH INTERNATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(In Thousands)December 31,2011 2010 2009Common Stock, Class AAt beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234 $ 226 $ 218Stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 4Conversion Class B to Class A common stock . . . . . . . . . . . . . . . . . . . . 1 3 4Contribution of Class A common stock to Employee Stock OwnershipPlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 —At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 234 226Common Stock, Class BAt beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 136 140Conversion Class B to Class A common stock . . . . . . . . . . . . . . . . . . . . (1) (3) (4)At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 133 136Additional Paid-In CapitalAt beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,407 362,730 336,454Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,170 7,443 8,289Stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,183 13,803 12,557Contribution of Class A common stock to Employee Stock OwnershipPlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,559 1,796 4,333Tax benefit (deficiency) from the exercise of stock options . . . . . . . . . . (236) (365) 1,097At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406,083 385,407 362,730Treasury Stock, at costAt beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,114) (9,114) (9,114)Treasury stock acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44) — —At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,158) (9,114) (9,114)Retained EarningsAt beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589,838 464,742 352,978Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,306 125,096 111,764Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,872) — —At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692,272 589,838 464,742Accumulated Other Comprehensive Income (Loss)At beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (155) (172) (140)Translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80) (70) (32)Actuarial gain (loss) on defined benefit pension plans, net of tax . . . . . (76) 87 —At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311) (155) (172)Unearned Employee Stock Ownership Plan SharesAt beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (1,083) —(Increase) decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,083 (1,083)At end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (1,083)Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,089,257 $966,343 $817,465See notes to consolidated financial statements.52MANTECH INTERNATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)Year Ended December 31,2011 2010 2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,306 $ 125,096 $111,764Adjustments to reconcile net income to net cash provided by operatingactivities:Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,170 7,443 8,289Excess tax benefits from the exercise of stock options . . . . . . . . . . . . . . (351) (545) (1,121)Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,745) — —Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,259) 4,688 (201)Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,189 28,878 17,747Change in assets and liabilities—net of effects from acquired businesses:Receivables-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,131 (36,226) 9,296Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,179) (4,770) 4,640Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . (1,907) 39,643 997Accrued salaries and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,261 2,029 (20,050)Billings in excess of revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,846 3,381 (714)Accrued retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 1,550 6,103Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,527 278 (4,503)Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221,355 171,445 132,247CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,043) (368,853) (13,775)Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,460) (10,257) (4,021)Investment in capitalized software for internal use . . . . . . . . . . . . . . . . . . . . . . . . . (5,227) (3,051) (2,218)Proceeds from sale of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,255 — —Net cash flow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,475) (382,161) (20,014)CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,846) — —Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,186 13,807 12,561Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,873) (4,997) —Excess tax benefits from the exercise of stock options . . . . . . . . . . . . . . . . . . . . . . 351 545 1,121Treasury stock acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44) — —Issuance of senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 200,000 —Net repayments under the revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . — — (44,100)Net cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,226) 209,355 (30,418)NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . 29,654 (1,361) 81,815CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . 84,829 86,190 4,375CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . $ 114,483 $ 84,829 $ 86,190SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,357 $ 8,908 $ 868Noncash financing activities:Employee Stock Ownership Plan Contributions . . . . . . . . . . . . . . . . . . . . . . . $ 4,103 $ 1,923 $ 3,937See notes to consolidated financial statements.53NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 20091. Description of the BusinessManTech International Corporation (depending on the circumstances, “ManTech” “Company” “we” “our”“ours” or “us”) is a leading provider of innovative technologies and solutions for mission-critical nationalsecurity programs for the intelligence community; Departments of Defense, State, Homeland Security, Energyand Justice, including the Federal Bureau of Investigations (FBI); the space community; and other U.S. federalgovernment customers. Our services generally include the following solution sets that are aligned with the long-term needs of our national security clients: command, control, communications, computers, intelligence,surveillance and reconnaissance (C4ISR) lifecycle support; cyber security; global logistics support; intelligence/counter-intelligence support, information technology (IT) modernization and sustainment; systems engineering;and test and evaluation. We support major national missions, such as military readiness, terrorist threat detection,information security and border protection. Our employees operate primarily in the United States, as well asnumerous locations internationally.2. Summary of Significant Accounting PoliciesPrinciples of Consolidation—Our consolidated financial statements include the accounts of ManTechInternational Corporation, wholly-owned subsidiaries and other entities, which we control. Our share ofaffiliates’ earnings (losses) that we do not control is included in our consolidated statements of income using theequity method. All inter-company accounts and transactions have been eliminated.We determine whether we have a controlling financial interest in a Variable Interest Entity (VIE). Thereporting entity with a variable interest or interest that provide the reporting entity with a controlling financialinterest in a VIE will have both (a) the power to direct the activities of a VIE that most significantly impact theVIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially besignificant to the VIE or the right to receive benefits from the VIE that could potentially be significant to theVIE.We have one entity that has been consolidated as a VIE. The purpose of the entity is to perform on certainU.S. Navy contracts. The maximum amount of loss we are exposed to as of December 31, 2011 was not materialto our consolidated financial statements.Use of Accounting Estimates—We prepare our consolidated financial statements in conformity withaccounting principles generally accepted in the United States of America, which require management to makeestimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenues and expensesduring the reporting period. These estimates involve judgments with respect to, among other things, variousfuture economic factors that are difficult to predict and are beyond the control of the Company. Therefore, actualamounts could differ from these estimates.Revenue Recognition—We derive the majority of our revenues from cost-plus-fixed-fee, cost-plus-award-fee, firm-fixed-price or time-and-materials contracts. Revenues for cost-reimbursable contracts are recorded asreimbursable costs are incurred, including an estimated share of the applicable contractual fees earned. Forperformance-based fees under cost-reimbursable contracts, that are subject to the provisions of ASC 605-35,Construction-Type and Certain Production-Type Contracts, we recognize the relevant portion of the expected feeto be awarded by the client at the time such fee can be reasonably estimated, based on factors such as our prioraward experience and communications with the client regarding performance. For cost-reimbursable contractswith performance-based fee incentives that are subject to the provisions of SEC Topic 13, Revenue Recognition,we recognize the relevant portion of the fee upon customer approval. For time-and-materials contracts, revenuesare recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs54NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)incurred. For long-term fixed-price production contracts, revenues are recognized at a rate per unit as the unitsare delivered or by other methods to measure services provided. Revenues from other long-term fixed-pricecontracts are recognized ratably over the contract period or by other appropriate methods to measure servicesprovided. Contract costs are expensed as incurred except for certain limited long-term contracts noted below. Forlong-term contracts, specifically described in the scope section of ASC 605-35, we apply the percentage ofcompletion method. Under the percentage of completion method, income is recognized at a consistent profitmargin over the period of performance based on estimated profit margins at completion of the contract. Thismethod of accounting requires estimating the total revenues and total contract cost at completion of the contract.During the performance of long-term contracts, these estimates are periodically reviewed and revisions are madeas required using the cumulative catch-up method of accounting. The impact on revenues and contract profit as aresult of these revisions is included in the periods in which the revisions are made. This method can result in thedeferral of costs or the deferral of profit on these contracts. Because we assume the risk of performing a fixed-price contract at a set price, the failure to accurately estimate ultimate costs or to control costs duringperformance of the work could result, and in some instances has resulted, in reduced profits or losses for suchcontracts. Both the individual changes in contract estimates and aggregate net changes in contract estimatesrecognized using the cumulative catch-up method of accounting were not material to the consolidated statementof operations for all periods presented. Estimated losses on contracts at completion are recognized whenidentified. In certain circumstances, revenues are recognized when contract amendments have not been finalized.Cost of Services—Cost of services consists primarily of compensation expenses for program personnel, thefringe benefits associated with this compensation and other direct expenses incurred to complete programs,including cost of materials and subcontract efforts.Cash and Cash Equivalents—For the purpose of reporting cash flows, cash and cash equivalents includecash on hand, amounts due from banks and short-term investments with maturity dates of three months or less atthe date of purchase. Due to the short maturity of cash equivalents, the carrying value on our consolidatedbalance sheets approximates fair value.Property and Equipment—Property and equipment are recorded at original cost. Upon sale or retirement,the costs and related accumulated depreciation or amortization are eliminated from the respective accounts andany resulting gain or loss is included in income. Maintenance and repairs are charged to expense as incurred.Depreciation and Amortization—Furniture and office equipment are depreciated using the straight-linemethod with estimated useful lives ranging from one to seven years. Leasehold improvements are amortizedusing the straight-line method over the term of the lease.Inventory-Inventory is included in prepaid expenses and other on our consolidated balance sheets and iscarried at the lower of cost or market. Cost is computed on a specific identification basis.Goodwill and Other Intangibles-net—Goodwill represents the excess of cost over the fair value of nettangible and identifiable intangible assets of acquired companies. Contract rights and other intangibles areamortized primarily using the pattern of benefits method over periods ranging from one to twenty-five years.We accounted for the cost of computer software developed or obtained for internal use in accordance withASC 350-985, Software. These capitalized software costs are included in other intangibles, net.Software Development Costs—We account for software development costs related to software products forsale, lease or otherwise marketed in accordance with ASC 985-20, Costs of Software to be Sold, Leased, orMarketed. For projects fully funded by us, development costs are capitalized from the point of demonstrated55NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)technological feasibility until the point in time that the product is available for general release to customers. Oncethe product is available for general release, capitalized costs are amortized based on units sold or on a straight-line basis over a five-year period or other such shorter period as may be required. We recorded $0, $0.2 millionand $0.1 million per year of amortization expense on capitalized software cost for sale for the years endedDecember 31, 2011, 2010 and 2009, respectively. Amortization expense for the years ended December 31, 2010and 2009 included a write down of an acquisition related intangible asset for internally developed software of$0.1 million and less than $0.1 million, respectively. The write downs were based on changes in the estimated netrealizable value of the asset. There were no capitalized software costs for sale included in other intangibles, net atDecember 31, 2011 and 2010.Impairment of Long-Lived Assets—Whenever events or changes in circumstances indicate that the carryingamount of long-lived assets may not be fully recoverable, we evaluate the probability that future undiscountednet cash flows, without interest charges, will be less than the carrying amount of the assets. If any impairmentwere indicated as a result of this review, we would recognize a loss based on the amount by which the carryingamount exceeds the estimated fair value.We review goodwill at least annually for impairment. We have elected to perform this review annuallyduring the second quarter of each calendar year. No adjustments were necessary as a result of this review duringthe quarter ended June 30, 2011.Employee Supplemental Savings Plan Assets—We maintain several non-qualified defined contributionsupplemental retirement plans for certain key employees that are accounted for in accordance with ASC710-10-05, Deferred Compensation—Rabbi Trusts, as the underlying assets are held in rabbi trusts withinvestments directed by the respective employee. A rabbi trust is a grantor trust generally set up to fundcompensation for a select group of management and the assets of this trust are available to satisfy the claims ofgeneral creditors in the event of bankruptcy of the Company. The assets held by the rabbi trusts are recorded atcash surrender value in our consolidated financial statements as Employee Supplemental Savings Plan assetswith a related liability to employees recorded as a deferred compensation liability in accrued retirement.Billings In Excess of Revenue Earned—We receive advances and milestone payments from customers thatexceed the revenues earned to date. We classify such items as current liabilities.Stock-based Compensation—We account for stock-based compensation in accordance with ASC 718,Compensation—Stock Compensation. ASC 718 requires the use of a valuation model to calculate the fair value ofstock-based awards. We have elected to use the Black-Scholes-Merton pricing model to determine fair value onthe dates of grant. The fair value is included in operating expenses or capitalized, as appropriate, straight-lineover the period in which service is provided in exchange for the award. See Note 10 for further discussionregarding stock-based compensation.Income Taxes—We account for income taxes in accordance with ASC 740, Income Taxes. Under thismethod, deferred income taxes are determined based on the estimated future tax effects of differences betweenthe financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. Deferredincome tax provisions and benefits are based on changes to the assets or liabilities from year-to-year. Inproviding for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates offuture taxable income and available tax planning strategies. If tax regulations, operating results or the ability toimplement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilitiesmay be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely thannot” criteria.56NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)We recognize the financial statement benefit of a tax position only after determining that the relevant taxauthority 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 hasa greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.Foreign-Currency Translation—All assets and liabilities of foreign subsidiaries are translated into U.S.dollars at fiscal year-end exchange rates. Income and expense items are translated at average monthly exchangerates prevailing during the fiscal year. The resulting translation adjustments are recorded as a component ofaccumulated other comprehensive income (loss).Comprehensive Income—Comprehensive income is presented in our consolidated statements of changes instockholders’ equity. Comprehensive income consists of net income; translation adjustments, net of tax; andactuarial gain (loss) on defined benefit pension plan, net of tax.Fair Value of Financial Instruments—The carrying value of our cash and cash equivalents, accountsreceivable, accounts payable and accrued expenses approximate their fair values.Accounting Standards UpdatesIn September 2011, Accounting Standards Update No. 2011-08, Intangibles—Goodwill and Other (Topic350): Testing Goodwill for Impairment, was issued. The amendments in this Update will allow an entity to firstassess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwillimpairment test. Under these amendments, an entity would not be required to calculate the fair value of areporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not thatits fair value is less than its carrying amount. The amendments include a number of events and circumstances foran entity to consider in conducting the qualitative assessment. The amendments in this Update apply to allentities, both public and nonpublic, that have goodwill reported in their financial statements. The amendmentsare effective for annual and interim goodwill impairment tests performed for fiscal years beginning afterDecember 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment testsperformed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annualor interim period have not yet been issued or, for nonpublic entities, have not yet been made available forissuance. The adoption of Accounting Standards Update No. 2011-08 is not expected to have a significant impacton the Company’s results of operations or financial position.In June 2011, Accounting Standard Update No. 2011-05, Comprehensive Income (Topic 220): Presentationof Comprehensive Income, was issued. Under the amendments to Topic 220, Comprehensive Income, in thisUpdate, an entity has the option to present the total of comprehensive income, the components of net income, andthe components of other comprehensive income either in a single continuous statement of comprehensive incomeor in two separate but consecutive statements. In both choices, an entity is required to present each component ofnet income along with total net income, each component of other comprehensive income along with a total forother comprehensive income and a total amount for comprehensive income. This Update eliminates the option topresent the components of other comprehensive income as part of the statement of changes in stockholders’equity. The amendments in this Update do not change the items that must be reported in other comprehensiveincome or when an item of other comprehensive income must be reclassified to net income. All entities thatreport items of other comprehensive income, in any period presented, will be affected by the changes in thisUpdate. The amendments in this Update should be applied retrospectively. For public entities, the amendmentsare effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Earlyadoption is permitted, because compliance with the amendments is already permitted. The amendments do notrequire any transition disclosures. We currently comply with Accounting Standard Update No. 2011-05.57NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)In June 2011, Accounting Standard Update No. 2011-04, Fair Value Measurement (Topic 820):Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP andIFRS, was issued. The amendments in this Update explain how to measure fair value. They do not requireadditional fair value measurements and are not intended to establish valuation standards or affect valuationpractices outside of financial reporting. The amendments in this Update apply to all reporting entities that arerequired or permitted to measure or disclose the fair value of an asset, a liability or an instrument classified in areporting entity’s shareholders’ equity in the financial statements. The amendments in this Update result incommon fair value measurement and disclosure requirements in U.S. generally accepted accounting principles(GAAP) and International Financial Reporting Standards (IFRS). Consequently, the amendments change thewording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosinginformation about fair value measurements. For many of the requirements, the Financial Accounting StandardsBoard (FASB) does not intend for the amendments in this Update to result in a change in the application of therequirements in Topic 820. Some of the amendments clarify the FASB’s intent about the application of existingfair value measurement requirements. Other amendments change a particular principle or requirement formeasuring fair value or for disclosing information about fair value measurements. The amendments in thisUpdate are to be applied prospectively. For public entities, the amendments are effective during interim andannual periods beginning after December 15, 2011. Early application by public entities is not permitted. Theadoption of Accounting Standards Update No. 2011-04 is not expected to have an impact on the Company’sresults of operations or financial position.3. AcquisitionsOur acquisitions have been accounted for using the acquisition method of accounting under ASC 805,Business Combinations.Worldwide Information Network Systems, Inc.—On November 15, 2011, we completed the acquisition ofWorldwide Information Network Systems, Inc. (WINS). The results of WINS’ operations have been included inour consolidated financial statements since that date. The acquisition was completed through a stock purchaseagreement (WINS Purchase Agreement) dated October 26, 2011, by and among a subsidiary of ManTechInternational Corporation, WINS and its shareholder.WINS is a provider of information technology solutions with network engineering and cyber securitytechnical expertise to the Department of Defense, Department of State and other agencies. WINS’ largestcustomer is the Defense Intelligence Agency (DIA) through its prime position on the Solutions for theInformation Technology Enterprise (SITE) Indefinite Delivery/Indefinite Quantity contract vehicle. AtNovember 15, 2011, WINS had 199 employees of which 96% held security clearances.This acquisition, consistent with our long-term strategy, will allow us to broaden our footprint in thehigh-end defense and intelligence market. The addition of WINS’ IT capabilities, prime position on the DIASITE and other contracts will enhance our positioning with important customers and further our growthprospects.ManTech funded the acquisition with cash on hand. The preliminary purchase price was $90.0 million,which may increase or decrease depending on the completion of the working capital adjustment. The WINSPurchase Agreement did not contain provisions for contingent consideration. Pursuant to the WINS PurchaseAgreement, $9.0 million was placed into an escrow account to satisfy potential indemnification liabilities ofWINS. The escrow period will expire 18 months after the purchase closing date. At December 31, 2011, thebalance in the escrow account was $9.0 million.58NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)Revenues were $8.5 million and net income was $0.7 million for the period from November 15, 2011 toDecember 31, 2011. The Company incurred in 2011 approximately $0.6 million of acquisition costs related to theWINS transaction, which are included in general and administrative expense in the Company’s condensedconsolidated statement of income for the year ended December 31, 2011.The preliminary purchase price of $90.0 million was allocated to the underlying assets and liabilities basedon their fair values at the date of acquisition. The following information represents the preliminary purchaseprice allocation, as we are still in the process of reviewing the working capital accounts at the date of acquisitionfor potential adjustments to the purchase price and the determination of the fair value of the assets acquired andliabilities assumed. Total assets were $100.4 million, including goodwill and intangible assets recognized inconnection with the acquisition, and total liabilities were $10.4 million. Included in total assets were $18.7million in acquired intangible assets. We recorded goodwill of $62.2 million, which will be deductible for taxpurposes over 15 years, assuming adequate levels of taxable income. Recognition of goodwill is largelyattributed to the highly skilled employees and the value paid for companies supporting high-end defense,intelligence and homeland security markets.In allocating the preliminary purchase price, we consider among other factors, analyses of historicalfinancial performance and estimates of future performance of WINS’ contracts. The components of otherintangible assets associated with the acquisition were customer relationships and backlog valued at $18.0 millionand $0.7 million, respectively. Customer contracts and related relationships represent the underlyingrelationships and agreements with WINS’ existing customers. Customer relationships and backlog are amortizedover their estimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits method. Theweighted-average amortization period for the intangible assets is 19.3 years.TranTech, Inc.—On February 11, 2011, we completed the acquisition of TranTech, Inc. (TranTech). Theresults of TranTech’s operations have been included in our consolidated financial statements since that date. Theacquisition was completed through a stock purchase agreement dated February 11, 2011, by and among ManTechInternational Corporation, TranTech and its sole shareholder.TranTech provides information technology, networking and cyber security services to the federalgovernment. At February 11, 2011, TranTech had 57 employees.This acquisition allows us to continue extending our presence in the defense, security and intelligencecommunities, and to offer comprehensive solutions through a prime position on the Defense Information SystemsAgency ENCORE II contract.Revenues were $12.5 million and net income was $0.9 million for the period from February 11, 2011 toDecember 31, 2011. The Company incurred in fiscal year 2011 approximately $0.3 million of acquisition costsrelated to the TranTech acquisition, which are included in general and administrative expense in the Company’scondensed consolidated statement of income for the year ended December 31, 2011.ManTech funded the acquisition with cash on hand. The purchase price of $21.5 million was allocated to theunderlying assets and liabilities based on their fair values at the date of acquisition. Total assets were $23.8million, including goodwill and intangible assets recognized in connection with the acquisition, and totalliabilities were $2.3 million. Included in total assets were $5.0 million in acquired intangible assets. We recordedgoodwill of $14.6 million, which will be deductible for tax purposes over 15 years, assuming adequate levels oftaxable income.In allocating the purchase price, we consider among other factors, analyses of historical financialperformance and estimates of future performance of TranTech’s contracts. The components of other intangible59NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)assets associated with the acquisition were customer relationships and backlog valued at $4.6 million and $0.4million, respectively. Customer contracts and related relationships represent the underlying relationships andagreements with TranTech’s existing customers. Customer relationships and backlog are amortized over theirestimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits method. The weighted-average amortization period for the intangible assets is 18.5 years.MTCSC, Inc.—On December 23, 2010, we completed the acquisition of MTCSC, Inc. (MTCSC). Theresults of MTCSC’s operations have been included in our consolidated financial statements since that date. Theacquisition was consummated pursuant to a stock purchase agreement (MTCSC Purchase Agreement) datedNovember 19, 2010, by and among ManTech International Corporation and MTCSC, Inc and its shareholders.MTCSC provides C4ISR systems, integration, cyber security and network engineering solutions to U.S.government customers. At December 23, 2010, MTCSC had 366 employees of which approximately 90% heldsecurity clearances.The acquisition allows us to expand our work and direct support to the United States Marine Corp.ManTech funded the acquisition with cash on hand. The purchase price was $76.7 million in cash. TheMTCSC Purchase Agreement did not contain provisions for contingent consideration. Pursuant to the MTCSCPurchase Agreement, $11.3 million was placed into an escrow account to satisfy potential indemnificationliabilities of MTCSC. The escrow period will expire 18 months after the purchase closing date. AtDecember 31, 2011, the balance in the escrow account was $11.3 million.The Company incurred in fiscal years 2011 and 2010 approximately less than $0.1 million and $0.7 million,respectively, of acquisition costs related to the MTCSC acquisition. These costs are included in general andadministrative expense in the Company’s condensed consolidated statement of income for the years endedDecember 31, 2011 and 2010.The purchase price was allocated to the underlying assets and liabilities based on their fair values at the dateof acquisition. Total assets were $94.8 million, including goodwill and intangible assets recognized in connectionwith the acquisition, and total liabilities were $18.0 million. Included in total assets were $8.7 million in acquiredintangible assets. We have recorded goodwill of $60.1 million, which will not be deductible for tax purposes.Recognition of goodwill is largely attributed to the highly skilled employees and the value paid for companiessupporting high-end defense, intelligence and homeland security markets.In allocating the purchase price, we considered among other factors, analysis of historical financialperformance and estimates of future performance of MTCSC’s contracts. The components of other intangibleassets associated with the acquisition were customer relationships and backlog valued at $8.1 million and $0.6million, respectively. Customer contracts and related relationships represent the underlying relationships andagreements with MTCSC’s existing customers. Customer relationships and backlog are amortized over theirestimated useful lives of 20 years and 1 year, respectively, using the pattern of benefits method. The weighted-average amortization period for the intangible assets is 18.7 years.QinetiQ North America’s Security and Intelligence Solutions Business—On October 8, 2010, wecompleted the acquisition of certain assets of QinetiQ North America, Inc. (QNA) Security and IntelligenceSolutions (S&IS) business unit. The acquisition was completed through an asset purchase agreement (S&ISPurchase Agreement) dated September 29, 2010, by and among a subsidiary of ManTech InternationalCorporation; QNA, Inc.; and certain subsidiaries of QNA.60NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)S&IS provides integrated security solutions to the Department of Defense and the intelligence community.At October 8, 2010, S&IS had 370 employees of which approximately 93% held security clearances. Themajority of these employees were hired by ManTech as part of the acquisition.The acquisition is consistent with ManTech’s long-term strategy to extend our presence in the defense andintelligence market, allowing us to offer comprehensive solutions for the full range of security threats fromphysical through cyber.ManTech funded the acquisition with cash on hand. The purchase price was $60.0 million. The S&ISPurchase Agreement did not contain provisions for contingent consideration. Pursuant to the S&IS PurchaseAgreement, $1.0 million was placed into an escrow account to satisfy potential indemnification liabilities ofQNA. The escrow claim period expired 6 months after the purchase closing date. At December 31, 2011, thebalance in the escrow account was $0.4 million that continued to be held in the escrow account by mutualconsent of the parties pending resolution of potential indemnification claim.In fiscal years 2011 and 2010, the Company incurred approximately $0.1 million and $0.7 million,respectively, of acquisition-related expenses. These expenses were included in general and administrativeexpense in the Company’s condensed consolidated statement of income for the years ended December 31, 2011and 2010.The purchase price was allocated to the underlying assets and liabilities based on their fair values at the dateof acquisition. Total assets were $62.0 million, including goodwill and intangible assets recognized in connectionwith the acquisition, and total liabilities were $2.0 million. Included in total assets were $13.0 million in acquiredintangible assets. We have recorded goodwill of $40.3 million, which will be deductible for tax purposes over 15years, assuming adequate levels of taxable income. Recognition of goodwill is largely attributed to the highlyskilled employees and the value paid for companies supporting high-end defense, intelligence and homelandsecurity markets.In allocating the purchase price, we consider among other factors, analysis of historical financialperformance and estimates of future performance of S&IS’s contracts. The components of other intangible assetsassociated with the acquisition were customer relationships and backlog valued at $11.5 million and $1.5 million,respectively. Customer contracts and related relationships represent the underlying relationships and agreementswith S&IS’s existing customers. Customer relationships and backlog are amortized over their estimated usefullives of 20 years and 1 year, respectively, using the pattern of benefits method. The weighted-averageamortization period for the intangible assets is 17.9 years.Sensor Technologies Inc.—On January 15, 2010, we completed the acquisition of all outstanding equityinterests of Sensor Technologies Inc. (STI), a privately-held company. The results of STI’s operations have beenincluded in our consolidated financial statements since that date. The acquisition was consummated pursuant to astock purchase agreement (STI Purchase Agreement), dated December 18, 2009, by and among ManTech, STI,certain shareholders of STI and certain persons acting as a representative for the shareholders of STI.STI provides mission-critical systems engineering and C4ISR services and solutions to the Department ofDefense. STI’s largest customer was the U.S. Army through its prime position on the S3 Indefinite Delivery/Indefinite Quantity contract. At January 15, 2010, STI had 252 employees of which nearly 100% held securityclearances.The acquisition of STI is consistent with our long-term strategy to broaden our footprint in the high-enddefense and intelligence market, allowing us to expand our work with the Department of Defense and our directsupport of the U.S. Army as it continues its overseas operations.61NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)ManTech funded the acquisition through a combination of cash on hand and borrowings under our revolvingcredit facility. The purchase price was $241.4 million, which included a favorable $0.6 million working capitaladjustment. The STI Purchase Agreement did not contain provisions for contingent consideration.In fiscal years 2011 and 2010, the Company incurred $0 and $0.2 million of acquisition costs related to STI,respectively. These expenses are included in general and administrative expense in the Company’s statements ofincome for the related periods.The purchase price was allocated to underlying assets and liabilities based on their estimated fair values atthe date of acquisition. The purchase price allocation included goodwill and other intangible assets. Recognitionof goodwill was largely attributed to the highly skilled employees of STI, their presence in the high-end defenseand intelligence market place and the value paid for companies in this business. Assuming adequate levels oftaxable income, the goodwill is deductible for tax purposes over 15 years. The following table represents thepurchase price allocation (in thousands):Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,310Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,870Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,033Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,289Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,772Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69,185)Accrued salaries and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,087)Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62)Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $241,362Pursuant to the STI Purchase Agreement, the seller has agreed to indemnify the buyer for tax liabilitiesarising in connection with the operation of STI’s business on or before January 15, 2010 or owing by any personfor which STI may be liable as a result of the transactions or circumstances occurring or existing on or beforeJanuary 15, 2010. As of January 15, 2010, STI’s tax liabilities were estimated to be approximately $0.8 million,resulting in related indemnification assets of $0.8 million. We collected $0.8 million from the escrow account forthese indemnification assets.In allocating the purchase price, we considered among other factors, analysis of historical financialperformance and estimates of future performance of STI’s contracts. The components of other intangible assetsassociated with the acquisition were backlog, customer relationships and non-compete agreements valued at $7.8million, $85.2 million and $0.3 million, respectively. Customer contracts and related relationships represent theunderlying relationships and agreements with STI’s existing customers. Non-compete agreements represent theestimated value of the seller not competing with the Company for 4 years. Backlog, customer relationships andnon-compete agreements are amortized over their estimated useful lives of 1 year, 20 years and 4 years,respectively, using the pattern of benefits method. The weighted-average amortization period for the intangibleassets is 18.4 years.Pro Forma Financial Information—The following unaudited pro forma summary presents consolidatedinformation of the Company as if the WINS, TranTech, MTCSC, S&IS and STI acquisitions had occurred onJanuary 1, 2010. The pro forma financial information is presented for informational purposes only and is notindicative of the results of operations that would have been achieved if the acquisitions and related borrowings62NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)had occurred on January 1, 2010. The amounts have been calculated after applying the Company’s accountingpolicies and adjusting the results of WINS, TranTech, MTCSC, S&IS and STI to reflect the additionalamortization expense resulting from recognizing intangible assets, the interest expense effect of the financingnecessary to complete the acquisitions and the consequential tax effects (in thousands):Year EndedDecember 31,2011 2010Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,933,759 $2,810,682Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135,990 $ 131,170DDK Technologies Group—On March 13, 2009, we completed the acquisition of all outstanding equityinterests of DDK Technologies Group (DDK). The results of DDK’s operations have been included in ourconsolidated financial statements since that date. The acquisition was consummated pursuant to a stock purchaseagreement (DDK Purchase Agreement), dated March 13, 2009, by and among ManTech, DDK and theshareholders of DDK. DDK was a privately held company, providing information technology and cyber securityfor several Department of Defense agencies.The purchase price was $14.0 million. The DDK Purchase Agreement does not contain provisions forcontingent consideration. We primarily utilized borrowings under our credit agreement to finance the acquisition.The purchase price was allocated to the underlying assets and liabilities based on their fair values at the dateof acquisition. Total assets were $14.5 million, including goodwill and intangible assets recognized in connectionwith the acquisition, and total liabilities were $0.5 million. Included in total assets were $4.2 million in acquiredintangible assets. We have recorded goodwill of $8.9 million, which will be deductible for tax purposes over 15years, assuming adequate levels of taxable income. Recognition of goodwill is largely attributed to the highlyskilled employees and the value paid for companies supporting high-end defense, intelligence and homelandsecurity markets.The components of intangible assets associated with the acquisition were backlog valued at $0.3 million andcustomer relationships valued at $3.9 million. Customer contracts and related relationships represent theunderlying relationships and agreements with DDK’s existing customers. Backlog and customer relationships areamortized over their estimated useful lives of 1 year and 20 years, respectively, using the pattern of benefitsmethod. The weighted-average amortization period for the intangibles is 18.8 years.4. Earnings per ShareUnder ASC 260, Earnings per Share, the two-class method is an earnings allocation formula that determinesearnings per share for each class of common stock according to dividends declared (or accumulated) andparticipation rights in undistributed earnings. Under that method, basic and diluted earnings per share data arepresented for each class of common stock.In applying the two-class method, we determined that undistributed earnings should be allocated equally ona per share basis between Class A and Class B common stock. Under the Company’s Certificate of Incorporation,the holders of the common stock are entitled to participate ratably, on a share-for-share basis as if all shares ofcommon stock were of a single class, in such dividends, as may be declared by the Board of Directors. During2011, we declared and paid two dividends of $0.42 per share on both classes of common stock.Basic earnings per share has been computed by dividing net income available to common stockholders bythe weighted average number of shares of common stock outstanding during each period. Shares issued during63NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)the period and shares reacquired during the period are weighted for the portion of the period in which the shareswere outstanding. Diluted earnings per share has been computed in a manner consistent with that of basicearnings per share while giving effect to all potentially dilutive common shares that were outstanding during eachperiod.The weighted average number of common shares outstanding is computed as follows (in thousands):Year Ended December 31,2011 2010 2009Numerator for net income per Class A and Class B common stock:Distributed earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,872 $ — $ —Undistributed earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $102,434 $125,096 $111,764Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,306 $125,096 $111,764Numerator for basic net income Class A common stock . . . . . . . . . . . . . . . . . . . . . . . $ 85,172 $ 78,921 $ 68,837Numerator for basic net income Class B common stock . . . . . . . . . . . . . . . . . . . . . . . $ 48,134 $ 46,175 $ 42,927Numerator for diluted net income Class A common stock . . . . . . . . . . . . . . . . . . . . . . $ 85,323 $ 79,183 $ 69,192Numerator for diluted net income Class B common stock . . . . . . . . . . . . . . . . . . . . . . $ 47,983 $ 45,913 $ 42,572Basic weighted average common shares outstandingClass A common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,415 22,847 21,980Class B common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,233 13,367 13,707Effect of potential exercise of stock optionsClass A common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 207 298Class B common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Diluted weighted average common shares outstanding—Class A . . . . . . . . . . . . . . . . . 23,530 23,054 22,278Diluted weighted average common shares outstanding—Class B . . . . . . . . . . . . . . . . . 13,233 13,367 13,707For the years ended December 31, 2011, 2010 and 2009, options to purchase 2.2 million, 1.8 million and1.2 million shares, respectively, were outstanding but not included in the computation of diluted earnings per sharebecause the options’ effect would have been anti-dilutive. For the years ended December 31, 2011, 2010 and 2009,shares issued from the exercise of stock options were $0.3 million, $0.4 million and $0.4 million, respectively.5. Revenues and ReceivablesWe deliver a broad array of information technology and technical services solutions under contracts with theU.S. government, state and local governments and commercial customers. Revenues from the U.S. governmentunder prime contracts and subcontracts, as compared to total contract revenues, were approximately 99.2%,98.7% and 98.3% for the years ended December 31, 2011, 2010 and 2009, respectively. The components ofcontract receivables are as follows (in thousands):December 31,2011 2010Billed receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $422,954 $411,018Unbilled receivables:Amounts billable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,997 103,752Revenues recorded in excess of funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,982 16,508Retainage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,264 6,433Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,729) (8,946)Total receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $540,468 $528,76564NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)Amounts billable consist principally of amounts to be billed within the next month. Revenues recorded inexcess of funding are billable upon receipt of contractual amendments or other modifications. Revenues recordedin excess of milestone billings on fixed price contracts consist of amounts not expected to be billed within thenext month. The retainage is billable upon completion of the contract performance and approval of final indirectexpense rates by the government. Accounts receivable at December 31, 2011 are expected to be substantiallycollected in 2012 except for approximately $2.1 million, of which 93.6% is related to receivables from sales tothe U.S. government. The remainder is related to receivables from contracts in which we acted as a subcontractorto other contractors.The Company does not believe it has significant exposure to credit risk as accounts receivable and therelated unbilled amounts are primarily due from the U.S. government. The allowance for doubtful accountsrepresents the Company’s estimate for exposure to compliance, contractual issues and bad debts related to primecontractors.6. Property and EquipmentMajor classes of property and equipment are summarized as follows (in thousands):December 31,2011 2010Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,623 $ 39,271Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,345 21,948111,968 61,219Less: Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . (64,533) (34,133)Total property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,435 $ 27,086Depreciation and amortization expense related to property and equipment for the years endedDecember 31, 2011, 2010 and 2009 was $33.7 million, $5.0 million and $4.9 million, respectively.7. Goodwill and Other IntangiblesDuring the second quarter, we completed our annual goodwill impairment test. Based on the results of stepone of this test, no impairment losses were identified and performance of step two was not required. During2011, there was a decrease in goodwill related to the divestiture of an immaterial business. The changes in thecarrying amounts of goodwill during fiscal years 2011 and 2010 were as follows (in thousands):GoodwillBalanceNet amount at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $488,217Acquisition-STI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,772Acquisition-S&IS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,169Acquisition-MTCSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,400Net amount at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $729,558Additional consideration for the acquisition of S&IS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148Additional consideration for the acquisition of MTCSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,694Acquisition-TranTech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,601Acquisition-WINS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,242Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (788)Net amount at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $808,45565NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)Other intangible assets consisted of the following (in thousands):December 31, 2011 December 31, 2010Gross CarryingAmountAccumulatedAmortizationNet CarryingAmountGross CarryingAmountAccumulatedAmortizationNet CarryingAmountOther intangible assets:Contract andprogramintangibles . . . . . . $243,082 $75,351 $167,731 $219,382 $57,754 $161,628Capitalized software costfor sale . . . . . . . . . 3,729 3,729 — 3,729 3,729 —Capitalized software costfor internal use . . . 27,231 17,230 10,001 21,400 14,578 6,822Other . . . . . . . . . . . . 58 26 32 58 21 37Total other intangibles,net . . . . . . . . . . . . . . . . $274,100 $96,336 $177,764 $244,569 $76,082 $168,487Amortization expense relating to intangible assets for the years ended December 31, 2011, 2010 and 2009was $20.4 million, $23.3 million and $12.6 million, respectively. Amortization expense for the years endedDecember 31, 2010 and 2009 included a write down of an acquisition related intangible asset for internallydeveloped software of 0.1 million and less than 0.1 million, respectively. The write down was based on a changein the estimated net realizable value of the asset. We estimate that we will have the following amortizationexpense for the future periods indicated below (in thousands):Years ending:December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,309December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,432December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,603December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,942December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,0438. Long-term DebtLong-term debt consisted of the following (in thousands):December 31,2011 2010Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —7.25% senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,000Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000 $200,000Revolving Credit Facility—On October 12, 2011, we entered into a new credit agreement with a syndicateof lenders led by Bank of America, N.A., as administrative agent. The credit agreement provides for a $500.0million revolving credit facility, with a $25.0 million letter of credit sublimit and a $30.0 million swing line loansublimit. The credit agreement also contains an accordion feature that permits the Company to arrange with thelenders for the provision of up to $250.0 million in additional commitments. We incurred $3.9 million in debtissuance costs related to the new credit agreement, which have been deferred and amortized over the term of theagreement. The maturity date for this agreement is October 12, 2016.66NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)Borrowings under our credit agreement are collateralized by substantially all the assets of ManTech and itsMaterial Subsidiaries (as defined in the credit agreement) and bear interest at one of the following variable ratesas selected by the Company at the time of borrowing: a LIBOR based rate plus market-rate spreads (initially1.50%, then 1.25% to 2.25% based on the Company’s consolidated total leverage ratio) or the lender’s base rateplus market spreads (initially 0.50%, then 0.25% to 1.25% based on the Company’s consolidated total leverageratio). The aggregate annual weighted average interest rates were 0.00% and 0.60% for the years endedDecember 31, 2011 and 2010, respectively.The terms of the credit agreement permit prepayment and termination of the loan commitments at any time,subject to certain conditions. The credit agreement requires the Company to comply with specified financialcovenants, including the maintenance of a certain consolidated total leverage ratio, senior secured leverage ratioand fixed charge coverage ratio. The credit agreement also contains various covenants, including affirmativecovenants with respect to certain reporting requirements and maintaining certain business activities, and negativecovenants that, among other things, may limit or impose restrictions on our ability to incur liens, incur additionalindebtedness, make investments, make acquisitions and undertake certain additional actions. As of, and during,December 31, 2011 and 2010, we were in compliance with our financial covenants under the credit agreement.On October 12, 2011, in connection with the entry of the Company into the credit agreement, we terminatedthe commitments under our prior credit agreement, dated April 30, 2007.There was no outstanding balance on our revolving credit facility at December 31, 2011 and 2010. Theweighted average borrowings under the revolving portion of the facility during the years endedDecember 31, 2011 and 2010 were $0 and $38.2 million, respectively. The maximum available borrowing underthe revolving credit facility at December 31, 2011 was $498.8 million. At December 31, 2011 and 2010, we werecontingently liable under letters of credit totaling $1.2 million and $1.3 million, respectively, which reduces ouravailability to borrow under our revolving credit facility.The following table summarizes the activity under our revolving credit facility for the years endedDecember 31, 2011, 2010 and 2009:Year Ended December 31,2011 2010 2009(in thousands)Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . $— $287,700 $529,125Repayment of borrowings under revolving credit facility . . . . . . . . . . $— $287,700 $573,2257.25% Senior Unsecured Notes—Effective April 13, 2010, the Company issued $200.0 million of 7.25%senior unsecured notes in a private placement that were resold inside the United States to qualified institutionalbuyers in reliance on Rule 144A under the Securities Act of 1933, and outside the United States to non-U.S.persons in reliance on Regulation S under the Securities Act of 1933.Pursuant to the terms of a registration rights agreement entered into in connection with the issuance of the7.25% senior unsecured notes, on August 19, 2010, ManTech completed the exchange of $200.0 million inaggregate principal amount of 7.25% senior unsecured notes due 2018 that are registered under the Securities Actof 1933 for all of the then outstanding unregistered 7.25% senior unsecured notes due 2018.The 7.25% senior unsecured notes mature on April 15, 2018 with interest payable semi-annually starting onOctober 15, 2010. The 7.25% senior unsecured notes were issued at 100% of the aggregate principal amount andare effectively subordinate to the Company’s existing and future senior secured debt (to the extent of the value of67NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)the assets securing such debt), including debt outstanding under our senior revolving credit facility. The 7.25%senior unsecured notes may be redeemed, in whole or in part, at any time, at the option of the Company subjectto certain conditions specified in the indenture governing the 7.25% senior unsecured notes. The 7.25% seniorunsecured notes are guaranteed, jointly and severally, on a senior unsecured basis by each of our wholly-owneddomestic subsidiaries that also guarantees debt obligations under our senior revolving credit facility.The fair value of the 7.25% senior unsecured notes as of December 31, 2011 was approximately $204.0million based on quoted market prices.The Company incurred approximately $4.9 million in issuance costs, which are being amortized to interestexpense over the contractual life of the 7.25% senior unsecured notes using the effective interest rate method,resulting in an effective rate of 7.67%.The indenture governing the 7.25% senior unsecured notes contains customary events of default, as well asrestrictive covenants, which, subject to important exceptions and qualifications specified in such indenture, will,among other things, limit our ability and the ability of our subsidiaries that guarantee the 7.25% senior unsecurednotes to: pay dividends or distributions, repurchase equity, prepay subordinated debt or make certaininvestments; incur additional debt or issue certain disqualified stock and preferred stock; incur liens on assets;merge or consolidate with another company or sell all or substantially all assets; and allow to exist certain controlprovisions. An event of default under the indenture will allow either the trustee of the notes or the holders of atleast 25% in principal amount of the then outstanding notes to accelerate, or in certain cases, will automaticallycause the acceleration of, the amounts due under the notes. As of December 31, 2011, the Company was incompliance with all required covenants under the indenture.9. Commitments and ContingenciesContracts with the U.S. government including subcontracts are subject to extensive legal and regulatoryrequirements and, from time to time, agencies of the U.S. government, in the ordinary course of business,investigate whether the Company’s operations are conducted in accordance with these requirements and theterms of the relevant contracts. U.S. government investigations of the Company, whether related to theCompany’s U.S. government contracts or conducted for other reasons, could result in administrative, civil orcriminal liabilities, including repayments, fines or penalties being imposed upon the Company, or could lead tosuspension or debarment from future U.S. government contracting. Management believes it has adequatelyreserved for any losses that may be experienced from any investigation of which it is aware. The DefenseContract Audit Agency (DCAA) has completed our incurred cost audits through 2002 and the majority of theaudits for 2003, 2004 and 2005, with no material adjustments. The remaining audits for 2003 through 2011 arenot expected to have a material effect on our financial position, results of operations or cash flow andmanagement believes it has adequately reserved for any losses.In the normal course of business, we are involved in certain governmental and legal proceedings, claims anddisputes and have litigation pending under several suits. We believe that the ultimate resolution of these matterswill not have a material effect on our financial position, results of operations or cash flows.68NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)We lease office space and equipment under long-term operating leases. A number of the leases containrenewal options and escalation clauses. At December 31, 2011, aggregate future minimum rental commitmentsunder these leases are as follows (in thousands):Office Space Equipment TotalYear ending:December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,584 $ 961 $ 30,545December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,813 767 28,580December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,415 28 23,443December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,404 9 21,413December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,661 — 19,661Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,072 — 110,072Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $231,949 $1,765 $233,714Office space and equipment rent expense totaled approximately $55.2 million, $47.9 million and $51.4million for the years ended December 31, 2011, 2010 and 2009, respectively.We had $7.1 million and $6.9 million of deferred rent liabilities resulting from recording rent expense on astraight-line basis over the life of the respective lease for the years ended December 31, 2011 and 2010,respectively.10. Stockholders’ Equity and Stock OptionsCommon Stock—We have 150,000,000 shares of authorized Class A common stock, par value $0.01 pershare. We have 50,000,000 shares of authorized Class B common stock, par value $0.01 per share. OnDecember 31, 2011, there were 23,638,218 shares of Class A common stock outstanding, 244,113 shares ofClass A common stock recorded as treasury stock and 13,192,845 shares of Class B common stock outstanding.Holders of Class A common stock are entitled to one vote for each share held of record and holders of ClassB common stock are entitled to ten votes for each share held of record, except with respect to any “going privatetransaction” (generally, a transaction in which George J. Pedersen (our Chairman of the Board and CEO), hisaffiliates, his direct and indirect permitted transferees or a group, generally including Mr. Pedersen, suchaffiliates and permitted transferees, seek to buy all outstanding shares), as to which each share of Class Acommon stock and Class B common stock are entitled to one vote per share. The Class A common stock and theClass 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 cumulativevoting rights in the election of directors.Stockholders are entitled to receive, when and if declared by the Board of Directors from time-to-time, suchdividends and other distributions in cash, stock or property from our assets or funds legally and contractuallyavailable for such purposes subject to any dividend preferences that may be attributable to preferred stock thatmay be authorized. Each share of Class A common stock and Class B common stock is equal in respect ofdividends and other distributions in cash, stock or property, except that in the case of stock dividends, only sharesof Class A common stock will be distributed with respect to the Class A common stock and only shares of ClassB common stock will be distributed with respect to Class B common stock. In no event will either Class Acommon stock or Class B common stock be split, divided or combined unless the other class is proportionatelysplit, divided or combined.69NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)The shares of Class A common stock are not convertible into any other series or class of securities. Eachshare of Class B common stock, however, is freely convertible into one share of Class A common stock at theoption of the Class B stockholder. Upon the death or permanent mental incapacity of Mr. Pedersen, alloutstanding 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, $0.01par 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 adverselyaffected by, the rights of holders of any shares of preferred stock that we may designate and issue in the future.At December 31, 2011 and 2010, no shares of preferred stock were outstanding and the Board of Directorscurrently has no plans to issue a series of preferred stock.Accounting for Stock-Based Compensation:In May 2011, the Company’s stockholders approved our 2011 Management Incentive Plan (the Plan), whichwas designed to attract, retain and motivate key employees. Awards granted under the Plan are settled in sharesof Class A common stock. The 2011 restatement of the Plan increased the base number of shares of our Class Acommon stock reserved for issuance by 1,500,000 shares. At the beginning of each year, the Plan provides thatthe number of shares available for issuance automatically increases by an amount equal to one and one-halfpercent of the total number of shares of Class A and Class B common stock outstanding on December 31st of theprevious year. On January 3, 2012, 552,466 additional shares were made available for issuance under the Plan.Through December 31, 2011, the remaining aggregate number of shares of our common stock authorized forissuance under the Plan was 3,093,371. Through December 31, 2011, 4,399,273 shares of our Class A commonstock have been issued as a result of the exercise of the options granted under the Plan. The Plan expires in May2021.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 administerand interpret the Plan, including the discretion to determine the exercise price, vesting schedule, contractual lifeand the number of shares to be issued.Stock Compensation Expense—For the years ended December 31, 2011, 2010 and 2009, we recorded $9.2million, $7.4 million and $8.3 million of stock-based compensation cost, respectively. No compensation expensefor employees with stock options, including stock-based compensation expense, was capitalized during theperiods. For the years ended December 31, 2011, 2010 and 2009, the total recognized tax (deficiency) benefitsfrom the exercise of stock options were $(0.2) million, $(0.4) million and $1.1 million, respectively.Stock Options—We typically issue options that vest in three equal installments, beginning on the firstanniversary of the date of grant. Under the terms of the Plan, the contractual life of the option grants may notexceed eight years. During the years ended December 31, 2011 and 2010, we issued options that expire five yearsfrom the date of grant.Fair Value Determination—We have used the Black-Scholes-Merton option pricing model to determinefair value of our awards on date of grant. We will reconsider the use of the Black-Scholes-Merton model ifadditional information becomes available in the future that indicates another model would be more appropriate orif grants issued in future periods have characteristics that cannot be reasonably estimated under this model.70NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)The following weighted—average assumptions were used for option grants during the years endedDecember 31, 2011, 2010 and 2009:Volatility—The expected volatility of the options granted was estimated based upon historical volatility ofthe Company’s share price through weekly observations of the Company’s trading history.Expected Term—The expected term of options granted to employees during fiscal years 2011, 2010 and2009 was determined from historical exercises of the grantee population. Due to a lack of historical exercise data,the expected term for option grants to our Board of Directors during 2009 was determined under the SEC’s StaffAccounting Bulletin No. 110 ((vesting term + original contractual term)/2). There were no grants to our Board ofDirectors in fiscal years 2011 and 2010. For all grants valued during fiscal years 2011, 2010 and 2009, theoptions have graded vesting over 3 years (33.3% of the options in each grant vest annually) and a contractualterm of 5 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 theequivalent risk-free rate to be used in the Black-Scholes-Merton model based on expected term of the underlyinggrants.Dividend Yield—The Black-Scholes-Merton valuation model requires an expected dividend yield as aninput. During fiscal year 2011, we initiated a cash dividend program. For option grants made subsequent to May2011, we used an expected yield of 2% based on expected semi-annual cash dividend of $0.42 per share.The following table summarizes weighted-average assumptions used in our calculations of fair value for theyears ended December 31, 2011, 2010 and 2009:Year Ended December 31,2011 2010 2009Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.08% 39.02% 40.13%Expected life of options (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.98 2.95 2.92Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.81% 1.25% 1.48%Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.70% —% —%Stock Option Activity—During the year ended December 31, 2011, we granted stock options to purchase986,000 shares of class A common stock at a weighted-average exercise price of $38.56 per share, which reflectsthe fair market value of the shares on the date of grant. The weighted-average fair value of options granted duringthe years ended December 31, 2011, 2010 and 2009 as determined under the Black-Scholes-Merton valuationmodel, was $9.14, $12.87 and $13.58, respectively. These options vest in three equal installments over three yearsand have a contractual term of five years. Option grants that vested during the years ended December 31, 2011,2010 and 2009 had a combined fair value of $7.8 million, $7.7 million and $6.9 million, respectively.71NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)The following table includes information with respect to stock option activity and stock options outstandingfor the years ended December 31, 2011, 2010 and 2009, was as follows:Number ofSharesWeightedAverageExercisePriceAggregateIntrinsic Value(in thousands)Shares under option, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,961,149 $35.75Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,359,500 $47.65Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (394,949) $31.81 $ 6,529Options cancelled and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (207,517) $42.34Shares under option, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,718,183 $41.85 $17,643Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,500 $46.50Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (391,176) $35.30 $ 4,224Options cancelled and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (798,250) $49.42Shares under option, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,473,257 $42.22 $ 7,731Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986,000 $38.56Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (271,165) $27.94 $ 3,087Options cancelled and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (301,982) $45.07Shares under option, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,886,110 $41.14 $ 1,096The following table summarizes non-vested stock options for the year ended December 31, 2011:Number ofSharesWeightedAverageFair ValueNon-vested stock options at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . 1,459,008 $12.77Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986,000 $ 9.14Vested during period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (609,419) $12.75Options cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (216,334) $12.32Non-vested shares under option, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . 1,619,255 $10.47The following table includes information concerning stock options exercisable and stock options expected tovest at December 31, 2011:OptionsExercisableWeightedAverageRemainingContractualLife (years)WeightedAverageExercisePriceAggregateIntrinsicValue(in thousands)Stock options exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,266,855 2.1 $41.49 $1,096Stock options expected to vest . . . . . . . . . . . . . . . . . . . . . . . . . . 1,444,696 3.8 $41.78 $ —Options exercisable and expected to vest . . . . . . . . . . . . . . . . . 2,711,551Unrecognized compensation expense related to outstanding stock options expected to vest as ofDecember 31, 2011 was $10.7 million. The expense is expected to be recognized over a weighted-average periodof 1.8 years and will be adjusted for any future changes in estimated forfeitures.Restricted Stock—Under the Plan, we have issued restricted stock. A restricted stock award is an issuanceof shares that cannot be sold or transferred by the recipient until the vesting period lapses. Restricted shares72NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)issued to employees vest over three years in one-third increments on the first, second and third anniversaries ofthe grant date, contingent upon employment with the Company on the vesting dates. Restricted shares issued toour Board of Directors vest in one year. The related compensation expense is recognized over the service periodand is based on the grant date fair value of the stock and the number of shares expected to vest.Restricted Stock Activity—The following table summarizes the restricted stock activity during the yearsended December 31, 2010 and 2011:Number ofSharesGrant DateFair Value(in thousands)Non-vested, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 $2,447Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,000) $1,196Non-vested, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000 $1,070Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,333) $ 862Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Non-vested, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,66711. Retirement PlansAs of December 31, 2011, we maintained one qualified defined contribution plan in addition to anEmployee Stock Ownership Plan (ESOP). Our qualified defined contribution plan covers substantially allemployees and complies with Section 401 of the Internal Revenue Code. Under this plan, we stipulated a basicmatching contribution that matches a portion of the participants’ contribution based upon a defined schedule.Additionally, this plan contains a discretionary contribution component where the Company may contributeadditional amounts based on a percentage of eligible employees’ compensation. Contributions are invested by anindependent investment company in one or more of several investment alternatives. The choice of investmentalternatives is at the election of each participating employee. Our contributions to the plan were approximately$23.8 million, $22.9 million and $22.0 million for the years ended December 31, 2011, 2010 and 2009,respectively.On December 18, 1998, the Board of Directors approved the establishment of a qualified ESOP, effectiveJanuary 1, 1999, for the benefit of substantially all of our U.S. domestic-based employees. The ESOP isnon-leveraged and is funded entirely through Company contributions based on a percentage of eligible employeecompensation, as defined in the plan. Participants must be employees of the Company or eligible Companysubsidiaries and must meet minimum service requirements to be eligible for annual contributions. The ESOPspecifies a five-year vesting schedule over which participants become vested in the Class A common stockallocated to their participant account. The amount of our annual contribution to the ESOP is at the discretion ofour Board of Directors.For the years ended December 31, 2011, 2010 and 2009, we recorded $3.6 million, $3.4 million and $3.0million, respectively, as compensation expense related to ESOP contributions. Shares contributed to the ESOPfor the years ended December 31, 2011, 2010 and 2009, were 116,087; 81,730; and 84,991, respectively, ofClass A common stock. There were no unearned ESOP shares at December 31, 2011 and 2010.73NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)As required under ASC 714-40, Employee Stock Ownership Plans, compensation expense is recorded forshares committed to be released to employees based on the fair market value of those shares in the period in whichthey are committed to be released. For the years ended December 31, 2011, 2010 and 2009, new shares were issuedto satisfy this obligation.We also maintain an Employee Supplemental Savings Plan (ESSP), a non-qualified deferred compensationplan, for certain key employees. Under this plan, eligible employees may defer up to 75% of qualified annual basecompensation and 100% of bonus. In the ESSP, participant deferral accounts are credited with a rate of return basedon investment elections as selected by the participant. The assets related to the ESSP are held in a rabbi trust ownedby the Company for benefit of the participating employees. The trust investments are in the form of variable universallife insurance products, which are owned by the Company. These investments seek to replicate the return of theparticipant investment elections. Participant contributions to this plan were approximately $4.5 million, $4.2 millionand $4.3 million for the years ended December 31, 2011, 2010 and 2009, respectively.We maintain nonqualified supplemental defined benefit pension plan for certain retired employees of anacquired company. 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 bothDecember 31, 2011 and 2010, 100% of the rabbi trust assets were invested in a money market account with acommercial bank. All covered employees retired prior to 1998. Our benefit obligation at December 31, 2011 and2010 was $1.5 million and $1.5 million, respectively.12. Income TaxesThe domestic and foreign components of income before provision for income taxes were as follows (inthousands):Year Ended December 31,2011 2010 2009Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $215,437 $202,522 $178,610Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 (71) (102)$215,502 $202,451 $178,508The provision for income taxes was comprised of the following components (in thousands):Year Ended December 31,2011 2010 2009Current provision (benefit):Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,505 $63,195 $57,773State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,601 9,108 7,668Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 348 31386,399 72,651 65,754Deferred provision (benefit):Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,209) 3,894 723State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97) 983 (996)(3,306) 4,877 (273)Non-current provision (benefit) resulting from allocating tax benefits directly toadditional paid in capital and changes in liabilities:Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (787) (474) 1,067State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (116 ) 274 288Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 27 (92)(897) (173) 1,263Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $82,196 $77,355 $66,74474NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)For the year ended December 31, 2011, the non-current provision for income taxes includes $0.2 million foramounts arising from the exercise of stock options allocated as equity; $(0.4) million arising from thecancellation of vested stock options allocated to equity and valuation differences between grant and vesting dateson restricted stock allocated to equity; and $(0.7) million related to liabilities for uncertain tax positions(including $(0.2) million for use of a state net operating loss). For the year ended December 31, 2010, thenon-current provision for income taxes includes $0.1 million for amounts arising from the exercise of stockoptions allocated as equity; $(0.5) million arising from the cancellation of vested stock options allocated toequity; and $0.2 million related to liabilities for uncertain tax positions. For 2009, the non-current provision forincome taxes includes $1.1 million from amounts arising from the exercise of stock options allocated as equity,and $0.2 million related to liabilities for uncertain tax positions.The provision for income taxes varies from the amount of income tax determined by applying the applicableU.S. statutory tax rate to pre-tax income and the following:Year Ended December 31,2011 2010 2009Statutory U.S. Federal tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%Increase (decrease) in rate resulting from:State taxes—net of Federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1% 3.3% 3.1%Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —% (0.1)% (0.7)%Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.1% 38.2% 37.4%The Company paid income taxes, net of refunds, of $92.9 million, $77.2 million and $68.9 million for theyears ended December 31, 2011, 2010 and 2009, respectively.Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities andtheir reported amounts in the financial statements. A summary of the tax effect of the significant components ofdeferred income taxes follows (in thousands):December 31,2011 2010Gross deferred tax liabilities:Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,560 $ 9,673Goodwill and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,979 59,708Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,324Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,539 71,705Gross deferred tax assets:Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,753) —Capital and state operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . (86) (138 )Retirement and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,823) (26,220)Allowance for potential contract losses and other contract reserves . . . . . (3,728 ) (3,316 )Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,390) (29,674)Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,149 $ 42,031The net deferred tax liabilities were increased by adjustments to the purchase accounting on the acquisitionof MTCSC, acquired on December 23, 2010, and WINS, acquired on November 15, 2011, by $1.3 million in theyear ended December 31, 2011.75NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)The tax benefits associated with nonqualified stock options and disqualifying dispositions of incentive stockoptions reduced the current taxes payable by $0.2 million in the year ended December 31, 2011 and $0.1 millionin year ended December 31, 2010. Such benefits were recorded as an increase to additional paid-in capital.At December 31, 2011, we had state net operating losses of approximately $0.1 million that expirebeginning 2014 through 2030.A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized taxbenefits is as follows (in thousands):December 31,2011 2010 2009Gross unrecognized tax benefits at beginning of year . . . . . . . . . . . . . . . $2,519 $1,680 $1,516Increases in tax positions related to prior years . . . . . . . . . . . . . . . . . . . . 87 508 —Decreases in tax positions for prior years . . . . . . . . . . . . . . . . . . . . . . . . (71) (26) (8)Increases in tax positions for current year . . . . . . . . . . . . . . . . . . . . . . . . 269 481 343Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (508) — —Lapse in statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (961) (124) (171)Acquisitions—increase in tax position for prior years . . . . . . . . . . . . . . . 105 — —Gross unrecognized tax benefits at end of year . . . . . . . . . . . . . . . . . . . . $1,440 $2,519 $1,680The total liability for gross unrecognized tax benefits as of December 31, 2011, 2010 and 2009 was $1.4million, $2.5 million and $1.7 million, respectively. That amount includes $1.1 million, $2.1 million and $1.4million, respectively, of unrecognized net tax benefits which, if ultimately recognized, would reduce theCompany’s annual effective tax rate in a future period.The Company is subject to income taxes in the U.S., various state and foreign jurisdictions. Tax statutes andregulations within each jurisdiction are subject to interpretation and require significant judgment to apply. TheCompany is no longer subject to U.S., state or non-U.S. income tax examinations by tax authorities for the yearsbefore 2007. A German audit, relating to pre-2007 years, was settled in 2009. The Company believes it isreasonably possible that $0.2 million of gross unrecognized tax benefits will be settled within the next year dueto expirations of statute of limitations.The Company recognizes interest accrued, related to net unrecognized tax benefits, in interest expense; andpenalties, in general and administrative expenses; for all periods presented. At December 31, 2011, 2010 and2009, accrued interest and penalties relating to net unrecognized tax benefits were $0.2 million, $0.4 million and$0.3 million, respectively.13. Business Segment and Geographic Area InformationWe have one reportable segment. We deliver information technology and technical services solutions undercontracts with the U.S. government, state and local governments and commercial customers. Our federalgovernment customers typically exercise independent contracting authority, and even offices or divisions withinan agency or department may directly, or through a prime contractor, use our services as a separate customer solong as that customer has independent decision-making and contracting authority within its organization.Revenues from the U.S. government under prime contracts and subcontracts were approximately 99.2%, 98.7%and 98.3% for the years ended December 31, 2011, 2010 and 2009, respectively. There were no sales to anycustomers within a single country (except for the United States) where the sales accounted for 10% or more of76NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)total revenues. We treat sales to U.S. government customers as sales within the United States regardless of wherethe services are performed. Substantially all assets of continuing operations were held in the United States for theyears ended December 31, 2011, 2010 and 2009. Revenues by geographic customer and the related percentagesof total revenues for the years ended December 31, 2011, 2010 and 2009, were as follows (dollars in thousands):Year Ended December 31,2011 2010 2009United States . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,861,038 99.7%$2,583,600 99.2%$1,999,308 99.0%International . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,944 0.3% 20,438 0.8% 21,026 1.0%Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,869,982 100.0%$2,604,038 100.0%$2,020,334 100.0%The following table includes contracts that exceeded 10% of our revenues for the years endedDecember 31, 2011, 2010 and 2009 (dollars in thousands):Year Ended December 31,2011 2010 2009Revenues:U.S. Army contract A . . . . . . . . . . . . . . . . . $ 487,615 17.0%$ 318,615 12.2%$ 407,656 20.2%All other contracts . . . . . . . . . . . . . . . . . . . 2,382,367 83.0% 2,285,423 87.8% 1,612,678 79.8%Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,869,982 100.0%$2,604,038 100.0%$2,020,334 100.0%The following table includes contracts that exceeded 10% of our operating income for the years endedDecember 31, 2011, 2010 and 2009 (dollars in thousands):Year Ended December 31,2011 2010 2009Operating income:U.S. Army contract A . . . . . . . . . . . . . . . . . . . . . $ 39,432 17.3%$ 22,748 10.6%$ 21,077 11.8%All other contracts . . . . . . . . . . . . . . . . . . . . . . . . 187,922 82.7% 192,392 89.4% 158,002 88.2%Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $227,354 100.0%$215,140 100.0%$179,079 100.0%The following table includes contracts that exceeded 10% of our receivables, net at December 31, 2011 and2010 (dollars in thousands):December 31,2011 2010Receivables, net:U.S. Army contract A . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,359 16.3% $ 25,357 4.8%U.S. Army contract B . . . . . . . . . . . . . . . . . . . . . . . . . 59,309 11.0% 6,778 1.3%All other contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,800 72.7% 496,630 93.9%Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $540,468 100.0% $528,765 100.0%Disclosure items required under ASC 280, Segment Reporting, including interest income, interest expense,depreciation and amortization expense, costs for stock-based compensation programs, certain unallowable costsas determined under Federal Acquisition Regulations and expenditures for segment assets are not applicable aswe review those items on a consolidated basis.77NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)14. Sale of InvestmentOn April 8, 2011, ManTech received approximately $3.2 million in proceeds, with an additional $0.5million held in escrow to be distributed no later than December 15, 2012, for sale of our investment of less than5% in NetWitness Corporation (NetWitness). The transaction was consummated on April 1, 2011 pursuant to anagreement and plan of merger dated March 12, 2011 by and among EMC Corporation, NetWitness and certainpersons acting as the representative for the shareholders of NetWitness. The sale of our investment resulted in apre-tax gain of approximately $3.7 million, which was recorded in other income in our consolidated statement ofincome for the year ended December 31, 2011.15. Quarterly Financial Data (Unaudited)The following tables set forth selected unaudited quarterly financial data. The quarterly financial datareflects, in the opinion of the Company, all normal and recurring adjustments necessary to present fairly theresults of operations for such periods. Results of any one or more quarters are not necessarily indicative of annualresults or continuing trends.2011March 31, June 30, September 30, December 31,(in thousands, except per share data)Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $700,864 $752,673 $734,607 $681,838Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,767 644,647 629,181 580,084General and administrative expenses . . . . . . . . . . . . . . . . . . . 45,242 48,858 46,918 47,931Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,855 59,168 58,508 53,823Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,970) (3,979) (3,857) (3,985)Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 59 107 102Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . 96 3,820 (20) (289)Income before provision for income taxes . . . . . . . . . . . . . . . 52,045 59,068 54,738 49,651Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,903 $ 36,442 $ 34,486 $ 30,475Basic net income per share—Class A common stock . . . . . . $ 0.87 $ 0.99 $ 0.94 $ 0.83Weighted average shares outstanding—Class A . . . . . . . . . . 23,206 23,357 23,513 23,578Basic net income per share—Class B common stock . . . . . . . $ 0.87 $ 0.99 $ 0.94 $ 0.83Weighted average shares outstanding—Class B . . . . . . . . . . . 13,275 13,271 13,193 13,193Diluted net income per share—Class A common stock . . . . . $ 0.87 $ 0.99 $ 0.94 $ 0.83Weighted average shares outstanding—Class A . . . . . . . . . . 23,357 23,510 23,607 23,643Diluted net income per share—Class B common stock . . . . . $ 0.87 $ 0.99 $ 0.94 $ 0.83Weighted average shares outstanding—Class B . . . . . . . . . . . 13,275 13,271 13,193 13,19378NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)2010March 31, June 30, September 30, December 31,(in thousands, except per share data)Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $587,557 $661,611 $656,954 $697,916Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499,566 562,306 555,318 591,441General and administrative expenses . . . . . . . . . . . . . . . . . . . 42,759 42,776 47,121 47,611Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,232 56,529 54,515 58,864Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (997) (3,598) (3,970) (4,002)Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 57 51 125Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . (62) (270) 64 (215)Income before provision for income taxes . . . . . . . . . . . . . . . 44,301 52,718 50,660 54,772Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,541 $ 32,167 $ 31,376 $ 34,012Basic net income per share—Class A common stock . . . . . . $ 0.76 $ 0.89 $ 0.86 $ 0.94Weighted average shares outstanding—Class A . . . . . . . . . . 22,415 22,872 23,010 23,082Basic net income per share—Class B common stock . . . . . . . $ 0.76 $ 0.89 $ 0.86 $ 0.94Weighted average shares outstanding—Class B . . . . . . . . . . . 13,605 13,317 13,276 13,275Diluted net income per share—Class A common stock . . . . . $ 0.76 $ 0.88 $ 0.86 $ 0.93Weighted average shares outstanding—Class A . . . . . . . . . . 22,727 23,126 23,171 23,251Diluted net income per share—Class B common stock . . . . . $ 0.76 $ 0.88 $ 0.86 $ 0.93Weighted average shares outstanding—Class B . . . . . . . . . . . 13,605 13,317 13,276 13,27516. Subsequent EventManagement has evaluated subsequent events after the balance sheet date through the financial statementsissuance date for appropriate accounting and disclosure.Acquisition of Evolvent Technologies, Inc.On January 6, 2012, we completed the acquisition of the equity interests of Evolvent Technologies, Inc.(Evolvent). The results of Evolvent’s operations have been included in our consolidated financial statementssince that date. The acquisition was completed through an equity purchase agreement dated January 6, 2012, byand among ManTech, shareholders and warrantholders of Evolvent and Prudent Management, LLC in itscapacity as the sellers’ representative.Evolvent provides services in clinical IT, clinical business intelligence, imaging cyber security, behavioralhealth, tele-health, software development and system integration. Its systems and processes enable betterdecision-making at the point of care and full integration of medical information across different platforms. AtJanuary 6, 2012, Evolvent had 189 employees of which 26% held security clearances.This acquisition will enable ManTech to deliver information technology solutions through Evolvent’sexisting relationships with Department of Defense Health organizations, the Veterans Administration andDepartment of Health and Human Services.79NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2011, 2010 and 2009—(Continued)ManTech funded the acquisition with cash on hand. The preliminary purchase price was $40.0 million andmay increase or decrease depending on the finalization of the post-closing working capital adjustment.During 2011, ManTech incurred approximately $0.1 million of acquisition related costs. These costs areincluded in general and administrative expense in our consolidated statement of income for the year endedDecember 31, 2011.80Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureThe Company has had no disagreements with its auditors on accounting principles, practices or financialstatement disclosure during and through the date of the financial statements included in this Report.Item 9A Controls and ProceduresWe performed an assessment as of December 31, 2011 of the effectiveness of the design and operation ofour disclosure controls and procedures and our internal control over financial reporting. This assessment wasdone under the supervision and with the participation of management, including our principal executive officerand principal financial officer. Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are formsof “Certification” of our principal executive officer (our Chairman of the Board and Chief Executive Officer) andour principal financial officer (our Chief Financial Officer). The forms of Certification are required in accordancewith Section 302 of the Sarbanes-Oxley Act of 2002. This section of the Annual Report on Form 10-K that youare currently reading is the information concerning the assessment referred to in the Section 302 certificationsand required by the rules and regulations of the SEC. You should read this information in conjunction with theSection 302 certifications for a more complete understanding of the topics presented.Disclosure Controls and Procedures and Internal Control over Financial Reporting—Management isresponsible for establishing and maintaining adequate disclosure controls and procedures and internal controlover financial reporting. Disclosure controls and procedures are designed to provide reasonable assurance thatinformation required to be disclosed in our reports filed or submitted under the Exchange Act, such as thisAnnual Report on Form 10-K, is accurately recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to providereasonable assurance that such information is accumulated and communicated to our management, including ourprincipal executive officer and our principal financial officer, as appropriate to allow timely decisions regardingrequired disclosure.Internal control over financial reporting is a process designed by, or under the supervision of our principalexecutive officer and our principal financial officer, and effected by our Board of Directors, management andother personnel, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with GAAP and includes those policiesand procedures that:• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of our assets;• provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with GAAP and that our receipts and expenditures are being madeonly in accordance with authorizations of management or our Board of Directors; and• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, useor 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 andour principal financial officer, do not expect that our disclosure controls and procedures or our internal controlover financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived andoperated, 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 ofcontrols must be considered relative to their costs. Because of the inherent limitations in all control systems, noassessment of controls can provide absolute assurance that all control issues and instances of fraud, if any, withinthe Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controlscan be circumvented by the individual acts of some persons, by collusion of two or more people, or by81management’s override of the control. The design of any system of controls also is based in part upon certainassumptions about the likelihood of future events and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions; over time, controls may become inadequatebecause 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 mayoccur and not be detected.Scope of the Assessments—The assessment by our principal executive officer and our principal financialofficer of our disclosure controls and procedures and the assessment by our management of our internal controlover financial reporting included a review of procedures and documents and discussions with other employees inour organization in order to evaluate the adequacy of our internal control system design. In the course of theevaluation, we sought to identify exposure to unprevented or undetected data errors, control problems or acts offraud 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. Ourmanagement used the criteria issued by the Committee of Sponsoring Organizations of the TreadwayCommission in Internal Control—Integrated Framework to assess the effectiveness of our internal control overfinancial reporting.We assess our disclosure controls and procedures and our internal control over financial reporting on anongoing basis so that the conclusions concerning controls effectiveness can be reported in our Quarterly Reportson Form 10-Q and Annual Reports on Form 10-K. We consider the results of these assessment activities as wemonitor our disclosure controls and procedures and our internal control over financial reporting. Our intent is toensure that disclosure controls and procedures and internal control over financial reporting will be maintainedand updated as conditions warrant. Among other matters, we sought in our assessment to determine whetherthere were any “material weaknesses” in our internal control over financial reporting, or whether we hadidentified any acts of fraud involving senior management, management or other personnel who have a significantrole in our internal control over financial reporting. This information was important both for the assessmentgenerally and because the Section 302 certifications require that our principal executive officer and our principalfinancial officer disclose that information, along with any “significant deficiencies,” to the Audit Committee ofour Board of Directors, and to our independent auditors and to report on related matters in this section of theAnnual Report on Form 10-K.Assessment of Effectiveness of Disclosure Controls and Procedures—Based upon the assessments, ourprincipal executive officer and our principal financial officer have concluded that as of December 31, 2011 ourdisclosure controls and procedures were effective at the reasonable assurance level described above.Management’s Report on Internal Control over Financial Reporting—Management is responsible forestablishing and maintaining adequate control over financial reporting. Management used the criteria issued bythe Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—IntegratedFramework to assess the effectiveness of our internal control over financial reporting. Based upon theassessments, our management has concluded that as of December 31, 2011 our internal control over financialreporting was effective. Our independent registered public accounting firm issued an attestation reportconcerning 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, 2011,there were no changes in our internal control over financial reporting that have materially affected, or arereasonably likely to materially affect, our internal control for financial reporting.Item 9B. Other InformationDuring 2011, the Company had change in control agreements in place with certain of its executiveofficers. Upon notice provided under the terms of the agreements, all such change in control agreements expiredin accordance with their terms prior to the end of 2011.82REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofManTech International CorporationFairfax, VirginiaWe have audited the internal control over financial reporting of ManTech International Corporation andsubsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. TheCompany’s management is responsible for maintaining effective internal control over financial reporting and forits assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinionon the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained in all material respects. Our auditincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a materialweakness exists, testing and evaluating the design and operating effectiveness of internal control based on theassessed risk, and performing such other procedures as we considered necessary in the circumstances. We believethat our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed by, or under the supervision of, thecompany’s principal executive and principal financial officers, or persons performing similar functions, andeffected by the company’s board of directors, management, and other personnel to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reportingincludes 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 reasonableassurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility ofcollusion or improper management override of controls, material misstatements due to error or fraud may not beprevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internalcontrol over financial reporting to future periods are subject to the risk that the controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financialreporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated financial statements and financial statement schedule as of and for the yearended December 31, 2011 of the Company and our report dated February 24, 2012 expressed an unqualifiedopinion on those financial statements and financial statement schedule./s/ DELOITTE & TOUCHE LLPMcLean, VirginiaFebruary 24, 201283PART IIIItem 10. Directors and Executive Officers of the Registrant and Corporate GovernanceThe information concerning our directors and executive officers required by Item 401 of Regulation S-K isincluded under the captions “Election of Directors” and “Executive Officers,” respectively, in our definitiveProxy Statement to be filed with the Securities and Exchange Commission (SEC) in connection with our 2012Annual Meeting of Stockholders (the “2012 Proxy Statement”), and that information is incorporated by referencein this Annual Report on Form 10-K.The information required by Item 405 of Regulation S-K concerning compliance with Section 16(a) of theExchange Act is included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our2012 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 ofconduct, satisfy the SEC’s requirements (including Item 406 of Regulation S-K) for a “code of ethics” applicableto our principal executive officer, principal financial officer, principal accounting officer, controller or personsperforming 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 includesguidelines 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) thesestandards. A copy of our Standards of Ethics and Business Conduct is available on the investor relations sectionof our website: www.mantech.com. We are required to disclose any amendment to, or waiver from, a provisionof our code of ethics that applies to our principal executive officer, principal financial officer, principalaccounting officer, controller and persons performing similar functions. We intend to use our website as amethod of disseminating this disclosure as permitted by applicable SEC rules.The information required by Item 407(c)(3) of Regulation S-K concerning the procedures by which ourstockholders may recommend nominees to our Board of Directors is included under the caption “CorporateGovernance—Director Nominations” in our 2012 Proxy Statement and that information is incorporated byreference in this Annual Report on Form 10-K.The information required by Item 407(d)(4) of Regulation S-K concerning the Audit Committee is includedunder the caption “Committees of the Board of Directors—Audit Committee” in our 2012 Proxy Statement andthat 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 auditcommittee financial expert is included under the caption “Committees of the Board of Directors—AuditCommittee” in our 2012 Proxy Statement and that information is incorporated by reference in this Annual Reporton Form 10-K.Item 11. Executive CompensationThe information required by this Item 11 is included under the captions “Non-Employee DirectorCompensation Table,” “Certain Relationships and Related Person Transactions—Compensation CommitteeInterlocks and Insider Participation,” “Compensation Committee Report” and “Compensation Discussion andAnalysis” and the related text and tables in our 2012 Proxy Statement and that information is incorporated byreference in this Annual Report on Form 10-K.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 is included under the captions “Beneficial Ownership of OurStock—Ownership by Our Directors and Executive Officers” and “Beneficial Ownership of Our Stock—Ownership by Holders of More Than 5% of Our Class A Common Stock” in our 2012 Proxy Statement, and thatinformation is incorporated by reference in this Annual Report on Form 10-K.84Securities Authorized for Issuance under Equity Compensation PlansThe following table provides information as of December 31, 2011 with respect to compensation plans(including individual compensation arrangements) under which our equity securities are authorized for issuance.Equity Compensation Plan InformationPlan CategoryNumber ofsecuritiesto be issueduponexercise ofoutstandingoptions,warrantsand rights(a)Weighted-averageexerciseprice ofoutstandingoptions,warrantsand rights(b)Number ofsecuritiesremainingavailable forfutureissuanceunder equitycompensationplans(excludingsecuritiesreflected incolumn (a))(c)Equity compensation plans approved by security holders . . . . . . . . . . . . . . 2,886,110 $41.14 3,093,371Equity compensation plans not approved by security holders . . . . . . . . . . . — — —Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,886,110 $41.14 3,093,3711) The plan contains a formula that automatically increases the number of securities available for issuance. Theplan provision provides that the number of shares available for issuance under the plan automaticallyincreases on the first trading day of January each calendar year during the term of the plan, by an amountequal to one and one-half percent (1.5%) of the total number of shares outstanding (including alloutstanding classes of common stock) on the last trading day in December of the immediately precedingcalendar year, but provides that in no event shall any such annual increase exceed one million five hundredthousand (1,500,000) shares. On January 3, 2012, 552,466 shares were added to the plan under thisprovision.Item 13. Certain Relationships and Related Transactions and Director IndependenceThe information required by this Item 13 is included under the caption “Certain Relationships and RelatedPerson Transactions” and “Corporate Governance—Director Independence” in our 2012 Proxy Statement andthat information is incorporated by reference in this Annual Report on Form 10-K.Item 14. Principal Accounting Fees and ServicesThe information required by this Item 14 is included under the captions “Ratification of Appointment ofIndependent Auditors-Fees Paid to Deloitte & Touche LLP” and “Ratification of Appointment of IndependentAuditors—Policy Regarding Audit Committee Pre-Approval of Audit and Permitted Non-audit Services” in our2012 Proxy Statement and that information is incorporated by reference in this Annual Report on Form 10-K.85PART IVItem 15. Exhibits and Financial Statement Schedule(a) The following documents are filed as a part of this Annual Report on Form 10-K:(1) All financial statements:DESCRIPTIONReport of Independent Registered Public Accounting Firm 48Consolidated Balance Sheets as of December 31, 2011 and 2010 49Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009 50Consolidated Statements of Comprehensive Income for the years ended December 31, 2011,2010 and 2009 51Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,2011, 2010 and 2009 52Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009 53Notes to Consolidated Financial Statements 54(2) Financial statement schedule:SCHEDULENO. DESCRIPTIONSchedule II Valuation and Qualifying Accounts for the years ended December 31, 2011,2010 and 2009(3) Exhibits required by Item 601 of Regulation S-K (each management contract or compensatory planor arrangement required to be filed as an exhibit to this annual report pursuant to Item 15(b) of this annualreport is identified in the Exhibit list below):Exhibit Description3.1 Second Amended and restated Certificate of Incorporation of the registrant as filed with the Secretaryof State of the State of Delaware on January 30, 2002 (incorporated herein by reference fromregistrant’s Registration Statement on Form S-1 (File No. 333-73946), as filed with the SEC onNovember 23, 2002, as amended).3.2 Second Amended and Restated Bylaws of the registrant (incorporated herein by reference fromregistrant’s Annual Report on Form 10-K for the year ended December 31, 2003, as filed with theSEC on March 15, 2004, as amended).4.1 Form of Common Stock Certificate (incorporated herein by reference from registrant’s RegistrationStatement on Form S-1 (File No. 333-73946), as filed with the SEC on November 23, 2002, asamended).4.2 Indenture governing 7.25% Senior Notes due 2018, including the form of 7.25% Senior Notes due2018, dated April 13, 2010, among ManTech International Corporation, the Guarantors namedtherein, and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein byreference from the registrant’s Current Report on Form 8-K, as filed with the SEC on April 13, 2010).10.1 Credit Agreement, October 12, 2011, by and among the registrant and a syndicate of lenders,including Bank of America, N.A., acting as administrative agent for the lenders (incorporated hereinby reference from the registrant’s Current Report on Form 8-K filed with the SEC on October 13,2011).10.2* 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).86Exhibit Description10.3* ManTech International Corporation 2011 Executive Compensation Plan, adopted on March 10, 2011in which our executive officers and certain key senior executives participate (incorporated herein byreference from registrant’s Current Report on Form 8-K, as filed with the SEC on March 5, 2011).10.4* Management Incentive Plan of ManTech International Corporation 2011 Restatement (incorporatedherein by reference from registrant’s Current Report on Form 8-K, as filed with the SEC on May 16,2011).10.5*‡ Form of Grant of Non-Qualified Stock Options granted under the Management Incentive Plan.10.6*‡ Standard Terms and Conditions for Non-Qualified Stock Options granted under the ManagementIncentive Plan.10.7*‡ Form of Grant of Restricted Stock granted under the Management Incentive Plan.10.8*‡ Standard Terms and Conditions for Restricted Stock granted under the Management Incentive Plan.12.1‡ Ratio of Earnings to Fixed Charges.21.1‡ Subsidiaries of the Registrant.23.1‡ Independent Registered Public Accounting Firm Consent.24.1 Power of Attorney (included on signature page).31.1‡ Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of1934, as amended.31.2‡ Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of1934, as amended.32‡ Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of theSecurities Exchange Act of 1934, as amended.101 The following materials from ManTech International Corporation’s Annual Report on Form 10-K forthe year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language):(i) Consolidated Balance Sheets at December 31, 2011 and 2010; (ii) Consolidated Statement ofIncome for the Years Ended December 31, 2011, 2010 and 2009; (iii) Consolidated Statements ofComprehensive Income for the Years Ended December 31, 2011, 2010 and 2009; (iv) ConsolidatedStatements of Changes in Stockholders’ Equity for the Years Ended December 31, 2011, 2010 and2009; (v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and2009; and (vi) Notes to Consolidated Financial Statements.*** Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this reportpursuant to item 15(a)(3).‡ Filed herewith** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed notfiled or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Actof 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of1934, as amended, and otherwise are not subject to liability under those sections.87SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.MANTECH INTERNATIONAL CORPORATIONBy: /s/ GEORGE J. PEDERSENName: George J. PedersenTitle: Chairman of the Board of Directorsand Chief Executive Officer(Principal Executive Officer)Date: February 24, 2012Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed belowby the following persons on behalf of the registrant and in the capacities and on the dates indicated. Eachperson whose signature appears below hereby constitutes and appoints each of George J. Pedersen and KevinM. Phillips as his attorney-in-fact and agent, with full power of substitution and resubstitution for him in anyand all capacities, to sign any or all amendments to this Report and to file same, with exhibits thereto andother documents in connection therewith, granting unto such attorney-in-fact and agent full power andauthority to do and perform each and every act and thing requisite and necessary in connection with suchmatters and hereby ratifying and confirming all that such attorney-in-fact and agent or his substitutes may door cause to be done by virtue hereof.Name and Signature Title Date/S/ GEORGE J. PEDERSENGeorge J. PedersenChairman of the Board of Directorsand Chief Executive Officer(Principal Executive Officer)February 24, 2012/S/ KEVIN M. PHILLIPSKevin M. PhillipsExecutive VP and Chief FinancialOfficer (Principal FinancialOfficer)February 24, 2012/S/ JOHN J. FITZGERALDJohn J. FitzgeraldSenior VP Finance and Controller(Principal Accounting Officer)February 24, 2012/S/ RICHARD L. ARMITAGERichard L. ArmitageDirector February 24, 2012/S/ MARY K. BUSHMary K. BushDirector February 24, 2012/S/ BARRY G. CAMPBELLBarry G. CampbellDirector February 24, 2012/S/ WALTER R. FATZINGER, JR .Walter R. Fatzinger, Jr.Director February 24, 2012/S/ DAVID E. JEREMIAHDavid E. JeremiahDirector February 24, 2012/S/ RICHARD J. KERRRichard J. KerrDirector February 24, 2012/S/ KENNETH A. MINIHANKenneth A. MinihanDirector February 24, 2012/S/ STEPHEN W. PORTERStephen W. PorterDirector February 24, 201288SCHEDULE IIValuation and Qualifying AccountsActivities in the Company’s allowance accounts for the years ended December 31, 2011, 2010 and 2009were as follows (in thousands):Doubtful AccountsBalance atBeginning ofPeriodCharged to Costsand Expenses Deductions Other*Balance at End ofPeriod2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,321 227 (902) 474 $8,1202010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,120 90 (168) 904 $8,9462011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,946 5 (5) 783 $9,729* Other represents doubtful account reserves recorded as part of net revenues for estimated customerdisallowances.89Corporation InformationCorporate HeadquartersManTech International Corporation12015 Lee Jackson HighwaySuite 800Fairfax, VA 22033-3300Main: (703) 218-6000Fax: (703) 218-8296Websitewww.mantech.comEmploymentIt is ManTech’s policy to recruit, hire, employ, train and promote persons in all job classifi cations without regard to race, color, religion, sex, age, national origin, disability or any other characteristics protected by law.Forward-Looking StatementThis summary annual report contains forward-looking statements that involve substantial risks and uncertainties, many of which are outside of our control. You can identify these forward-looking statements by the use of words such as “may,” “will,” “intends,” “should,” “expects,” “plans,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or “opportunity,” or the negative of these terms or words of similar import. You should read our forward looking statements carefully; because they discuss our future expectations, make projections of our future results of operations or fi nancial condition, or state other forward-looking information.Although forward-looking statements in this summary annual report refl ect the good faith judgment of management, such statements can only be based on facts and circumstances currently known to us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties; and actual results and outcomes may diff er materially from the results and outcomes we anticipate. Factors that could cause actual results to diff er materially from the results we anticipate include, but are not limited to the following: adverse changes in U.S. government spending priorities; failure to retain existing U.S. government contracts, win new contracts or win recompetes; adverse changes in future levels of expenditures for programs we support caused by budgetary pressures facing the federal government; risks associated with complex U.S. government procurement laws and regulations; adverse results of U.S. government audits of our government contracts; risk of contract performance, modifi cation, or termination; failure to obtain option awards, task orders, or funding under contracts; adverse changes in our mix of contract types; risks of fi nancing, such as increases in interest rates and restrictions imposed by our outstanding indebtedness, including the ability to meet fi nancial covenants and risks related to an inability to obtain new or additional fi nancing; failure to successfully integrate recently acquired companies or businesses into our operations or to realize any accretive or synergistic eff ects from such acquisitions; failure to identify, execute or eff ectively integrate future acquisitions; and competition. These and other risk factors are more fully discussed in the section entitled “Risk Factors” in ManTech’s Annual Report on Form 10-K fi led with the Securities and Exchange Commission on February 24, 2012, Item 1A of Part II of our Quarterly Reports on Form 10-Q and, from time to time, in ManTech’s other fi lings with the Securities and Exchange Commission. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this summary annual report. We undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or circumstances, changes in expectations, or otherwise. We also suggest that you carefully review and consider the various disclosures made in our Annual Report on Form 10-K and other fi lings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may aff ect our business, fi nancial condition, results of operations, and prospects. Shareholder InformationTransfer AgentStockholders may obtain information with respect to share position, transfer requirements, address changes, lost stock certifi cates and duplicate mailings by writing or telephoning: American Stock Transfer & Trust Co. 6201 15th Avenue, Brooklyn, NY 11219Attn: Shareholder Services800-937-5449 or 718-921-8124 • www.amstock.comAnnual MeetingManTech’s Annual Meeting will be held on Thursday, May 10, 2012, 11:00 am ET, at the Fair Lakes Hyatt, Fairfax, VA Class A Common StockStock symbol: MANTListed: NASDAQ National MarketIndependent AuditorsDeloitte & Touche LLP McLean, VAInvestor CommunicationsInvestors seeking the Form 10-K and additional information about the Company may call 703-218-6000, write to Investors Relations at our corporate headquarters, or send an email to investor@mantech.com. ManTech’s earnings announcements, news releases, SEC fi lings and other investor information are available in the Investors section of our Website. 9