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Item 1.	Financial Statements

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1.	Description of the Business

2.	Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with accounting principles generally accepted in the U.S., have been condensed or omitted pursuant to those rules and regulations. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We recommend that you read these condensed consolidated financial statements in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 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.

3.	Revenue from Contracts with Customers

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

For contracts that do not meet the criteria to measure performance as a right to invoice under the series guidance, we utilize an Estimate at Completion process to measure progress toward completion. We typically estimate progress towards completion based on cost incurred or direct labor incurred. As part of this process, we review information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs. The risks and opportunities include judgments about the ability and cost to achieve the contract milestones and other technical contract requirements. We make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. A significant change in one or more of these estimates could affect the timing in which we recognize revenue on our contracts. For the three months ended June 30, 2020 and 2019, the aggregate impact of adjustments in contract estimates increased our revenue by $5.8 million and $3.5 million, respectively. For the six months ended June 30, 2020 and 2019, the aggregate impact of adjustments in contract estimates increased our revenue by $7.2 million and $5.6 million, respectively.

We have one reportable segment. Our U.S. government customers typically exercise independent decision-making and contracting authority. Offices or divisions within an agency or department of the U.S. government may directly, or through a prime contractor, use our services as a separate customer as long as the customer has independent decision-making and contracting authority within its organization. We treat sales to U.S. government customers as sales within the U.S. regardless of where the services are performed. We generated 99% 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.

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

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
Cost-reimbursable	$	432,876			$	371,852			$	851,531			$	731,617
Fixed-price	120,359				108,028				241,914				203,091
Time-and-materials	79,257				57,157				149,959				104,259
Revenue	$	632,492			$	537,037			$	1,243,404			$	1,038,967

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
U.S. Government	$	622,627			$	524,976			$	1,223,155			$	1,015,993
State agencies, international agencies and commercial entities	9,865				12,061				20,249				22,974
Revenue	$	632,492			$	537,037			$	1,243,404			$	1,038,967

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
Prime contractor	$	577,377			$	477,986			$	1,132,545			$	924,505
Subcontractor	55,115				59,051				110,859				114,462
Revenue	$	632,492			$	537,037			$	1,243,404			$	1,038,967

The components of our receivables are as follows (in thousands):

	June 30, 2020				December 31, 2019
Billed receivables	$	357,092			$	311,061
Unbilled receivables	100,290				99,493
Allowance for doubtful accounts	(14,364		)		(11,578		)
Receivables—net	$	443,018			$	398,976

Receivables at June 30, 2020 are expected to be substantially collected within one year except for approximately $2.6 million, a majority is related to U.S. government receivables. We do not believe that we have significant exposure to credit risk as billed receivables and unbilled receivables are primarily due from the U.S. government. The allowance for doubtful accounts represents our estimate for exposure due to compliance, contractual issues and bad debts related to prime contractors.

The following table discloses contract liabilities (in thousands):

	June 30, 2020				December 31, 2019
Contract liabilities	$	47,766			$	27,620

Changes in the balance of contract liabilities are primarily due to the timing difference between our performance and our customers' payments. For the three months ended June 30, 2020, the amount of revenue that was included in the opening contract liabilities balance were $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.

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The remaining performance obligation as of June 30, 2020 is $2.2 billion. The following table discloses when we expect to recognize the remaining performance obligation as revenue (in billions):

For the remaining six months ending December 31, 2020				For the year ending
				December 31, 2021				December 31, 2022				Thereafter
$	1.0			$	0.7			$	0.2			$	0.3

4.	Acquisitions

H2M Group (H2M)—On August 8, 2019, we completed the acquisition of H2M through a membership interest purchase agreement by and among H2M Group, HHM Holding LLC, and the Members and ManTech International Corporation. H2M is a provider of intelligence and analysis services and solutions primarily to the National Geospatial-Intelligence Agency (NGA). This acquisition strengthens our ability to help key government agencies implement new automation techniques that enable intelligence analysts to more efficiently navigate large amounts of data and distill critical information to inform actionable intelligence and make mission-critical decisions.

The acquisition was accounted for as a business combination. The results of H2M's operations have been included in our condensed consolidated financial statements since that date. We funded the acquisition with cash on hand and borrowings on our revolving credit facility.

The purchase price of $38.5 million, which includes the finalized working capital adjustment, was allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocation for H2M is complete as of June 30, 2020.

Determining the fair value of assets acquired and liabilities assumed requires significant judgment, which includes, among other factors, analysis of historical performance and estimates of future performance of H2M's contracts. In some cases, we have used discounted cash flow analyses, which were based on our best estimate of future revenue, earnings and cash flows as well as our discount rate adjusted for risk.

Recognition of goodwill is largely attributed to the value paid for H2M's capabilities to support government agencies in the implementation of high-quality geospatial and professional services. The goodwill recorded for this transaction will be deductible for tax purposes over 15 years. The components of other intangible assets associated with the acquisition were customer relationships and backlog valued at $9.6 million and $2.3 million, respectively. The fair values of the customer relationships and backlog were determined using the excess earnings method (income approach) in which the value is derived from an estimation of the after-tax cash flows specifically attributable to backlog and customer relationships. Assumptions used in the analysis included revenue and expense forecasts, contributory asset charges, tax amortization benefit and discount rates. Customer contracts and related relationships represent the underlying relationships and agreements with H2M's existing customers. Customer relationships are amortized using the pattern of benefits method over their estimated useful lives of approximately 20 years. Backlog is amortized using the pattern of benefits method over its estimated useful life of 2 years. The weighted-average amortization period for other intangible assets is 17 years.

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

Cash and cash equivalents	$	29
Receivables	4,187
Prepaid expenses	188
Other current assets	5
Goodwill	25,089
Other intangible assets	11,900
Operating lease right of use assets	152
Property and equipment	56
Other assets	7
Accounts payable and accrued expenses	(1,956		)
Accrued salaries and related expenses	(1,023		)
Operating lease obligations—long term	(152		)
Net assets acquired and liabilities assumed	$	38,482

Kforce Government Solutions (KGS)—On April 1, 2019, we completed the acquisition of KGS. KGS was a wholly owned subsidiary of the publicly traded commercial technology and staffing company KForce, Inc. The acquisition was completed through an equity purchase agreement dated February 28, 2019, by and among Kforce Government Solutions, Inc and other beneficiaries and ManTech International Corporation. KGS provides services, IT solutions, transformation and management consulting and data analytics - most notably in the healthcare IT market. This acquisition expands our presence with important customers such as the Department of Veteran Affairs (VA).

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

The purchase price of $114.6 million, which includes the finalized working capital adjustment, was allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocation of KGS is complete as of June 30, 2020.

Determining the fair value of assets acquired and liabilities assumed requires significant judgment, which includes, among other factors, analysis of historical performance and estimates of future performance of KGS’s contracts. In some cases, we have used discounted cash flow analyses, which were based on our best estimate of future revenue, earnings and cash flows as well as our discount rate adjusted for risk.

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

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

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

Cash and cash equivalents	$	154
Receivables	17,071
Prepaid expenses	368
Other current assets	168
Goodwill	80,374
Other intangible assets	34,839
Property and equipment	361
Accounts payable and accrued expenses	(6,895		)
Accrued salaries and related expenses	(4,421		)
Deferred income taxes	(7,087		)
Other long-term liabilities	(379		)
Net assets acquired and liabilities assumed	$	114,553

5.	Earnings Per Share

Under ASC 260, Earnings per Share, the two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under that method, basic and diluted earnings per share data are presented for each class of common stock.

In applying the two-class method, we determined that undistributed earnings should be allocated equally on a per share basis between Class A and Class B common stock. Under our Certificate of Incorporation, the holders of the common stock are entitled to participate ratably, on a share-for-share basis as if all shares of common stock were of a single class, in such dividends as may be declared by the Board of Directors. During the six months ended June 30, 2020 and 2019, we declared and paid a quarterly dividend in the amount of $0.32 per share and $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.

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The net income available to common stockholders and weighted average number of common shares outstanding used to compute basic and diluted earnings per share for each class of common stock are as follows (in thousands, except per share amounts): 

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
Distributed earnings	$	12,902			$	10,788			$	25,770			$	21,537
Undistributed earnings	17,046				13,426				32,857				23,795
Net income	$	29,948			$	24,214			$	58,627			$	45,332
Class A common stock:
Basic net income available to common stockholders	$	20,141			$	16,210			$	39,407			$	30,324
Basic weighted average common shares outstanding	27,082				26,707				27,037				26,646
Basic earnings per share	$	0.74			$	0.61			$	1.46			$	1.14
Diluted net income available to common stockholders	$	20,220			$	16,255			$	39,576			$	30,411
Effect of potential exercise of stock options	327				229				358				232
Diluted weighted average common shares outstanding	27,409				26,936				27,395				26,878
Diluted earnings per share	$	0.74			$	0.60			$	1.44			$	1.13
Class B common stock:
Basic net income available to common stockholders	$	9,807			$	8,004			$	19,220			$	15,008
Basic weighted average common shares outstanding	13,187				13,188				13,187				13,188
Basic earnings per share	$	0.74			$	0.61			$	1.46			$	1.14
Diluted net income available to common stockholders	$	9,728			$	7,959			$	19,051			$	14,921
Diluted weighted average common shares outstanding	13,187				13,188				13,187				13,188
Diluted earnings per share	$	0.74			$	0.60			$	1.44			$	1.13

For the three months ended June 30, 2020 and 2019, options to purchase 228,816 shares and 479,685 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 six months ended June 30, 2020 and 2019, options to purchase 231,938 shares and 496,859 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 six months ended June 30, 2020 and 2019, there were 103,660 shares and 144,585 shares, respectively, issued from the exercise of stock options. For the six months ended June 30, 2020 and 2019 there were 48,861 shares and 72,493 shares, respectively, issued from the vesting of restricted stock units.

6.	Property and Equipment

Major classes of property and equipment are summarized as follows (in thousands):

	June 30, 2020				December 31, 2019
Furniture and equipment	$	184,038			$	150,640
Leasehold improvements	50,817				49,625
Finance leases	704				641
Property and equipment—gross	235,559				200,906
Accumulated depreciation and amortization	(124,178		)		(115,275		)
Property and equipment—net	$	111,381			$	85,631

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Depreciation and amortization expense related to property and equipment for the three months ended June 30, 2020 and 2019 was $9.7 million and $6.2 million, respectively. Depreciation and amortization related to property and equipment for the six months ended June 30, 2020 and 2019 was $18.5 million and $12.5 million, respectively.

7.	Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill during the year ended December 31, 2019 and six months ended June 30, 2020 are as follows (in thousands):

	Goodwill Balance
Goodwill at December 31, 2018	$	1,085,806
Acquisitions	105,453
Goodwill at December 31, 2019	1,191,259
Acquisition fair value adjustment	11
Goodwill at June 30, 2020	$	1,191,270

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

	June 30, 2020												December 31, 2019
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Other intangible assets:
Contract and program intangible assets	$	402,532			$	231,971			$	170,561			$	402,532			$	221,437			$	181,095
Capitalized software	56,075				37,985				18,090				52,411				36,728				15,683
Total other intangible assets—net	$	458,607			$	269,956			$	188,651			$	454,943			$	258,165			$	196,778

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

For the remaining six months ending December 31, 2020	$	12,865
For the year ending:
December 31, 2021	$	23,932
December 31, 2022	$	21,306
December 31, 2023	$	18,021
December 31, 2024	$	16,276
December 31, 2025	$	13,789

8.	Debt

Revolving Credit Facility—We maintain a credit facility with a syndicate of lenders led by Bank of America, N.A., as sole administrative agent. The credit agreement provides for a $500 million revolving credit facility, with a $75 million letter of credit sublimit and a $30 million swing line loan sublimit. The credit agreement also includes an accordion feature that permits us to arrange with the lenders for the provision of additional commitments. The maturity date is August 17, 2022.

Borrowings under our credit agreement are collateralized by substantially all of our assets and 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).

The terms of the credit agreement permit prepayment and termination of the loan commitments at any time, subject to certain

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conditions. The credit agreement requires us to comply with specified financial covenants, including the maintenance of certain leverage ratios and a consolidated coverage ratio. The credit agreement also contains various covenants, including affirmative covenants with respect to certain reporting requirements and maintaining certain business activities, and negative covenants that, among other things, may limit or impose restrictions on our ability to incur liens, incur additional indebtedness, make investments, make acquisitions and undertake certain other actions. As of and during the six months ended June 30, 2020 and 2019, we were in compliance with the financial covenants under the credit agreement.

9.	Commitments and Contingencies

Contracts with the U.S. government, including subcontracts, are subject to extensive legal and regulatory requirements and, from time-to-time, agencies of the U.S. government, in the ordinary course of business, investigate whether 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 2019 are not expected to have a material effect on our financial position, results of operations or cash flow and management believes it has adequately reserved for any losses.

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

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

10.	Stock-Based Compensation

Our 2016 Management Incentive Plan (the Plan) was designed to attract, retain and motivate key employees. The types of awards available under the Plan include, among others, stock options, restricted stock and restricted stock units (RSUs), among others. Equity awards granted under the Plan are settled in shares of Class A common stock. At the beginning of each year, the Plan provides that the number of shares available for issuance automatically increases by an amount equal to 1.5% of the total number of shares of Class A and Class B common stock outstanding on December 31^st of the previous year. On January 2, 2020, there were 602,684 additional shares made available for issuance under the Plan. Through June 30, 2020, the Board of Directors has authorized the issuance of up to 15,751,005 shares under this Plan. Through June 30, 2020, the remaining aggregate number of shares of our common stock available for future grants under the Plan was 7,068,410. The Plan expires in March 2026.

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

Stock Compensation Expense—For the three months ended June 30, 2020 and 2019, we recorded $2.9 million and $1.9 million of stock-based compensation expense. For the six months ended June 30, 2020 and 2019, we recorded $5.5 million and $3.2 million of stock-based compensation expense. No compensation expense of employees with stock awards, including stock-based compensation expense, was capitalized during the periods. For the three months ended June 30, 2020 and 2019, we recorded $0.3 million and $0.5 million, respectively, to income tax benefit related to the exercise of stock options, vested cancellations and the vesting of restricted stock and restricted stock units. For the six months ended June 30, 2020 and 2019, we recorded $0.8 million and $0.7 million, respectively, to income tax benefit related to the exercise of stock options, vested cancellations and the vesting of restricted stock and restricted stock units.

Stock Options—Under the Plan, we have issued stock options. A stock option gives the holder the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period.

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Fair Value Determination—We have used the Black-Scholes-Merton option pricing model to determine the fair value of our awards on the date of grant. We will reconsider the use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that cannot be reasonably estimated under this model.

There were no option grants during the six months ended June 30, 2020. The following weighted-average assumptions were used for option grants during the six months ended June 30, 2019:

•	Volatility—The expected volatility of the options granted was estimated based upon historical volatility of our share price through weekly observations of our trading history.

•	Expected life of options—The expected life of options granted to employees was determined from historical exercises of the grantee population. The options had graded vesting over three years in equal installments beginning on the first anniversary of the date of grant and a contractual term of five years.

•	Risk-free interest rate—The yield on zero-coupon U.S. Treasury strips was used to extrapolate a forward-yield curve. This “term structure” of future interest rates was then input into a numeric model to provide the equivalent risk-free rate to be used in the Black-Scholes-Merton model based on the expected term of the underlying grants.

•	Dividend Yield—The Black-Scholes-Merton valuation model requires an expected dividend yield as an input. For the six months ended June 30, 2019, we have calculated our expected dividend yield based on an expected annual cash dividend of $1.08 per share.

The following table summarizes weighted-average assumptions used in our calculations of fair value for the six months ended June 30, 2019:

	Six months ended June 30, 2019
Volatility	27.00	%
Expected life of options	3 years
Risk-free interest rate	2.39	%
Dividend yield	2.00	%

Stock Option Activity—No options were granted during the six months ended June 30, 2020. The weighted-average fair value of options granted during the six months ended June 30, 2019, as determined under the Black-Scholes-Merton valuation model, was $10.07. Option grants that vested during the six months ended June 30, 2020 and 2019 had a combined fair value of $1.7 million and $1.2 million, respectively.

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

	Number of Shares			Weighted Average Exercise Price				Aggregate Intrinsic Value (in thousands)				Weighted Average Remaining Contractual Life
Stock options outstanding at December 31, 2018	1,093,400			$	45.34			$	8,776
Granted	489,947			$	63.87
Exercised	(338,748	)		$	37.94			$	9,641
Cancelled and expired	(108,504	)		$	51.21
Stock options outstanding at December 31, 2019	1,136,095			$	54.98			$	28,291
Exercised	(103,660	)		$	47.10			$	3,227
Cancelled and expired	(98,446	)		$	60.89
Stock options outstanding at June 30, 2020	933,989			$	55.23			$	13,662			3 years
Stock options exercisable at June 30, 2020	382,652			$	46.37			$	8,467			2 years

The following table summarizes non-vested stock options for the six months ended June 30, 2020:

	Number of Shares			Weighted Average Fair Value
Non-vested stock options at December 31, 2019	845,555			$	10.88
Vested	(197,689	)		$	8.76
Cancelled	(96,529	)		$	11.56
Non-vested stock options at June 30, 2020	551,337			$	11.52

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

Restricted Stock—Under the Plan, we have issued restricted stock. A restricted stock award is an issuance of shares that cannot be sold or transferred by the recipient until the vesting period lapses. Restricted stock issued to members of our Board of Directors vest on the one year anniversary of the grant date. The related compensation expense is recognized over the service period and is based on the grant date fair value of the stock. The grant date fair value of the restricted stock is equal to the closing market price of our common stock on the date of grant.

Restricted Stock Activity—The following table summarizes the restricted stock activity during the year ended December 31, 2019 and the six months ended June 30, 2020.

	Number of Shares			Weighted Average Fair Value
Non-vested restricted stock at December 31, 2018	20,000			$	52.83
Granted	24,000			$	62.66
Vested	(20,000	)		$	52.83
Non-vested restricted stock at December 31, 2019	24,000			$	62.66
Granted	24,000			$	71.11
Vested	(24,000	)		$	62.66
Non-vested restricted stock at June 30, 2020	24,000			$	71.11

RSUs—Under the Plan, we have issued restricted stock units (RSUs). RSUs are not actual shares, but rather a right to receive shares in the future. The shares are not issued and the employee cannot sell or transfer shares prior to vesting and have no voting rights until the RSUs vest. Employees who are granted RSUs do not receive dividend payments during the vesting period. Our employees' performance-based RSUs will result in the delivery of shares if (a) performance criteria is met and (b) the employee

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remains employed, in good standing, through the date of the performance period. Our employees' time-based RSUs will result in the delivery of shares in one-third increments on the first, second and third anniversaries of the date of grant. The grant date fair value of the RSUs is equal to the closing market price of our common stock on the grant date less the present value of dividends expected to be awarded during the service period. We recognize the grant date fair value of RSUs of shares we expect to issue as compensation expense ratably over the requisite service period.

RSU Activity—For performance-based RSUs that vested in the six months ended June 30, 2020, each RSU awarded resulted in the issuance of one share, which were issued net of applicable payroll tax withholdings. For the year ended December 31, 2019, each RSU awarded resulted in the issuance of 1.5 shares, which were issued net of applicable payroll tax withholdings. The following table summarizes the non-vested RSU activity during the year ended December 31, 2019 and the six months ended June 30, 2020:

	Number of Units			Weighted Average Fair Value
Non-vested RSUs at December 31, 2018	137,596			$	45.11
Granted	145,440			$	59.43
Vested	(60,915	)		$	42.75
Forfeited	(11,294	)		$	51.88
Non-vested RSUs at December 31, 2019	210,827			$	55.31
Granted	187,450			$	68.29
Vested	(35,882	)		$	51.80
Forfeited	(43,970	)		$	63.59
Non-vested RSUs at June 30, 2020	318,425			$	62.21

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

•	failure to maintain our relationship with the U.S. government, or the failure to compete effectively for new contract awards or to retain existing U.S. government contracts;

•	disruptions to our business resulting from the recent outbreak of the novel coronavirus disease 2019 (known as COVID-19) or other similar global health epidemics, pandemics and/or other disease outbreaks;

•	adverse changes in U.S. government spending for programs we support, whether due to changing mission priorities, economic and political policy change or federal budget constraints generally;

•	inability to recruit and retain a sufficient number of employees with specialized skill sets or necessary security clearances who are in great demand and limited supply;

•	failure to compete effectively for awards procured through the competitive bidding process, and the adverse impact of delays resulting from our competitors' protests of new contracts that are awarded to us;

•	disruptions to our business or damage to our reputation resulting from cyber attacks and other security threats;

•	failure to obtain option awards, task orders or funding under our contracts;

•	the government renegotiating, modifying or terminating our contracts;

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•	failure to comply with, or adverse changes in, complex U.S. government laws and procurement regulations;

•	adverse results of U.S. government audits or other investigations of our government contracts;

•	failure to successfully integrate acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions;

•	failure to mitigate risks associated with conducting business internationally; and

•	adverse changes in business conditions that may cause our investments in recorded goodwill to become impaired.

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Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Item 4.	Controls and Procedures

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Item 1.	Legal Proceedings

Item 6.	Exhibits

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