ManTech International Corporation (depending on the circumstances, “ManTech” “Company” “we” “our” “ours” or “us”) provides mission-focused technology solutions and services for U.S. defense, intelligence community and federal civilian agencies. In business for more than 50 years, weWe excel in full-spectrum cyber, data collection & analytics, enterprise information technology (IT) and systems engineering and software engineeringapplication development solutions that support national and homeland security.

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the U.S., have been condensed or omitted pursuant to those rules and regulations. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We recommend that you read these condensed consolidated financial statements in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, previously filed with the SEC. We believe that the condensed consolidated financial statements in this Form 10-Q reflect all adjustments that are necessary to fairly present the financial position, results of operations and cash flows for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results that can be expected for the full year.

We derive revenue from contracts with customers primarily from contracts with the U.S. government in the areas of defense, intelligence, homeland security and other federal civilian agencies. Substantially all of our revenue is derived from services and solutions provided to the U.S. government or to prime contractors supporting the U.S. government, including services by our employees and our subcontractors, and solutions that include third-party hardware and software that we purchase and integrate as a part of our overall solutions. Customer requirements may vary from period-to-period depending on specific contract and customer requirements. We provide our services and solutions under three types of contracts: cost-reimbursable, fixed-price and time-and-materials. Under cost-reimbursable contracts, we are reimbursed for costs that are determined to be reasonable, allowable and allocable to the contract and paid a fee representing the profit margin negotiated between us and the contracting agency, which may be fixed or performance based. Under fixed-price contracts, we perform specific tasks for a fixed price. Fixed-price contracts may include either a product delivery or specific service performance over a defined period. Under time-and-materials contracts, we are reimbursed for labor at fixed hourly rates and are generally reimbursed separately for allowable materials and expenses at cost. We typically recognize revenue for time and material contracts under the "right to invoice" model.

For contracts that do not meet the criteria to measure performance as a right to invoice under the series guidance, we utilize an Estimate at Completion process to measure progress toward completion. We typically estimate progress towards completion based on cost incurred or direct labor incurred. As part of this process, we review information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs. The risks and opportunities include judgments about the ability and cost to achieve the contract milestones and other technical contract requirements. We make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. A significant change in one or more of these estimates could affect the timing in which we recognize revenue on our contracts. For the three months ended SeptemberJune 30, 20192020 and 2018,2019, the aggregate impact of adjustments in contract estimates increased our revenue by $5.9$5.8 million and $4.5$3.5 million, respectively. For the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, the aggregate impact of adjustments in contract estimates increased our revenue by $9.0$7.2 million and $8.8$5.6 million, respectively.

We have 1 reportable segment. Our U.S. government customers typically exercise independent decision-making and contracting authority. Offices or divisions within an agency or department of the U.S. government may directly, or through a prime contractor, use our services as a separate customer as long as the customer has independent decision-making and contracting authority within its organization. We treat sales to U.S. government customers as sales within the U.S. regardless of where the services are performed. We generated 99% of our revenue from sales in the U.S. for both the three months ended June 30, 2020 and 2019. We generated 99% of our revenue from sales in the U.S. for both the six months ended June 30, 2020 and 2019.

The following tables disclose revenue (in thousands) by contract type, customer prime or subcontractor and geographycontractor type for the periods presented.

The following table discloses contractcomponents of our receivables are as follows (in thousands):

Receivables at SeptemberJune 30, 20192020 are expected to be substantially collected within one year except for approximately $1.1$2.6 million, of which 100%a majority is related to receivables from sales to the U.S. government or from contracts in which we acted as a subcontractor to other contractors selling to the U.S. government.receivables. We do not believe that we have significant exposure to credit

The following table discloses contract liabilities (in thousands):

Changes in the balance of contract liabilities are primarily due to the timing difference between our performance and our customers' payments. For the three months ended and nine months ended SeptemberJune 30, 2019,2020, the amount of revenue that was included in the opening contract liabilities balance were $0.9 million and $23.4 million, respectively.$1.8 million. For the six months ended June 30, 2020, the amount of revenue that was included in the opening contract liabilities balance was $18.5 million.

The remaining performance obligation as of SeptemberJune 30, 20192020 is $3.1$2.2 billion. The following table discloses when we expect to recognize the remaining performance obligation as revenue (in billions):

For the nine months ended September 30, 2019, we incurred approximately $0.3 millionThe acquisition was accounted for as a business combination. The results of acquisition costs related to the H2M transaction, which areH2M's operations have been included in general and administrative expenses in our condensed consolidated statement of income.financial statements since that date. We funded the acquisition with cash on hand and borrowings on our revolving credit facility.

The preliminary purchase price of $38.8$38.5 million, which includes an estimatedthe finalized working capital adjustment, was preliminarily allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. As we are still inThe excess of the process of reviewingpurchase price over the fair value of the assets acquired and liabilities assumed and in finalizing the closing working capital adjustment, thewas recorded as goodwill. The purchase price allocation for H2M is not complete as of SeptemberJune 30, 2019. 2020.

Recognition of goodwill is largely attributed to the value paid for H2M's capabilities to support government agencies in the implementation of high-quality geospatial and professional services. The goodwill recorded for this transaction will be deductible for tax purposes over 15 years.

The following table represents the preliminary purchase price allocation for H2M (in thousands):

For the nine months ended September 30, 2019, we incurred approximately $1.0 millionThe acquisition was accounted for as a business combination. The results of acquisition costs related to the KGS transaction, which areKGS's operations have been included in generalour consolidated financial statements since that date. We funded the acquisition with cash on hand and administrative expenses inborrowings on our condensed consolidated statement of income.revolving credit facility.

The purchase price of $114.6 million, which includes the finalized working capital adjustment, was preliminarily allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. As we are still inThe excess of the process of reviewingpurchase price over the fair value of the assets acquired and liabilities assumed thewas recorded as goodwill. The purchase price allocation forof KGS is not complete as of SeptemberJune 30, 2019. 2020.

Recognition of goodwill is largely attributed to the value paid for KGS's capabilities to support customers in IT solutions, transformation and management consulting and data analytics. A majority of the goodwill recorded will not be deductible for tax purposes.

In preliminarily allocating the purchase price, we considered, among other factors, analysis of historical financial performance and estimates of future performance of KGS's contracts. The components of other intangible assets associated with the acquisition were customer relationships and backlog valued at $33.1 million and $1.6 million, respectively. The fair values of the customer relationships and backlog were determined using the excess earnings method (income approach) in which the value is derived from an estimation of the after-tax cash flows specifically attributable to backlog and customer relationships. Assumptions used in the analysis included revenue and expense forecasts, contributory asset charges, tax amortization benefit and discount rates. Customer contracts and related relationships represent the underlying relationships and agreements with KGS's existing customers. Customer relationships are amortized using the pattern of benefits method over their estimated useful lives of approximately 20 years. Backlog is amortized straight-line over its estimated useful life of 1 year. The weighted-average amortization period for theother intangible assets is 19 years.

The following table represents the preliminaryfinalized purchase price allocation for KGS (in thousands):

In applying the two-class method, we determined that undistributed earnings should be allocated equally on a per share basis between Class A and Class B common stock. Under our Certificate of Incorporation, the holders of the common stock are entitled to participate ratably, on a share-for-share basis as if all shares of common stock were of a single class, in such dividends as may be declared by the Board of Directors. During the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, we declared and paid a quarterly dividendsdividend in the amount of $0.27$0.32 per share and $0.25$0.27 per share, respectively, on both classes of common stock.

Basic earnings per share has been computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during each period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period in which the shares were outstanding. Diluted earnings per share have been computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares that were outstanding during each period.

For the three months ended SeptemberJune 30, 20192020 and 2018,2019, options to purchase 7,641228,816 shares and 242,789479,685 shares, respectively, were outstanding but not included in the computation of diluted earnings per share because the options' effect would have been anti-dilutive. For the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, options to purchase 331,994231,938 shares and 268,013496,859 shares, respectively, were outstanding but not included in the computation of diluted earnings per share because the options' effect would have been anti-dilutive. For the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, there were 255,376103,660 shares and 387,926144,585 shares, respectively, issued from the exercise of stock options. For the ninesix months ended SeptemberJune 30, 20192020 and 20182019 there were 76,34648,861 shares and 86,23372,493 shares, respectively, issued from the vesting of restricted stock units.

Depreciation and amortization expense related to property and equipment for the three months ended SeptemberJune 30, 2020 and 2019 and 2018 was $6.9$9.7 million and $6.4$6.2 million, respectively. Depreciation and amortization expense related to property and equipment for the ninesix months ended SeptemberJune 30, 2020 and 2019 and 2018 was $19.4$18.5 million and $19.1$12.5 million, respectively.

Amortization expense relating to intangible assets for the three months ended SeptemberJune 30, 2020 and 2019 and 2018 was $6.1$6.5 million and $6.8$6.1 million, respectively. Amortization expense relating to intangible assets for the ninesix months ended SeptemberJune 30, 2020 and 2019 and 2018 was $18.0$13.0 million and $20.3$11.9 million, respectively. We estimate that we will have the following amortization expense for the future periods indicated below (in thousands):

Borrowings under our credit agreement are collateralized by substantially all of our assets and those of our Material Subsidiaries (as defined in the credit agreement) and bear interest at one of the following variable rates as selected by us at the time of borrowing: a London Interbank Offer Rate base rate plus market-rate spreads (1.25% to 2.25% based on our consolidated total leverage ratio) or Bank of America's base rate plus market spreads (0.25% to 1.25% based on our consolidated total leverage ratio).

There was $25.0$20.0 million and $7.5$36.5 million outstanding on our revolving credit facility at SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively. The maximum available borrowing under the revolving credit facility at SeptemberJune 30, 20192020 was $467.3$473.7 million. As of SeptemberJune 30, 2019,2020, we were contingently liable under letters of credit totaling $7.7$6.3 million, which reduces our availability to borrow under our revolving credit facility.

Contracts with the U.S. government, including subcontracts, are subject to extensive legal and regulatory requirements and, from time-to-time, agencies of the U.S. government, in the ordinary course of business, investigate whether our operations are conducted in accordance with these requirements and the terms of the relevant contracts. U.S. government investigations of us, whether related to our U.S. government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future U.S. government contracting activities. Management believes it has adequately reserved for any losses that may be experienced from any investigation of which it is aware. The Defense Contract Audit Agency has substantially completed our incurred cost audits through 2016 with no material adjustments. The remaining audits for 2017 through 20182019 are not expected to have a material effect on our financial position, results of operations or cash flow and management believes it has adequately reserved for any losses.

In the normal course of business, we are involved in certain governmental and legal proceedings, claims and disputes and have litigation pending under several suits. Current legal matters are individually immaterial and weWe believe that the ultimate resolution of these itemsmatters will not have a material effect on our financial position, results of operations or cash flows. Management believes it has adequately reserved for any losses that may be experienced from legal proceedings, claims and disputes and pending litigations of which it is aware.

We have $7.7$6.3 million outstanding on our letter of credit, of which $7.6$5.7 million is related to an outstanding performance bond in connection with a contract between ManTech MENA, LLC and Jadwalean International Operations and Management Company to fulfill technical support requirements for the Royal Saudi Air Force.

The Plan is administered by the compensation committee of our Board of Directors, along with its delegates. Subject to the express provisions of the Plan, the committee has the Board of Directors’ authority to administer and interpret the Plan, including the discretion to determine the exercise price, vesting schedule, contractual life and the number of shares to be issued.

There were 0 option grants during the six months ended June 30, 2020. The following weighted-average assumptions were used for option grants during the ninesix months ended SeptemberJune 30, 2019 and 2018:2019:

The following table summarizes weighted-average assumptions used in our calculations of fair value for the ninesix months ended SeptemberJune 30, 2019 and 2018:2019:

The following table summarizes stock option activity for the year ended December 31, 20182019 and the ninesix months ended SeptemberJune 30, 2019:2020:

The following table summarizes non-vested stock options for the ninesix months ended SeptemberJune 30, 2019:2020:

Unrecognized compensation expense related to non-vested awards was $5.1$4.7 million as of SeptemberJune 30, 2019,2020, which is expected to be recognized over a weighted-average period of 2 years.