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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 þ  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010.
 COMMISSION FILE NUMBER 33389756
 
 
 Alion
Science and Technology Corporation
  DELAWARE
(State or Other Jurisdiction of 
Incorporation of Organization)
    
    542061691
(I.R.S. Employer
Identification No.)10 West 35th Street 
Chicago, IL 60616
(312) 567-4000
    
    1750 Tysons Boulevard, Suite 1300
McLean, VA 22102
(703) 9184480
   (Former
name, former address and former fiscal year, if changed since last
report)
  o þ
  o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
  o þ




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##### 



ALION SCIENCE AND TECHNOLOGY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2010
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    1Condensed Consolidated Balance Sheets (unaudited)
    
    
    1Condensed Consolidated Statements of Operations (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    35Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    54Item 4T. Controls and Procedures
    
    
    54PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    55Item 1A. Risk Factors
    
    
    55Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    59Item 3. Defaults Upon Senior Securities
    
    
    59Item 4. Removed and Reserved
    
    
    59Item 5. Other Information
    
    
    59Item 6. Exhibits
    
    
    60Exhibit 4.22Exhibit 4.23Exhibit 4.24Exhibit 4.25Exhibit 4.26Exhibit 4.27Exhibit 4.28Exhibit 4.29Exhibit 4.30Exhibit 4.31Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements (unaudited)
 ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 Condensed Consolidated Balance Sheets 
(unaudited)
As of March 31, 2010 and September 30, 2009
 March 31,
    
    
    September 30,2010
    
    
    2009(In thousands, except shareand per share information)Current assets:Cash and cash equivalents
    
    $
    28,300
    
    
    $
    11,185Accounts receivable, net
    
    
    187,847
    
    
    
    180,157Prepaid expenses and other current assets
    
    
    5,432
    
    
    
    3,795Total current assets
    
    
    221,579
    
    
    
    195,137Property, plant and equipment, net
    
    
    12,952
    
    
    
    14,474Intangible assets, net
    
    
    23,048
    
    
    
    28,680Goodwill
    
    
    398,921
    
    
    
    398,921Other assets
    
    
    10,661
    
    
    
    10,286Total assets
    
    $
    667,161
    
    
    $
    647,498Current liabilities:Interest payable
    
    $
    5,095
    
    
    $
    9,039Current portion, senior term loan payable
    
    
    
    
    
    
    2,389Current portion, subordinated note payable
    
    
    
    
    
    
    3,000Current portion, acquisition obligations
    
    
    
    
    
    
    50Trade accounts payable
    
    
    71,127
    
    
    
    60,707Accrued liabilities
    
    
    54,698
    
    
    
    45,425Accrued payroll and related liabilities
    
    
    36,435
    
    
    
    43,033Billings in excess of revenue earned
    
    
    3,783
    
    
    
    3,661Total current liabilities
    
    
    171,138
    
    
    
    167,304Senior term loan payable, excluding current portion
    
    
    
    
    
    
    229,221Senior secured notes
    
    
    268,400
    
    
    
    Senior unsecured notes
    
    
    245,684
    
    
    
    245,241Subordinated note payable
    
    
    
    
    
    
    46,932Accrued compensation, excluding current portion
    
    
    5,275
    
    
    
    5,740Accrued postretirement benefit obligations
    
    
    740
    
    
    
    717Non-current portion of lease obligations
    
    
    7,921
    
    
    
    7,286Deferred income taxes
    
    
    33,818
    
    
    
    Commitments and contingencies
    
    
    
    
    
    
    Redeemable common stock warrants
    
    
    
    
    
    
    32,717Redeemable common stock, $0.01 par value, 8,000,000 shares
authorized, 5,469,272 and 5,424,274 shares issued and outstanding
at March 31, 2010 and September 30, 2009
    
    
    153,140
    
    
    
    187,137Common stock warrants
    
    
    20,785
    
    
    
    Accumulated other comprehensive loss
    
    
    (238
    )
    
    
    (238
    )Accumulated deficit
    
    
    (239,502
    )
    
    
    (274,559
    )Total liabilities, redeemable common stock and accumulated deficit
    
    $
    667,161
    
    
    $
    647,498
 See accompanying notes to condensed consolidated financial statements.
  1




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 Condensed Consolidated Statements of Operations

(unaudited)
 Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except share and per share information)Contract revenue
    
    $
    203,546
    
    
    $
    195,429
    
    
    $
    409,284
    
    
    $
    384,225Direct contract expense
    
    
    156,049
    
    
    
    149,135
    
    
    
    315,045
    
    
    
    294,457Gross profit
    
    
    47,497
    
    
    
    46,294
    
    
    
    94,239
    
    
    
    89,768Operating expenses:Indirect contract expense
    
    
    9,982
    
    
    
    9,332
    
    
    
    19,268
    
    
    
    18,456Research and development
    
    
    309
    
    
    
    78
    
    
    
    570
    
    
    
    147General and administrative
    
    
    18,466
    
    
    
    13,426
    
    
    
    34,473
    
    
    
    23,599Rental and occupancy expense
    
    
    8,298
    
    
    
    8,468
    
    
    
    16,284
    
    
    
    16,206Depreciation and amortization
    
    
    4,212
    
    
    
    4,700
    
    
    
    8,443
    
    
    
    9,506Total operating expenses
    
    
    41,267
    
    
    
    36,004
    
    
    
    79,038
    
    
    
    67,914Operating income
    
    
    6,230
    
    
    
    10,290
    
    
    
    15,201
    
    
    
    21,854Other income (expense):Interest income
    
    
    12
    
    
    
    25
    
    
    
    57
    
    
    
    48Interest expense
    
    
    (14,097
    )
    
    
    (10,244
    )
    
    
    (30,983
    )
    
    
    (24,332
    )Other
    
    
    87
    
    
    
    (87
    )
    
    
    (24
    )
    
    
    (122
    )Gain on extinguishment of debt
    
    
    50,749
    
    
    
    
    
    
    
    50,749
    
    
    
    Total other income (expense)
    
    
    36,751
    
    
    
    (10,306
    )
    
    
    19,799
    
    
    
    (24,406
    )Pre-tax income (loss)
    
    
    42,981
    
    
    
    (16
    )
    
    
    35,000
    
    
    
    (2,552
    )Income tax (expense) benefit
    
    
    (33,816
    )
    
    
    55
    
    
    
    (33,776
    )
    
    
    51Net income (loss)
    
    $
    9,165
    
    
    $
    39
    
    
    $
    1,224
    
    
    $
    (2,501
    )Basic and diluted earnings (loss) per share
    
    
    1.69
    
    
    
    0.01
    
    
    
    0.23
    
    
    
    (0.48
    )Basic and weighted average common shares outstanding
    
    
    5,411,342
    
    
    
    5,227,835
    
    
    
    5,417,756
    
    
    
    5,228,787
 See accompanying notes to condensed consolidated financial statements.
  2




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 Condensed Consolidated
Statements of Cash Flows 
(unaudited)
 Six Months Ended March 31,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net loss
    
    $
    1,224
    
    
    $
    (2,501
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    8,443
    
    
    
    9,506Bad debt expense
    
    
    
    
    
    
    512Accretion of debt to face value
    
    
    
    
    
    
    1,180Amortization of debt issuance costs
    
    
    2,223
    
    
    
    1,364Secured Note paid in kind interest
    
    
    155
    
    
    
    Change in fair value of redeemable common stock warrants
    
    
    (160
    )
    
    
    (6,899
    )Stock-based compensation
    
    
    (865
    )
    
    
    (5,764
    )Incentive compensation
    
    
    1,168
    
    
    
    1,848Gain on extinguishment of debt
    
    
    (50,749
    )
    
    
    Deferred income taxes
    
    
    33,818
    
    
    
    Other gains and losses
    
    
    (1
    )
    
    
    18Changes in assets and liabilities:Accounts receivable
    
    
    (7,690
    )
    
    
    (15,824
    )Other assets
    
    
    (754
    )
    
    
    (578
    )Trade accounts payable
    
    
    10,540
    
    
    
    2,100Accrued liabilities
    
    
    5,675
    
    
    
    (347
    )Interest payable
    
    
    (3,944
    )
    
    
    2,478Other liabilities
    
    
    840
    
    
    
    4,022Net cash used in operating activities
    
    
    (77
    )
    
    
    (8,885
    )Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (50
    )
    
    
    (166
    )Capital expenditures
    
    
    (1,271
    )
    
    
    (1,076
    )Proceeds from sale of assets
    
    
    5
    
    
    
    Net cash used in investing activities
    
    
    (1,316
    )
    
    
    (1,242
    )Cash flows from financing activities:Change in book overdraft
    
    
    
    
    
    
    100Cash paid for interest rate swap
    
    
    
    
    
    
    (4,647
    )Sale of Secured Notes
    
    
    281,465
    
    
    
    Sale of Common Stock Warrants
    
    
    20,785Payment of debt issue costs
    
    
    (16,710
    )
    
    
    Payment of Term B Loan
    
    
    (236,596
    )
    
    
    (1,216
    )Repurchase of Subordinated Note and related warrants
    
    
    (25,000
    )
    
    
    Payment of Subordinated Note principal
    
    
    
    
    
    
    (3,000
    )Revolver borrowings
    
    
    84,200
    
    
    
    227,500Revolver repayments
    
    
    (84,200
    )
    
    
    (222,780
    )Loan to ESOP Trust
    
    
    (5,323
    )
    
    
    (5,936
    )ESOP loan repayment
    
    
    5,323
    
    
    
    5,936Redeemable common stock purchased from ESOP Trust
    
    
    (7,561
    )
    
    
    (7,232
    )Redeemable common stock sold to ESOP Trust
    
    
    2,128
    
    
    
    5,115Net cash provided by (used in) financing activities
    
    
    18,511
    
    
    
    (6,160
    )Net increase (decrease) in cash and cash equivalents
    
    
    17,115
    
    
    
    (16,287
    )Cash and cash equivalents at beginning of period
    
    
    11,185
    
    
    
    16,287Cash and cash equivalents at end of period
    
    $
    28,300
    
    
    $
    Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    32,759
    
    
    $
    23,397Cash received for taxes
    
    
    (42
    )
    
    
    (51
    )
  3




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 Condensed Consolidated Statements of Cash Flows (unaudited)
 Six Months Ended March 31,2010
    
    
    2009(In thousands)Non-cash financing activities:Common stock issued to ESOP Trust in satisfaction
of employer contribution liability
    
    $
    5,268
    
    
    $
    5,252
 See accompanying notes to condensed consolidated financial statements.
  4




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 (1) Description and Formation of the Business
    (2) Summary of Significant Accounting Policies
 Basis of Presentation and Principles of Consolidation
   Fiscal, Quarter and Interim Periods
  Use of Estimates
  Revenue Recognition
   5




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
    Revenue Recognition .
 Income Taxes
      6




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
  Cash and Cash Equivalents
  Accounts Receivable and Billings in Excess of Revenue Earned
  Property, Plant and Equipment
  Goodwill and Intangible Assets
  Intangibles, Goodwill and Other Assets
   7




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
       Purchased contracts
    
    1  13 yearsInternal use software and engineering designs
    
    2  3 yearsNon-compete agreements
    
    3  6 years
  8




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Redeemable Common Stock
    Concentration of Credit Risk
  Fair Value of Financial Instruments
  Cash, cash equivalents, accounts payable and accounts receivable
 Senior long-term debt
 Subordinated notes and redeemable common stock warrants.
  9




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Redeemable Alion common stock.
 Recently Issued Accounting Pronouncements
 Revenue Recognition  Multiple Deliverable
Revenue Arrangements Revenue Recognition
 Certain Revenue Arrangements That Include
Software Elements Software  Revenue
Recognition
 (3) Employee Stock Ownership Plan (ESOP) and ESOP Trust
  (4) Earnings (Loss) Per Share
  (5) Redeemable Common Stock Owned by ESOP Trust
   10




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
    (6) Accounts Receivable
  March 31,
    
    
    September 30,2010
    
    
    2009(In thousands)Billed receivables
    
    $
    103,166
    
    
    $
    108,566Unbilled receivables:Amounts currently billable
    
    
    37,392
    
    
    
    22,954Revenues recorded in excess of milestone billings on fixed price contracts
    
    
    3,726
    
    
    
    3,757Revenues recorded in excess of estimated contract value or funding
    
    
    33,543
    
    
    
    36,327Retainages and other amounts billable upon contract completion
    
    
    13,877
    
    
    
    12,972Allowance for doubtful accounts
    
    
    (3,857
    )
    
    
    (4,419
    )Total Accounts Receivable
    
    $
    187,847
    
    
    $
    180,157
   11




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 (7) Property, Plant and Equipment
 March 31,
    
    
    September 30,2010
    
    
    2009(In thousands)Leasehold improvements
    
    $
    10,980
    
    
    $
    10,214Equipment and software
    
    
    33,100
    
    
    
    32,807Total cost
    
    
    44,080
    
    
    
    43,021Less: accumulated depreciation and amortization
    
    
    (31,128
    )
    
    
    (28,547
    )Net Property, Plant and Equipment
    
    $
    12,952
    
    
    $
    14,474
  (8) Goodwill and Intangible Assets
   March 31, 2010
    
    
    September 30, 2009Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetPurchased contracts
    
    $
    111,635
    
    
    $
    (88,987
    )
    
    $
    22,648
    
    
    $
    111,635
    
    
    $
    (83,563
    )
    
    $
    28,072Internal use software and
engineering designs
    
    
    2,155
    
    
    
    (1,763
    )
    
    
    392
    
    
    
    2,155
    
    
    
    (1,568
    )
    
    
    587Non-compete agreements
    
    
    725
    
    
    
    (717
    )
    
    
    8
    
    
    
    725
    
    
    
    (704
    )
    
    
    21Total
    
    $
    114,515
    
    
    $
    (91,467
    )
    
    $
    23,048
    
    
    $
    114,515
    
    
    $
    (85,835
    )
    
    $
    28,680
  (In thousands)For the remaining six months:2010
    
    $
    5,353For the year ending September 30:2011
    
    
    6,8432012
    
    
    5,7662013
    
    
    3,2462014
    
    
    8792015
    
    
    737Thereafter
    
    
    224$
    23,048
  12




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 (9) Long-Term Debt
  Credit Agreement
    Security.
 Guarantees
 Interest and Fees.
 Other Fees and Expenses.
  Covenants.
 Period
    
    Minimum Consolidated EBITDAJune 30, 2010 through March 31, 2011
    
    $
    52,500,000April 1, 2011 through September 30, 2011
    
    $
    55,000,000October 1, 2011 through September 30, 2012
    
    $
    60,000,000October 1, 2012 through September 30, 2013
    
    $
    62,500,000Thereafter
    
    $
    65,000,000
  13




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
  Secured Notes
  Security .
 Guarantees
 Interest and Fees.
 Unsecured Notes
  Guarantees
 Interest and Fees.
 Retired Term B Senior Credit Agreement
   14




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
   Retired Subordinated Note
    Interest Payable
  March 31,
    
    
    September 30,2010
    
    
    2009(In thousands)Unsecured Notes
    
    $
    4,271
    
    
    $
    4,271Secured Notes
    
    
    824
    
    
    
    Senior Term Loan
    
    
    
    
    
    
    3,975Subordinated Note Payable
    
    
    
    
    
    
    793Total
    
    $
    5,095
    
    
    $
    9,039
  2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    TotalSecured Notes and PIK Interest(1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    339,788
    
    
    $
    339,788Unsecured Notes(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    250,000Total Principal Payments
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    589,788
    
    
    $
    589,788
  15




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 1.
    
    The Secured Notes due in 2015 include $310 million of debt issued in March 2010 and an
estimated $29.8 million in PIK interest added to principal over the life of the notes. As
of March 31, 2010, the $276.9 million carrying value on the face of the balance sheet
included $310 million in principal, $0.9 million in accrued interest and is net of $34
million in unamortized debt issue costs. Initial debt issue costs consist of $7.7 million
in original issue discount, $5.8 million in third-party costs and $20.8 million for the
initial fair value of the new Secured Note warrants.2.
    
    The Unsecured Notes on the face of the balance sheet include $250 million in principal
and $4.3 million in unamortized debt issue costs as of March 31, 2010 (initially $7.1
million). (10) Fair Value Measurement
 Fair Value Disclosures
        16




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
   Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3Liabilities: as of September 30, 2009Redeemable common stock warrants
    
    
    
    
    
    
    
    
    
    
    (32,717
    )Liabilities: as of September 30, 2009
    
    $
    
    
    
    $
    
    
    
    $
    (32,717
    )
  As of March 31,2010
    
    
    2009Redeemable Common StockWarrantsBalance, beginning of period
    
    $
    (32,557
    )
    
    $
    (39,996
    )Total realized and unrealized gains and
(losses)
    
    
    14,724
    
    
    
    Included in interest expense
    
    
    (160
    )
    
    
    1,454Issuances and settlements
    
    
    17,993
    
    
    
    Balance, end of period
    
    $
    
    
    
    $
    (38,542
    )
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  
 (11) Interest Rate Swap
  
 (12) Redeemable Common Stock Warrants
   17




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
    Derivatives
 (13) Secured Note Common Stock Warrants
    
 (14) Leases
   18




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Lease Payments for Fiscal Years Ending
    
    (In thousands)2010 (for the remainder of fiscal year)
    
    $
    14,0992011
    
    
    26,2962012
    
    
    22,3362013
    
    
    20,8422014
    
    
    14,4082015
    
    
    14,366And thereafter
    
    
    24,180Gross lease payments
    
    $
    136,527Less: non-cancelable subtenant receipts
    
    
    (3,104
    )Net lease payments
    
    $
    133,423
 Composition of Total Rent Expense
 March 31,2010
    
    
    2009(In thousands)Minimum rentals
    
    $
    11,649
    
    
    $
    12,821Less: Sublease rental income
    
    
    (958
    )
    
    
    (1,484
    )Total rent expense, net
    
    $
    10,691
    
    
    $
    11,337
 (15) Long Term Incentive Compensation Plan
  (16) Stock Appreciation Rights
   Stock Compensation
  19




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
  Stock-based Compensation Disclosure per ASC 718
Stock Appreciation Rights
As of March 31, 2010
 SharesGrantedto
    
    
    Exercise
    
    
    OutstandingDate of Grant
    
    Employees
    
    
    Price
    
    
    at 9/30/09February 2005
    
    
    165,000
    
    
    $
    19.94
    
    
    
    71,150March 2005
    
    
    2,000
    
    
    $
    19.94
    
    
    
    2,000April 2005
    
    
    33,000
    
    
    $
    29.81
    
    
    
    18,000June 2005
    
    
    2,000
    
    
    $
    29.81
    
    
    
    2,000December 2005
    
    
    276,675
    
    
    $
    35.89
    
    
    
    175,284February 2006
    
    
    13,000
    
    
    $
    35.89
    
    
    
    7,750February 2006
    
    
    7,500
    
    
    $
    35.89
    
    
    
    2,500May 2006
    
    
    7,000
    
    
    $
    37.06
    
    
    
    6,000July 2006
    
    
    15,000
    
    
    $
    37.06
    
    
    
    10,000October 2006
    
    
    2,500
    
    
    $
    41.02
    
    
    
    2,500December 2006
    
    
    238,350
    
    
    $
    41.02
    
    
    
    171,500February 2007
    
    
    33,450
    
    
    $
    41.02
    
    
    
    21,700May 2007
    
    
    2,000
    
    
    $
    43.37
    
    
    
    2,000September 2007
    
    
    2,000
    
    
    $
    43.37
    
    
    
    2,000December 2007
    
    
    232,385
    
    
    $
    40.05
    
    
    
    187,740April 2008
    
    
    2,000
    
    
    $
    41.00
    
    
    
    2,000September 2008
    
    
    2,000
    
    
    $
    41.00
    
    
    
    2,000December 2008
    
    
    203,250
    
    
    $
    38.35
    
    
    
    189,875April 2009
    
    
    1,000
    
    
    $
    34.30
    
    
    
    1,000Total
    
    
    1,240,110
    
    
    
    
    
    
    
    876,999Weighted Average Exercise Price
    
    $
    35.95
    
    
    
    
    
    
    $
    37.07
  20




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Stock-based Compensation Disclosures per ASC 718
Stock Appreciation Rights
As of March 31, 2010
 Outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested at
    
    
    ExercisableDate of Grant
    
    at 03/31/10
    
    
    Forfeited
    
    
    Exercised
    
    
    Expired
    
    
    03/31/10
    
    
    at 03/31/10February 2005
    
    
    71,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,150
    
    
    
    March 2005
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    April 2005
    
    
    18,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    June 2005
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    December 2005
    
    
    167,034
    
    
    
    412
    
    
    
    7,838
    
    
    
    
    
    
    
    167,034
    
    
    
    February 2006
    
    
    7,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,750
    
    
    
    February 2006
    
    
    1,250
    
    
    
    
    
    
    
    1,250
    
    
    
    
    
    
    
    1,250
    
    
    
    May 2006
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,500
    
    
    
    July 2006
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    October 2006
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,875
    
    
    
    December 2006
    
    
    161,930
    
    
    
    2,830
    
    
    
    6,740
    
    
    
    
    
    
    
    121,448
    
    
    
    February 2007
    
    
    21,200
    
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    15,900
    
    
    
    May 2007
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    September 2007
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    December 2007
    
    
    178,040
    
    
    
    5,313
    
    
    
    4,387
    
    
    
    
    
    
    
    89,020
    
    
    
    April 2008
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    September 2008
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    December 2008
    
    
    178,475
    
    
    
    9,275
    
    
    
    2,125
    
    
    
    
    
    
    
    44,619
    
    
    
    April 2009
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    836,329
    
    
    
    18,080
    
    
    
    22,590
    
    
    
    
    
    
    
    557,046
    
    
    
    Weighted Average Exercise Price
    
    $
    36.98
    
    
    $
    39.25
    
    
    $
    38.52
    
    
    $
    
    
    
    $
    35.78
    
    
    
    
  21




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Stock-based Compensation Disclosures per ASC 718
Stock Appreciation Rights
As of March 31, 2010
 Remaining LifeDate of Grant
    
    Risk Free Interest Rate
    
    
    Volatility
    
    
    Expected Life
    
    
    (months)February 2005
    
    
    3.10
    %
    
    
    
    
    
    
    3.60
    %
    
    
    45
    %
    
    4 yrs
    
    
    March 2005
    
    
    3.10
    %
    
    
    
    
    
    
    3.60
    %
    
    
    45
    %
    
    4 yrs
    
    
    April 2005
    
    
    4.10
    %
    
    
    
    
    
    
    4.20
    %
    
    
    45
    %
    
    4 yrs
    
    
    June 2005
    
    
    4.10
    %
    
    
    
    
    
    
    4.20
    %
    
    
    45
    %
    
    4 yrs
    
    
    December 2005
    
    
    4.20
    %
    
    
    
    
    
    
    4.20
    %
    
    
    40
    %
    
    4 yrs
    
    
    February 2006
    
    
    4.20
    %
    
    
    
    
    
    
    4.20
    %
    
    
    40
    %
    
    4 yrs
    
    
    February 2006
    
    
    4.20
    %
    
    
    
    
    
    
    4.20
    %
    
    
    40
    %
    
    4 yrs
    
    
    May 2006
    
    
    4.82
    %
    
    
    
    
    
    
    4.83
    %
    
    
    35
    %
    
    4 yrs
    
    
    1.6July 2006
    
    
    4.82
    %
    
    
    
    
    
    
    4.83
    %
    
    
    35
    %
    
    4 yrs
    
    
    3.0October 2006
    
    
    4.82
    %
    
    
    
    
    
    
    4.83
    %
    
    
    35
    %
    
    4 yrs
    
    
    6.8December 2006
    
    
    4.54
    %
    
    
    
    
    
    
    4.58
    %
    
    
    35
    %
    
    4 yrs
    
    
    8.7February 2007
    
    
    4.54
    %
    
    
    
    
    
    
    4.58
    %
    
    
    35
    %
    
    4 yrs
    
    
    10.8May 2007
    
    
    4.54
    %
    
    
    
    
    
    
    4.58
    %
    
    
    35
    %
    
    4 yrs
    
    
    13.6September 2007
    
    
    4.54
    %
    
    
    
    
    
    
    4.54
    %
    
    
    35
    %
    
    4 yrs
    
    
    17.1December 2007
    
    
    4.23
    %
    
    
    
    
    
    
    4.23
    %
    
    
    35
    %
    
    4 yrs
    
    
    20.8April 2008
    
    
    4.23
    %
    
    
    
    
    
    
    4.23
    %
    
    
    35
    %
    
    4 yrs
    
    
    24.9September 2008
    
    
    4.23
    %
    
    
    
    
    
    
    4.23
    %
    
    
    35
    %
    
    4 yrs
    
    
    29.5December 2008
    
    
    4.23
    %
    
    
    
    
    
    
    4.23
    %
    
    
    35
    %
    
    4 yrs
    
    
    32.8April 2009
    
    
    4.23
    %
    
    
    
    
    
    
    4.23
    %
    
    
    35
    %
    
    4 yrs
    
    
    36.4Weighted Average Remaining Life (months)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.7
 (17) Phantom Stock Plans
    Stock Compensation
  22




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
  Stock-based Compensation Disclosure per ASC 718
Director Phantom Stock Plan
as of March 31, 2010
 Total Shares
    
    
    Grant Date
    
    
    Outstanding atDate of Grant
    
    Shares Granted
    
    
    Granted
    
    
    Share Price
    
    
    9/30/09November 2006
    
    
    5,978
    
    
    
    5,978
    
    
    
    41.02
    
    
    
    4,839November 2007
    
    
    6,993
    
    
    
    6,993
    
    
    
    40.05
    
    
    
    5,994Total
    
    
    12,971
    
    
    
    12,971
    
    
    
    
    
    
    
    10,833Weighted Average Grant Date
Fair Value Price Per Share
    
    $
    40.50
    
    
    $
    40.50
    
    
    
    
    
    
    $
    40.48
 Stock-based Compensation Disclosure per ASC 718
Director Phantom Stock Plan
as of March 31, 2010
 Outstanding at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested at
    
    
    Exercisable atDate of Grant
    
    03/31/10
    
    
    Forfeited
    
    
    Exercised
    
    
    Expired
    
    
    3/31/10
    
    
    03/31/10November 2006
    
    
    4,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,839
    
    
    
    4,839November 2007
    
    
    5,994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,663
    
    
    
    3,663Total
    
    
    10,833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,502
    
    
    
    8,502Weighted Average Grant Date
    
    $
    40.48
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    40.60
    
    
    $
    40.60
 Stock-based Compensation Disclosure per ASC 718
Director Phantom Stock Plan
as of March 31, 2010
 Expected
    
    
    Remaining LifeDate of Grant
    
    Risk Free Interest Rate
    
    
    Volatility
    
    
    Life
    
    
    (months)November 2006
    
    
    4.54%  4.58
    %
    
    
    35
    %
    
    3 yrs
    
    
    November 2007
    
    
    4.23%  4.23
    %
    
    
    35
    %
    
    3 yrs
    
    
    7.4Weighted Average Remaining Life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.1
 (18) Segment Information and Customer Concentration
   23




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
   (19) Income Taxes
    Income Taxes
     24




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
  March 31, 2010Current:Federal
    
    $
    State
    
    
    (2
    )Foreign
    
    
    (40
    )Total current provision
    
    
    (42
    )Deferred:Federal
    
    
    27,833State
    
    
    5,985Foreign
    
    
    Total deferred provision/(benefit)
    
    
    33,818Total provision for income taxes
    
    $
    33,776
  March 31, 2010
    
    
    March 31, 2010Expected fed income tax (benefit)
    
    
    35.0
    %
    
    $
    12,250State taxes (net of federal benefit)
    
    
    11.1
    %
    
    
    3,891Nondeductible expenses
    
    
    0.4
    %
    
    
    150Provision to return true-ups (permanent
items)
    
    
    0.0
    %
    
    
    (2
    )Tax credits
    
    
    -0.1
    %
    
    
    (40
    )Deferred tax assets at conversion
    
    
    101.0
    %
    
    
    35,359Valuation allowance
    
    
    -101.0
    %
    
    
    (35,359
    )Deferred tax liabilities at conversion
    
    
    96.6
    %
    
    
    33,818Debt extinguishment and tax status change
    
    
    -46.5
    %
    
    
    (16,291
    )Income tax expense (benefit)
    
    
    96.5
    %
    
    $
    33,776
  March 31, 2010Deferred tax assets:Accrued expenses and reserves
    
    $
    9,511Intangible amortization
    
    
    12,657Deferred rent
    
    
    2,556Deferred wages
    
    
    4,857Depreciation and leases
    
    
    2,784Carryforwards and tax credits
    
    
    2,968Other
    
    
    25Gross deferred tax assets
    
    $
    35,359Less Valuation
    
    
    35,359Net Deferred Tax Assets
    
    $
    Deferred tax liabilities:Goodwill
    
    
    (33,818
    )Net deferred tax asset/(liability)
    
    $
    (33,818
    )
  25




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 (20) Debt Extinguishment
  (21) Commitments and Contingencies
 Secured Notes registration rights agreement
  Earn-Out and Hold-Back Commitments
  Legal Proceedings
  Government Audits
  (22) Guarantor/Non-guarantor Condensed Consolidated Financial Information
    26




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed
Consolidating Balance Sheet as of March 31, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Current assets:Cash and cash equivalents
    
    $
    28,541
    
    
    $
    (241
    )
    
    $
    
    
    
    $
    
    
    
    $
    28,300Accounts receivable, net
    
    
    181,494
    
    
    
    6,241
    
    
    
    112
    
    
    
    
    
    
    
    187,847Prepaid expenses and other current assets
    
    
    5,300
    
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    5,432Total current assets
    
    
    215,335
    
    
    
    6,132
    
    
    
    112
    
    
    
    
    
    
    
    221,579Property, plant and equipment, net
    
    
    12,834
    
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    12,952Intangible assets, net
    
    
    23,048
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,048Goodwill
    
    
    398,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,921Investment in subsidiaries
    
    
    20,172
    
    
    
    
    
    
    
    
    
    
    
    (20,172
    )
    
    
    Intercompany receivables
    
    
    896
    
    
    
    18,592
    
    
    
    
    
    
    
    (19,488
    )
    
    
    Other assets
    
    
    10,645
    
    
    
    13
    
    
    
    3
    
    
    
    
    
    
    
    10,661Total assets
    
    $
    681,851
    
    
    $
    24,855
    
    
    $
    115
    
    
    $
    (39,660
    )
    
    $
    667,161Current liabilities:Book cash overdraft
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest payable
    
    
    5,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,095Current portion, senior term loan payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Current portion of subordinated note
payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Current portion, acquisition obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade accounts payable
    
    
    70,081
    
    
    
    1,046
    
    
    
    
    
    
    
    
    
    
    
    71,127Accrued liabilities
    
    
    53,050
    
    
    
    1,648
    
    
    
    
    
    
    
    
    
    
    
    54,698Accrued payroll and related liabilities
    
    
    35,284
    
    
    
    1,129
    
    
    
    22
    
    
    
    
    
    
    
    36,435Billings in excess of revenue earned
    
    
    3,783
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,783Total current liabilities
    
    
    167,293
    
    
    
    3,823
    
    
    
    22
    
    
    
    
    
    
    
    171,138Intercompany payables
    
    
    18,593
    
    
    
    
    
    
    
    895
    
    
    
    (19,488
    )
    
    
    Senior term loan payable, excluding current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior secured notes
    
    
    268,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268,400Senior unsecured notes
    
    
    245,684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,684Subordinated note payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accrued compensation, excluding current portion
    
    
    5,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,275Accrued postretirement benefit obligations
    
    
    740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    740Non-current portion of lease obligations
    
    
    7,863
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    7,921Deferred income taxes
    
    
    33,818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,818Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redeemable common stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redeemable common stock
    
    
    153,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,140Common stock warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,785Common stock of subsidiaries
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    (2,800
    )
    
    
    Accumulated other comprehensive loss
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )Accumulated deficit
    
    
    (239,502
    )
    
    
    18,174
    
    
    
    (802
    )
    
    
    (17,372
    )
    
    
    (239,502
    )Total liabilities, redeemable common stock and accumulated deficit
    
    $
    681,851
    
    
    $
    24,855
    
    
    $
    115
    
    
    $
    (39,660
    )
    
    $
    667,161
  27




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Balance Sheet as of September 30, 2009
(In thousands)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    11,404
    
    
    $
    (215
    )
    
    $
    (4
    )
    
    $
    
    
    
    $
    11,185Accounts receivable, net
    
    
    174,458
    
    
    
    5,661
    
    
    
    38
    
    
    
    
    
    
    
    180,157Prepaid expenses and other current
assets
    
    
    3,659
    
    
    
    133
    
    
    
    3
    
    
    
    
    
    
    
    3,795Total current assets
    
    
    189,521
    
    
    
    5,579
    
    
    
    37
    
    
    
    
    
    
    
    195,137Property, plant and equipment, net
    
    
    14,346
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    14,474Intangible assets, net
    
    
    28,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,680Goodwill
    
    
    398,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,921Investment in subsidiaries
    
    
    17,132
    
    
    
    
    
    
    
    
    
    
    
    (17,132
    )
    
    
    Intercompany receivables
    
    
    702
    
    
    
    15,939
    
    
    
    
    
    
    
    (16,641
    )
    
    
    Other assets
    
    
    10,270
    
    
    
    13
    
    
    
    3
    
    
    
    
    
    
    
    10,286Total assets
    
    $
    659,572
    
    
    $
    21,659
    
    
    $
    40
    
    
    $
    (33,773
    )
    
    $
    647,498Interest payable
    
    $
    9,039
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,039Current portion, senior term loan
payable
    
    
    2,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,389Current portion of subordinated note
payable
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Current portion, acquisition obligations
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Trade accounts payable
    
    
    59,742
    
    
    
    963
    
    
    
    2
    
    
    
    
    
    
    
    60,707Accrued liabilities
    
    
    43,985
    
    
    
    1,440
    
    
    
    
    
    
    
    
    
    
    
    45,425Accrued payroll and related liabilities
    
    
    41,643
    
    
    
    1,381
    
    
    
    9
    
    
    
    
    
    
    
    43,033Billings in excess of revenue earned
    
    
    3,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,661Total current liabilities
    
    
    163,509
    
    
    
    3,784
    
    
    
    11
    
    
    
    
    
    
    
    167,304Intercompany payables
    
    
    15,939
    
    
    
    
    
    
    
    702
    
    
    
    (16,641
    )
    
    
    Senior term loan payable, excluding
current portion
    
    
    229,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229,221Senior unsecured notes
    
    
    245,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,241Subordinated note payable
    
    
    46,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,932Accrued compensation, excluding current
portion
    
    
    5,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,740Accrued postretirement benefit
obligations
    
    
    717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    717Non-current portion of lease obligations
    
    
    7,216
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    7,286Redeemable common stock warrants
    
    
    32,717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,717Redeemable common stock
    
    
    187,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,137Common stock of subsidiaries
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    (2,800
    )
    
    
    Accumulated other comprehensive loss
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )Accumulated deficit
    
    
    (274,559
    )
    
    
    15,005
    
    
    
    (673
    )
    
    
    (14,332
    )
    
    
    (274,559
    )Total liabilities, redeemable common
stock and accumulated deficit
    
    $
    659,572
    
    
    $
    21,659
    
    
    $
    40
    
    
    $
    (33,773
    )
    
    $
    647,498
  28




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Statement of Operations
for the Three Months Ended March 31, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    195,192
    
    
    $
    8,322
    
    
    $
    32
    
    
    $
    
    
    
    $
    203,546Direct contract expense
    
    
    150,349
    
    
    
    5,680
    
    
    
    20
    
    
    
    
    
    
    
    156,049Gross profit
    
    
    44,843
    
    
    
    2,642
    
    
    
    12
    
    
    
    
    
    
    
    47,497Operating expenses:Indirect contract expense
    
    
    9,023
    
    
    
    949
    
    
    
    10
    
    
    
    
    
    
    
    9,982Research and development
    
    
    309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    309General and administrative
    
    
    18,172
    
    
    
    204
    
    
    
    90
    
    
    
    
    
    
    
    18,466Rental and occupancy expense
    
    
    8,138
    
    
    
    149
    
    
    
    11
    
    
    
    
    
    
    
    8,298Depreciation and amortization
    
    
    4,199
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    4,212Total operating expenses
    
    
    39,841
    
    
    
    1,315
    
    
    
    111
    
    
    
    
    
    
    
    41,267Operating income
    
    
    5,002
    
    
    
    1,327
    
    
    
    (99
    )
    
    
    
    
    
    
    6,230Other income (expense):Interest income
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Interest expense
    
    
    (14,097
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,097
    )Other
    
    
    8
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    87Gain on extinguishment of debt
    
    
    50,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,749Equity in net income of
subsidiaries
    
    
    1,309
    
    
    
    
    
    
    
    
    
    
    
    (1,309
    )
    
    
    Total other expenses
    
    
    37,981
    
    
    
    79
    
    
    
    
    
    
    
    (1,309
    )
    
    
    36,751Pre-tax income (loss)
    
    
    42,983
    
    
    
    1,406
    
    
    
    (99
    )
    
    
    (1,309
    )
    
    
    42,981Income tax (expense) benefit
    
    
    (33,818
    )
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    (33,816
    )Net income (loss)
    
    $
    9,165
    
    
    $
    1,408
    
    
    $
    (99
    )
    
    $
    (1,309
    )
    
    $
    9,165
  29




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Statement of Operations for the Three Months Ended March 31, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    186,153
    
    
    
    9,274
    
    
    
    2
    
    
    
    
    
    
    $
    195,429Direct contract expense
    
    
    142,650
    
    
    
    6,485
    
    
    
    
    
    
    
    
    
    
    
    149,135Gross profit
    
    
    43,503
    
    
    
    2,789
    
    
    
    2
    
    
    
    
    
    
    
    46,294Indirect contract expense
    
    
    8,478
    
    
    
    805
    
    
    
    49
    
    
    
    
    
    
    
    9,332Research and development
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78General and administrative
    
    
    13,163
    
    
    
    261
    
    
    
    2
    
    
    
    
    
    
    
    13,426Rental and occupancy expense
    
    
    8,311
    
    
    
    156
    
    
    
    1
    
    
    
    
    
    
    
    8,468Depreciation and amortization
    
    
    4,687
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    4,700Total operating expenses
    
    
    34,717
    
    
    
    1,235
    
    
    
    52
    
    
    
    
    
    
    
    36,004Operating income
    
    
    8,786
    
    
    
    1,554
    
    
    
    (50
    )
    
    
    
    
    
    
    10,290Other income (expense):Interest income
    
    
    9
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    25Interest expense
    
    
    (10,244
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,244
    )Other
    
    
    (173
    )
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    (87
    )Equity in net income of
subsidiaries
    
    
    1,606
    
    
    
    
    
    
    
    
    
    
    
    (1,606
    )
    
    
    Total other expenses
    
    
    (8,802
    )
    
    
    102
    
    
    
    
    
    
    
    (1,606
    )
    
    
    (10,306
    )Pre-tax income (loss)
    
    
    (16
    )
    
    
    1,656
    
    
    
    (50
    )
    
    
    (1,606
    )
    
    
    (16
    )Income tax (expense) benefit
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55Net income (loss)
    
    $
    39
    
    
    
    1,656
    
    
    
    (50
    )
    
    
    (1,606
    )
    
    $
    39
  30




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Statement of Operations for the Six Months Ended March 31, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    392,466
    
    
    $
    16,748
    
    
    $
    70
    
    
    $
    
    
    
    $
    409,284Direct contract expense
    
    
    303,814
    
    
    
    11,186
    
    
    
    45
    
    
    
    
    
    
    
    315,045Gross profit
    
    
    88,652
    
    
    
    5,562
    
    
    
    25
    
    
    
    
    
    
    
    94,239Operating expenses:Indirect contract expense
    
    
    17,394
    
    
    
    1,856
    
    
    
    18
    
    
    
    
    
    
    
    19,268Research and development
    
    
    570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570General and administrative
    
    
    33,949
    
    
    
    369
    
    
    
    155
    
    
    
    
    
    
    
    34,473Rental and occupancy expense
    
    
    15,968
    
    
    
    295
    
    
    
    21
    
    
    
    
    
    
    
    16,284Depreciation and amortization
    
    
    8,418
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    8,443Total operating expenses
    
    
    76,299
    
    
    
    2,545
    
    
    
    194
    
    
    
    
    
    
    
    79,038Operating income
    
    
    12,353
    
    
    
    3,017
    
    
    
    (169
    )
    
    
    
    
    
    
    15,201Other income (expense):Interest income
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Interest expense
    
    
    (30,983
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,983
    )Other
    
    
    (174
    )
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    (24
    )Gain on extinguishment of debt
    
    
    50,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,749Equity in net income of
subsidiaries
    
    
    3,040
    
    
    
    
    
    
    
    
    
    
    
    (3,040
    )
    
    
    Total other expenses
    
    
    22,689
    
    
    
    150
    
    
    
    
    
    
    
    (3,040
    )
    
    
    19,799Pre-tax income (loss)
    
    
    35,042
    
    
    
    3,167
    
    
    
    (169
    )
    
    
    (3,040
    )
    
    
    35,000Income tax (expense) benefit
    
    
    (33,818
    )
    
    
    2
    
    
    
    40
    
    
    
    
    
    
    
    (33,776
    )Net income (loss)
    
    $
    1,224
    
    
    $
    3,169
    
    
    $
    (129
    )
    
    $
    (3,040
    )
    
    $
    1,224
  31




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Statements of Operations for the Six Months Ended March 31, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    366,117
    
    
    $
    18,106
    
    
    $
    2
    
    
    $
    
    
    
    $
    384,225Direct contract expense
    
    
    281,369
    
    
    
    13,086
    
    
    
    2
    
    
    
    
    
    
    
    294,457Gross profit
    
    
    84,748
    
    
    
    5,020
    
    
    
    
    
    
    
    
    
    
    
    89,768Operating expenses:Indirect contract expense
    
    
    16,634
    
    
    
    1,773
    
    
    
    49
    
    
    
    
    
    
    
    18,456Research and development
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147General and administrative
    
    
    23,225
    
    
    
    372
    
    
    
    2
    
    
    
    
    
    
    
    23,599Rental and occupancy expense
    
    
    15,924
    
    
    
    281
    
    
    
    1
    
    
    
    
    
    
    
    16,206Depreciation and amortization
    
    
    9,481
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    9,506Total operating expenses
    
    
    65,411
    
    
    
    2,451
    
    
    
    52
    
    
    
    
    
    
    
    67,914Operating income
    
    
    19,337
    
    
    
    2,569
    
    
    
    (52
    )
    
    
    
    
    
    
    21,854Other income (expense):Interest income
    
    
    32
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    48Interest expense
    
    
    (24,332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,332
    )Other
    
    
    (267
    )
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    (122
    )Equity in net income of
subsidiaries
    
    
    2,678
    
    
    
    
    
    
    
    
    
    
    
    (2,678
    )
    
    
    Total other expenses
    
    
    (21,889
    )
    
    
    161
    
    
    
    
    
    
    
    (2,678
    )
    
    
    (24,406
    )Pre-tax income (loss)
    
    
    (2,552
    )
    
    
    2,730
    
    
    
    (52
    )
    
    
    (2,678
    )
    
    
    (2,552
    )Income tax (expense) benefit
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Net income (loss)
    
    $
    (2,501
    )
    
    $
    2,730
    
    
    $
    (52
    )
    
    $
    (2,678
    )
    
    $
    (2,501
    )
  32




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Statement of Cash Flows for the Six Months Ended March 31, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Consolidated(In thousands)Net cash used in operating activities
    
    $
    (72
    )
    
    $
    (10
    )
    
    $
    3
    
    
    $
    (79
    )Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Capital expenditures
    
    
    (1,255
    )
    
    
    (16
    )
    
    
    
    
    
    
    (1,271
    )Proceeds from sale of assets
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Net cash used in investing activities
    
    
    (1,300
    )
    
    
    (16
    )
    
    
    
    
    
    
    (1,316
    )Cash flows from financing activities:Change in book overdraft
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash (paid for) received from interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of Secured Notes
    
    
    281,465
    
    
    
    
    
    
    
    
    
    
    
    281,465Sale of Common Stock Warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    20,785Payment of debt issue costs
    
    
    (16,710
    )
    
    
    
    
    
    
    
    
    
    
    (16,710
    )Payment of Term B Loan
    
    
    (236,596
    )
    
    
    
    
    
    
    
    
    
    
    (236,596
    )Repurchase of Subordinated Note and related warrants
    
    
    (25,000
    )
    
    
    
    
    
    
    
    
    
    
    (25,000
    )Payment of Subordinated Note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Revolver borrowings
    
    
    84,200
    
    
    
    
    
    
    
    
    
    
    
    84,200Revolver payments
    
    
    (84,200
    )
    
    
    
    
    
    
    
    
    
    
    (84,200
    )Loan to ESOP Trust
    
    
    (5,323
    )
    
    
    
    
    
    
    
    
    
    
    (5,323
    )ESOP loan repayment
    
    
    5,323
    
    
    
    
    
    
    
    
    
    
    
    5,323Redeemable common stock purchased from ESOP Trust
    
    
    (7,581
    )
    
    
    
    
    
    
    
    
    
    
    (7,581
    )Redeemable common stock sold to ESOP Trust
    
    
    2,148
    
    
    
    
    
    
    
    
    
    
    
    2,148Net cash (used in) provided by financing activities
    
    
    18,511
    
    
    
    
    
    
    
    
    
    
    
    18,511Net increase (decrease) in cash and cash equivalents
    
    
    17,137
    
    
    
    (25
    )
    
    
    3
    
    
    
    17,115Cash and cash equivalents at beginning of period
    
    
    11,404
    
    
    
    (215
    )
    
    
    (4
    )
    
    
    11,185Cash and cash equivalents at end of period
    
    $
    28,541
    
    
    $
    (240
    )
    
    $
    (1
    )
    
    $
    28,300
  33




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
 Condensed Consolidating Statement of Cash Flows for the Six Months Ended March 31, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Consolidated(In thousands)Net cash used in operating activities
    
    $
    (8,982
    )
    
    $
    97
    
    
    $
    
    
    
    $
    (8,885
    )Cash paid for acquisitions-related obligations
    
    
    (166
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Capital expenditures
    
    
    (1,076
    )
    
    
    
    
    
    
    
    
    
    
    (1,076
    )Net cash used in investing activities
    
    
    (1,242
    )
    
    
    
    
    
    
    
    
    
    
    (1,242
    )Change in book overdraft
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Cash (paid for) received from interest rate swap
    
    
    (4,647
    )
    
    
    
    
    
    
    
    
    
    
    (4,647
    )Payment of senior term loan principal
    
    
    (1,216
    )
    
    
    
    
    
    
    
    
    
    
    (1,216
    )Payment of subordinated note principal
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Revolver borrowings
    
    
    227,500
    
    
    
    
    
    
    
    
    
    
    
    227,500Revolver payments
    
    
    (222,780
    )
    
    
    
    
    
    
    
    
    
    
    (222,780
    )Loan to ESOP Trust
    
    
    (5,936
    )
    
    
    
    
    
    
    
    
    
    
    (5,936
    )ESOP loan repayment
    
    
    5,936
    
    
    
    
    
    
    
    
    
    
    
    5,936Redeemable common stock purchased from ESOP Trust
    
    
    (7,232
    )
    
    
    
    
    
    
    
    
    
    
    (7,232
    )Redeemable common stock sold to ESOP Trust
    
    
    5,115
    
    
    
    
    
    
    
    
    
    
    
    5,115Net cash (used in) provided by financing activities
    
    
    (6,160
    )
    
    
    
    
    
    
    
    
    
    
    (6,160
    )Net increase (decrease) in cash and cash equivalents
    
    
    (16,384
    )
    
    
    97
    
    
    
    
    
    
    
    (16,287
    )Cash and cash equivalents at beginning of period
    
    
    16,392
    
    
    
    (104
    )
    
    
    (1
    )
    
    
    16,287Cash and cash equivalents at end of period
    
    $
    8
    
    
    $
    (7
    )
    
    $
    (1
    )
    
    $
    
  34




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   For the Six Months Ended March 31,2010
    
    
    2009Revenue by Contract Type
    
    (In thousands)Cost-reimbursement
    
    $
    297,478
    
    
    
    72.6
    %
    
    $
    270,217
    
    
    
    70.4
    %Fixed-price
    
    
    50,565
    
    
    
    12.4
    %
    
    
    40,523
    
    
    
    10.5
    %Time-and-material
    
    
    61,241
    
    
    
    15.0
    %
    
    
    73,485
    
    
    
    19.1
    %Total
    
    $
    409,284
    
    
    
    100.0
    %
    
    $
    384,225
    
    
    
    100.0
    %
  For the Six Months Ended March 31,2010
    
    
    2009Revenue by Customer Type
    
    (In thousands)U.S. Department of Defense (DoD)
    
    $
    376,861
    
    
    
    92.1
    %
    
    $
    351,542
    
    
    
    91.9
    %Other Federal Civilian Agencies
    
    
    21,036
    
    
    
    5.1
    %
    
    
    18,378
    
    
    
    4.4
    %Commercial / State / Local and International
    
    
    11,387
    
    
    
    2.8
    %
    
    
    14,305
    
    
    
    3.7
    %Total
    
    $
    409,284
    
    
    
    100.0
    %
    
    $
    384,225
    
    
    
    100.0
    %
     35




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##### Table of Contents



For the Six Months Ended March 31,2010
    
    
    2009Core Business Area
    
    (In thousands)Naval Architecture and Marine Engineering
    
    $
    178,599
    
    
    
    43.7
    %
    
    $
    174,381
    
    
    
    45.4
    %Defense Operations
    
    
    100,865
    
    
    
    24.6
    %
    
    
    68,806
    
    
    
    17.9
    %Modeling and Simulation
    
    
    70,810
    
    
    
    17.3
    %
    
    
    41,218
    
    
    
    10.7
    %Technology Integration
    
    
    23,622
    
    
    
    5.8
    %
    
    
    59,133
    
    
    
    15.4
    %Energy and Environmental Sciences
    
    
    19,303
    
    
    
    4.7
    %
    
    
    27,478
    
    
    
    7.2
    %Information Technology and Wireless
Communications
    
    
    16,085
    
    
    
    3.9
    %
    
    
    13,209
    
    
    
    3.4
    %Total
    
    $
    409,284
    
    
    
    100.0
    %
    
    $
    384,225
    
    
    
    100.0
    %
 Backlog .
  36




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##### Table of Contents



Results of Operations
 Quarter Ended March 31, 2010 Compared to Quarter Ended March 31, 2009
 Consolidated Operations of AlionQuarter Ended March 31,2010
    
    
    2009(Dollars in thousands)%
    
    
    
    
    
    
    %Selected Financial Information
    
    
    
    
    
    revenue
    
    
    
    
    
    
    revenueTotal contract revenue
    
    $
    203,546
    
    
    
    
    
    
    $
    195,429Total direct contract costs
    
    
    156,049
    
    
    
    76.7
    %
    
    
    149,135
    
    
    
    76.3
    %Direct labor costs
    
    
    68,976
    
    
    
    33.9
    %
    
    
    67,758
    
    
    
    34.7
    %Material and subcontract costs
    
    
    82,424
    
    
    
    40.5
    %
    
    
    75,385
    
    
    
    38.6
    %Other direct costs
    
    
    4,649
    
    
    
    2.3
    %
    
    
    5,992
    
    
    
    3.1
    %Gross profit
    
    
    47,497
    
    
    
    23.3
    %
    
    
    46,294
    
    
    
    23.7
    %Total operating expense
    
    
    41,267
    
    
    
    20.3
    %
    
    
    36,004
    
    
    
    18.4
    %Major components of operating expense:Indirect expenses including facilities costs
    
    
    18,280
    
    
    
    9.0
    %
    
    
    17,801
    
    
    
    9.1
    %General and administrative (excluding stock-based compensation)
    
    
    19,323
    
    
    
    9.5
    %
    
    
    14,587
    
    
    
    7.5
    %Stock-based compensation
    
    
    (857
    )
    
    
    -0.4
    %
    
    
    (1,161
    )
    
    
    -0.6
    %Depreciation and amortization
    
    
    4,212
    
    
    
    2.1
    %
    
    
    4,700
    
    
    
    2.4
    %Income from operations
    
    $
    6,230
    
    
    
    3.1
    %
    
    $
    10,290
    
    
    
    5.3
    %
 Revenue.
   Direct Contract Expense and Gross Profit.
  37




---



##### Table of Contents



Operating Expenses.
 Income from Operations.
 Other Expense.
   38




---



##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009(In thousands)Cash Pay InterestRevolver
    
    $
    94
    
    
    $
    390Senior Term Loan
    
    
    5,308
    
    
    
    5,662Secured Notes
    
    
    775
    
    
    
    Unsecured Notes
    
    
    6,406
    
    
    
    6,406Subordinated Note
    
    
    (793
    )
    
    
    776Other cash pay interest and fees
    
    
    2,679
    
    
    
    116Sub-total cash pay interest
    
    
    14,469
    
    
    
    13,350Deferred and Non-cash Interest
Secured Notes PIK interest
    
    
    155
    
    
    
    Debt issue costs and other non-cash items
    
    
    650
    
    
    
    1,272Subordinated Note interest
    
    
    (1,177
    )
    
    
    1,066Subordinated Note warrants
    
    
    
    
    
    
    (5,444
    )Sub-total non-cash interest
    
    
    (372
    )
    
    
    (3,106
    )Total interest expense
    
    $
    14,097
    
    
    $
    10,244
 Debt Extinguishment.
  Income Tax Expense.
   Net Income
  39




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##### Table of Contents



Six Months Ended March 31, 2010 Compared to Six Months Ended March 31, 2009
 Consolidated Operations of AlionSix Months Ended March 31,2010
    
    
    2009(Dollars in thousands)%
    
    
    
    
    
    
    %Selected Financial Information
    
    
    
    
    
    revenue
    
    
    
    
    
    
    revenueTotal contract revenue
    
    $
    409,284
    
    
    
    
    
    
    $
    384,225Total direct contract costs
    
    
    315,045
    
    
    
    77.0
    %
    
    
    294,457
    
    
    
    76.6
    %Direct labor costs
    
    
    136,103
    
    
    
    33.3
    %
    
    
    134,588
    
    
    
    35.0
    %Material and subcontract costs
    
    
    170,567
    
    
    
    41.7
    %
    
    
    147,849
    
    
    
    38.5
    %Other direct costs
    
    
    8,375
    
    
    
    2.0
    %
    
    
    12,020
    
    
    
    3.1
    %Gross profit
    
    
    94,239
    
    
    
    23.0
    %
    
    
    89,768
    
    
    
    23.4
    %Total operating expense
    
    
    79,038
    
    
    
    19.3
    %
    
    
    67,914
    
    
    
    17.7
    %Major components of operating expense:Indirect expenses including facilities costs
    
    
    35,552
    
    
    
    8.7
    %
    
    
    34,563
    
    
    
    9.0
    %General and administrative (excluding
stock-based compensation)
    
    
    35,328
    
    
    
    8.6
    %
    
    
    29,363
    
    
    
    7.6
    %Stock-based compensation
    
    
    (855
    )
    
    
    -0.21
    %
    
    
    (5,764
    )
    
    
    -1.5
    %Depreciation and amortization
    
    
    8,443
    
    
    
    2.1
    %
    
    
    9,506
    
    
    
    2.5
    %Income from operations
    
    $
    15,201
    
    
    
    3.7
    %
    
    $
    21,854
    
    
    
    5.7
    %
 Revenue
   Direct Contract Expense and Gross Profit.
  40




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##### Table of Contents



Operating Expenses.
 Income from Operations.
 Other Expense.
  41




---



##### Table of Contents



Six Months Ended March 31,2010
    
    
    2009(In thousands)Cash Pay InterestRevolver
    
    $
    98
    
    
    $
    522Senior Term Loan
    
    
    11,047
    
    
    
    11,455Secured Notes
    
    
    775
    
    
    
    Unsecured Notes
    
    
    12,813
    
    
    
    12,813Subordinated Note
    
    
    
    
    
    
    870Other cash pay interest and fees
    
    
    4,032
    
    
    
    214Sub-total cash pay interest
    
    
    28,765
    
    
    
    25,874Deferred and Non-cash InterestSecured Notes PIK interest
    
    
    155
    
    
    
    Debt issue costs and other non-cash items
    
    
    2,223
    
    
    
    2,544Subordinated Note interest
    
    
    
    
    
    
    2,812Subordinated Note warrants
    
    
    (160
    )
    
    
    (6,898
    )Sub-total non-cash interest
    
    
    2,218
    
    
    
    (1,542
    )Total interest expense
    
    $
    30,983
    
    
    $
    24,332
 Debt Extinguishment.
  Income Tax Expense.
   Net Income
  42




---



##### Table of Contents



Liquidity and Capital Resources
  Cash Flows
       43




---



##### Table of Contents



Cash flow effects and risks associated with equity-related obligations
     Discussion of Debt Structure
  Credit Agreement
     44




---



##### Table of Contents



Security.
 Guarantees
 Interest and Fees.
 Other Fees and Expenses.
  Covenants.
 Period
    
    Minimum Consolidated EBITDAJune 30, 2010 through March 31, 2011
    
    $
    52,500,000April 1, 2011 through September 30, 2011
    
    $
    55,000,000October 1, 2011 through September 30, 2012
    
    $
    60,000,000October 1, 2012 through September 30, 2013
    
    $
    62,500,000Thereafter
    
    $
    65,000,000
   
    
    incur additional indebtedness other than permitted additional indebtedness;
 
    
    grant certain liens and security interests;
 
    
    enter into sale and leaseback transactions;
 
    
    make certain loans and investments including acquisitions of businesses, other than
permitted acquisitions;
 
    
    consolidate, merge or sell all or substantially all of the Companys assets;
  45




---



##### Table of Contents




    
    pay dividends or distributions other than distributions required by the ESOP Plan or by
certain legal requirements;
 
    
    enter into certain transactions with the Companys shareholders and affiliates;
 
    
    change lines of business;
 
    
    repay subordinated indebtedness before it is due and redeem or repurchase certain
equity;
 
    
    enter into certain transactions not permitted under ERISA;
 
    
    spend more than $8 million on capital expenditures in any fiscal year;
 
    
    pay certain earn-outs in connection with permitted acquisitions; or
 
    
    change its fiscal year.
 Events of Default.
 
    
    breach of representations and warranties;
 
    
    payment default;
 
    
    uncured covenant breaches;
 
    
    default under certain other debt exceeding an agreed amount;
 
    
    bankruptcy and insolvency events;
 
    
    incurrence of a civil or criminal liability in excess of $5 million of the Company or
any subsidiary arising from a government investigation;
 
    
    unstayed judgments in excess of an agreed amount;
 
    
    failure of any guarantee of the Credit Agreement to be in effect;
 
    
    failure of the security interests to be valid, perfected first priority security
interests in the collateral;
 
    
    notice of debarment, suspension or termination under a material government contract;
 
    
    actual termination of a material contract due to alleged fraud, willful misconduct,
negligence, default or any other wrongdoing;
 
    
    certain ERISA violations;
 
    
    imposition on the ESOP Trust of certain taxes in excess of an agreed amount;
 
    
    final determination the ESOP is not a qualified plan;
 
    
    so long as any Secured Notes remain outstanding, the Intercreditor Agreement shall fail
to be effective; or
 
    
    change of control (as defined below).
  Secured Notes
  Security . parri passu
 Guarantees
 Interest and Fees.
  46




---



##### Table of Contents



Covenants.
  
    
    Indebtedness incurred pursuant to certain agreements up to $25 million
 
    
    Permitted inter-company indebtedness
 
    
    The Secured Notes and any public notes exchanged for those notes
 
    
    Indebtedness pre-existing the issuance of the Secured Notes
 
    
    Permitted Indebtedness of acquired subsidiaries
 
    
    Permitted refinancing Indebtedness
 
    
    Indebtedness under hedging agreements
 
    
    Performance, bid, appeal and surety bonds and completion guarantees
 
    
    Ordinary course insufficient funds coverage
 
    
    Guarantees in connection with permitted refinancing Indebtedness
 
    
    Indebtedness of non-U.S. subsidiaries incurred for working capital purposes
 
    
    Indebtedness incurred for capital expenditure purposes and Indebtedness for capital and
synthetic leases not exceeding in the aggregate $25 million and 2.5% of the Companys Total
Assets as defined in the Secured Note Indenture
 
    
    Permitted subordinated Indebtedness of the Company or any Restricted Subsidiary incurred
to finance a permitted acquisition, certain permitted transactions involving the ESOP and
refinancing Indebtedness of acquired non-U.S. subsidiaries in an amount not exceeding in
the aggregate $35 million
 
    
    Reimbursement obligations with regard to letters of credit
 
    
    Certain agreements in connection with the acquisition of a business as long as the
liabilities incurred in connection therewith are not reflected on the Companys balance
sheet
 
    
    Certain deferred compensation agreements
 
    
    Certain other Indebtedness not exceeding $20 million.
  
    
    Such payments out of substantially concurrent contributions of equity to the Company and
substantially concurrent incurrences of permitted Indebtedness
 
    
    Certain limited and permitted dividends
 
    
    Certain repurchases of the Companys equity securities deemed to occur upon exercise of
stock options or warrants
 
    
    Cash payments in lieu of the issuance of fractional shares in connection with the
exercise of warrants, options or other securities convertible into or exchangeable for the
Companys equity securities
 
    
    The required premium payable on the Secured Notes in connection with a change of control
of the Company
 
    
    Certain permitted inter-company subordinated obligations
 
    
    Certain repurchases and redemptions of subordination obligations of the Company or a
Subsidiary Guarantor from Net Available Cash (as defined in the Secured Note Indenture)
 
    
    Repurchases of subordinated obligations in connection with an asset sale to the extent
required by the Secured Note Indenture
 
    
    Certain permitted transactions with the ESOP
 
    
    Payments to directors, officers and employees of the Company in connection with
long-term incentive plans, subject to a $3 million annual cap that may increase annually
  47




---



##### Table of Contents




    
    Any purchase, repurchase, redemption, defeasance or other acquisition or retirement for
value of the Unsecured Notes, up to an aggregate amount of $10 million
 
    
    Certain other payments not exceeding $10 million in the aggregate.
  Events of Default.
 
    
    payment default;
 
    
    uncured covenant breaches;
 
    
    default under an acceleration of certain other debt exceeding $30 million;
 
    
    certain bankruptcy and insolvency events;
 
    
    a judgment for payment in excess of $30 million entered against the Company or any
material subsidiary that remains outstanding for a period of 60 days and is not discharged,
waived or stayed;
 
    
    failure of any guarantee of the Secured Notes to be in effect or the denial or
disaffirmation by any subsidiary guarantor of its guaranty obligations; and
 
    
    failure of any security interest securing the Secured Notes to constitute a valid and
perfected lien with its applicable priority after a permitted cure period.
 Change of Control.
 
    
    subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the
beneficial owner, directly or indirectly, of more than 35% of the total voting power or
voting stock of Alion;
 
    
    individuals who constituted Alions board of directors on the date the Secured Notes
were issued, cease for any reason to constitute a majority of the Companys board of
directors;
 
    
    the adoption of a plan relating to Alions liquidation or dissolution; and
 
    
    subject to certain exceptions, the merger or consolidation of the Company with or into
another person or the merger of another person with or into the Company, or the sale of all
or substantially all the assets of Alion to another person.
 Optional Redemption
    Period
    
    Redemption PriceApril 1, 2013 to September 30, 2013
    
    
    105.0
    %October 1, 2013 to March 31, 2014
    
    
    103.0
    %April 1, 2014 and thereafter
    
    
    100.0
    %
   48




---



##### Table of Contents



Unsecured Notes
  Guarantees
 Interest and Fees.
 Covenants.
  
    
    Indebtedness incurred pursuant to the Companys now terminated Term B Senior Credit
Facility and certain other contracts up to $360 million less principal repayments made
under that indebtedness;
 
    
    Permitted inter-company Indebtedness;
 
    
    The Unsecured Notes ;
 
    
    Indebtedness pre-existing the issuance of the Unsecured Notes;
 
    
    Permitted Indebtedness of acquired subsidiaries;
 
    
    Permitted refinancing Indebtedness;
 
    
    Indebtedness under hedging agreements;
 
    
    Performance, bid, appeal and surety bonds and completion guarantees;
 
    
    Ordinary course insufficient funds coverage;
 
    
    Guarantees in connection with permitted refinancing indebtedness;
 
    
    Indebtedness of non-U.S. subsidiaries incurred for working capital purposes;
 
    
    Indebtedness incurred for capital expenditure purposes and Indebtedness for capital and
synthetic leases not exceeding in the aggregate $25 million and 2.5% of the Companys Total
Assets as defined in the Unsecured Note Indenture;
 
    
    Permitted subordinated Indebtedness of the Company or any Restricted Subsidiary
incurred to finance a permitted acquisition, certain permitted transactions involving the
ESOP and refinancing Indebtedness of acquired non-U.S. subsidiaries in an amount not
exceeding in the aggregate $35 million;
 
    
    Reimbursement obligations with regard to letters of credit;
 
    
    Certain agreements in connection with the acquisition of a business as long as the
liabilities incurred in connection therewith are not reflected on the Companys balance
sheet;
 
    
    Certain deferred compensation agreements; and
 
    
    Certain other Indebtedness not exceeding $35 million.
  
    
    Such payments out of substantially concurrent contributions of equity to the Company and
substantially concurrent incurrences of permitted indebtedness;
  49




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
    
    Certain limited and permitted dividends;
 
    
    Certain repurchases of the Companys equity securities deemed to occur upon
exercise of stock options or warrants;
 
    
    Cash payments in lieu of the issuance of fractional shares in connection with the
exercise of warrants, options or other securities convertible into or exchangeable for the
Companys equity securities;
 
    
    The required premium payable on the Unsecured Notes in connection with a change of
control of the Company;
 
    
    Certain permitted inter-company subordinated obligations; and
 
    
    Certain repurchases and redemptions of subordination obligations of the Company or a
Subsidiary Guarantor from Net Available Cash (as defined in the Unsecured Note Indenture);
 
    
    Repurchases of subordinated obligations in connection with an asset sale to the extent
required by the Indenture;
 
    
    The redemption or repurchase for value of any Company equity securities for former
Company employees who were also former Joint Spectrum Center employees after voluntary or
involuntary termination of employment with the Company;
 
    
    Certain permitted transactions with the ESOP not exceeding
$25 million in the aggregate; and
 
    
    Certain other payments not exceeding $30 million in the aggregate.
  Events of Default.
 
    
    payment default;
 
    
    uncured covenant breaches;
 
    
    default under an acceleration of certain other debt exceeding $30 million;
 
    
    certain bankruptcy and insolvency events;
 
    
    a judgment for payment in excess of $30 million entered against the Company or any
material subsidiary that remains outstanding for a period of 60 days and is not discharged,
waived or stayed; and
 
    
    failure of any guarantee of the Unsecured Notes to be in effect or the denial or
disaffirmation by any subsidiary guarantor of its guaranty obligations.
 Change of Control.
 
    
    subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the
beneficial owner, directly or indirectly, of more than 35% of the total voting power or
voting stock of Alion;
 
    
    individuals who constituted Alions board of directors on the date the Unsecured Notes
were issued, cease for any reason to constitute a majority of the Companys board of
directors;
 
    
    the adoption of a plan relating to Alions liquidation or dissolution; and
 
    
    subject to certain exceptions, the merger or consolidation of the Company with or into
another person or the merger of another person with or into the Company, or the sale of all
or substantially all the assets of Alion to another person.
 Optional Redemption
   50




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Period
    
    Redemption Price2011
    
    
    105.125
    %2012
    
    
    102.563
    %2013 and thereafter
    
    
    100.000
    %
  Retired Term B Senior Credit Agreement
  Retired Subordinated Note
   6-Fiscal Years ($In thousands)2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Bank revolving credit facility(1)- Interest
    
    $
    233
    
    
    $
    444
    
    
    $
    445
    
    
    $
    444
    
    
    $
    396
    
    
    $
    Secured Notes(2)- Interest
    
    
    3,358
    
    
    
    31,223
    
    
    
    31,850
    
    
    
    32,490
    
    
    
    33,144
    
    
    
    16,821- Principal and PIK Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,788Unsecured Notes(3)- Interest
    
    
    12,813
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    12,813- Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Total cash  pay interest
    
    
    16,404
    
    
    
    57,292
    
    
    
    57,920
    
    
    
    58,559
    
    
    
    59,165
    
    
    
    29,634Total cash  pay principal and
PIK Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    589,788Total
    
    $
    16,404
    
    
    $
    57,292
    
    
    $
    57,920
    
    
    $
    58,559
    
    
    $
    59,165
    
    
    $
    619,422
 (1)
    
    Alion expects to occasionally utilize its $25.0 million revolving credit facility to meet
working capital needs through 2014. Management expects the average utilized revolver balance
will be immaterial and that interest expense will consist of commitment fees for unused
balances. The current facility expires August 22, 2014.(2)
    
    The Secured Notes bear interest at 10% in cash and 2% in PIK. Outstanding principal will
increase over time for the 2% compounding PIK interest added to the initial $310 million in
principal. The Secured Notes including $29.8 million in PIK interest mature November 1, 2014.  51




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(3)
    
    The Senior Unsecured Notes bear interest at 10.25% and mature February 1, 2015. Contingent Obligations
 Secured Notes registration rights agreement
  Earn-outs
  Other contingent obligations which will impact the Companys cash flow
  
    
    ESOP share repurchase and diversification obligations, and
 
    
    Long-term incentive compensation plan obligations.
  Number ofShares
    
    
    
    
    
    
    Total ValueDate
    
    Repurchased
    
    
    Share Price
    
    
    Purchased(In thousands)December 2008
    
    
    233
    
    
    $
    38.35
    
    
    $
    9March 2009
    
    
    189,038
    
    
    $
    38.35
    
    
    
    7,250April 2009
    
    
    122
    
    
    $
    34.30
    
    
    
    4May 2009
    
    
    38
    
    
    $
    34.30
    
    
    
    1July 2009
    
    
    100
    
    
    $
    34.30
    
    
    
    3July 2009
    
    
    128
    
    
    $
    38.35
    
    
    
    5August 2009
    
    
    178
    
    
    $
    34.30
    
    
    
    6September 2009
    
    
    55,282
    
    
    $
    34.30
    
    
    
    1,896December 2009
    
    
    745
    
    
    $
    34.50
    
    
    
    26March 2010
    
    
    218,408
    
    
    $
    34.50
    
    
    
    2,232Total
    
    
    464,272
    
    
    
    
    
    
    $
    11,432
   52




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##### Table of Contents



Recently Issued Accounting Pronouncements
 Revenue Recognition  Multiple Deliverable Revenue
Arrangements Revenue Recognition
 Certain Revenue Arrangements That Include Software Elements Software  Revenue Recognition
 Forward Looking Statements
   
    
    any future inability to maintain adequate internal control over financial reporting;
 
    
    limits on Alions financial and operational flexibility given the Companys substantial
debt and debt covenants;
 
    
    changes to the ERISA laws related to the KSOP;
 
    
    tax law changes that could affect Alions tax liabilities or its effective tax rate;
 
    
    changes in SEC rules, and other corporate governance requirements;
 
    
    failure of government customers to exercise contract options;
 
    
    U.S. government project funding decisions;
 
    
    government contract bid protest and termination risks;
 
    
    competitive factors such as pricing pressures and/or competition to hire and retain
employees;
 
    
    results of current and/or future legal proceedings and government agency proceedings
which may arise out of Alions operations with attendant risks of fines, liabilities,
penalties, suspension and/or debarment;
  53




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##### Table of Contents




    
    undertaking acquisitions that increase costs or liabilities or are disruptive;
 
    
    taking on additional debt to fund acquisitions;
 
    
    failing to adequately integrate acquired businesses;
 
    
    risks from private securities litigation, regulatory proceedings or government
enforcement actions relating to Alions prior covenant compliance disclosures;
 
    
    material changes in laws or regulations affecting Alions businesses;
 
    
    other risk factors discussed in the Companys annual report on Form 10-K for the year
ended September 30, 2009 filed with the SEC on December 24, 2009.
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk
  Foreign currency risk
  Risk associated with value of Alion common stock
  
 Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting.
  54




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##### Table of Contents



Item 4T.
    
    Controls and Procedures
  
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
  Risks Related to Internal Controls
 We discovered errors in our historic calculations of Consolidated EBITDA because of which we failed
to comply with certain covenants in our previously existing Term B Senior Credit Agreement. Our
prior disclosures relating to our compliance with our financial covenants could have material
adverse effects on our business and financial condition.
     55




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##### Table of Contents



As a result of the miscalculations of Consolidated EBITDA under our previously existing Term B
Senior Credit Agreement, we identified a material weakness in the operation of our internal control
over financial reporting. Future inability to maintain adequate control over financial reporting
could keep us from reporting our financial results in a timely and accurate matter and from
preventing financial fraud; such inability could also cause us to restate our financial statements.
   Risks Related to our Debt Structure
 We have incurred a significant amount of debt; our debt load may limit our financial and
operational flexibility which could prevent us from fulfilling our obligations under our debt
agreements.
   
    
    make it more difficult for us to satisfy our debt-related obligations; any
failure to comply with any of our debt instrument obligations, including restrictive
and financial covenants, could result in an event of default under our debt agreements;
 
    
    make it more difficult for us to satisfy our repurchase obligations to ESOP
participants;
 
    
    increase our vulnerability to general adverse economic and industry conditions
and make it more difficult for us to react to changing conditions;
 
    
    limit our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, other business opportunities, new technologies or other
general corporate requirements;
 
    
    require a substantial portion of our operating cash flow to pay interest on our
debt and reduce our ability to use our cash flow for future business needs;
 
    
    limit our flexibility to plan for, or react to changes in our business and the
government contracting industry; and
  56




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##### Table of Contents




    
    place us at a competitive disadvantage compared to less leveraged companies.
 Despite our current debt levels, we and our subsidiaries may still be able to incur more debt. This
could further aggravate risks associated with our substantial leverage.
 pari passu 1 4
 Our Unsecured Note Indenture, the new revolving credit facility and the Secured Note Indenture
restrict our operations.
  
    
    incur additional debt other than permitted additional debt;
 
    
    pay dividends or distributions on our capital stock or purchase, redeem or
retire capital stock other than to satisfy ESOP repurchase obligations or pay certain
amounts required under our equity-based compensation plans;
 
    
    make acquisitions and investments other than permitted acquisitions and
permitted investments;
 
    
    issue or sell preferred stock of subsidiaries;
 
    
    create liens on our assets;
 
    
    enter into certain transactions with affiliates;
 
    
    merge or consolidate with another company; or
 
    
    transfer or sell assets outside the ordinary course of business.
     57




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##### Table of Contents



We may not be able to obtain financing in the future, and the terms of any future financings may
limit our ability to manage our business. Difficulties in obtaining financing on favorable terms
would have a negative effect on our ability to execute our business strategy.
    If we breach our financial covenants, we could have to amend the financial covenants of the new
revolving credit facility which could materially impact our ability to finance our future
operations, future acquisitions or capital needs.
    58




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##### Table of Contents



Risks Related to Our Business and Operations
 On March 22, 2010, our S corporation election was terminated and we became a C corporation for U.S.
federal income tax purposes. As a C corporation we are subject to U.S. federal and state income tax
at regular corporate rates. The increase in our effective tax rate will potentially reduce the
amount of cash flow we have available to meet our debt and other financial obligations and to
reinvest in our operations.
  The Internal Revenue Service (IRS) could successfully challenge the validity of our S corporation
election for tax periods before March 22, 2010. In such an event, we could potentially owe
additional U.S. federal and state income tax.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
 None.
 
 Item 4.
    
    Removed and Reserved
 
 Item 5.
    
    Other Information
    59




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##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNo.
    
    Description3.4
    
    
    Amended and Restated By-Laws of Alion Science and Technology Corporation. (1)4.18
    
    
    Indenture, dated as of March 22, 2010, among the Company, certain subsidiary guarantors of
the Company and Wilmington Trust Company, as trustee. (1)4.19
    
    
    Form of 12% Senior Secured Notes due 2014. (1)4.20
    
    
    Form of Warrant. (1)4.21
    
    
    Form of Unit. (1)4.22
    
    
    Alion Science and Technology Corporation 2004 Stock Appreciation Rights Plan, as amended and restated effective January 1, 2007.4.23
    
    
    Alion Science and Technology Performance Shares and Retention Phantom Stock Plan, as amended
and restated effective November 1, 2007.4.24
    
    
    Alion Science and Technology Director Phantom Stock Plan, as amended and restated effective January 1, 2007.4.25
    
    
    Alion Executive Deferred Compensation Plan, as amended and restated effective January 1, 2008.4.26
    
    
    Alion Director Deferred Compensation Plan, as amended and restated effective January 1, 2008.4.27
    
    
    First Amendment to Alion Science and Technology Corporation 2004 Stock Appreciation Rights
Plan (as amended and restated), dated as of January 22, 2010.4.28
    
    
    First Amendment to Alion Science and Technology Corporation Director Phantom Stock Plan (as
amended and restated), dated as of January 22, 2010.4.29
    
    
    First Amendment to Alion Science and Technology Corporation Long-Term Incentive Plan, dated
as of January 22, 2010.4.30
    
    
    Third Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan.4.31
    
    
    Fourth Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan.10.91
    
    
    Separation Agreement dated as of December 8, 2009 between Alion Science and Technology
Corporation and James C. Fontana. (3)10.92
    
    
    First Supplemental Indenture, dated as February 26, 2010, between Alion-IPS Corporation,
Washington Consulting Government Services, Inc., Alion Canada (US) Corporation, Alion Science
and Technology Corporation and Wilmington Trust Company, as trustee. (2)10.93
    
    
    Purchase Agreement dated as of March 11, 2010, by and between the Company and Credit Suisse
Securities (USA) LLC. (1)10.94
    
    
    Warrant Agreement, dated as of March 22, 2010, by and between the Company and Wilmington
Trust Company, as warrant agent. (1)10.95
    
    
    Credit Agreement, dated as of March 22, 2010, by and among the Company, the lenders party
thereto and Credit Suisse AG, as administrative agent. (1)10.96
    
    
    Intercreditor Agreement, dated as of March 22, 2010, by and among the Company, the other
grantors party thereto, Credit Suisse AG, as administrative agent, and Wilmington Trust
Company, as collateral agent and trustee. (1)10.97
    
    
    Security Agreement, dated as of March 22, 2010, by and among the Company, certain
subsidiaries of the Company and Wilmington Trust Company, as collateral agent. (1)10.98
    
    
    Guarantee Agreement, dated as of March 22, 2010, by and among the Company, certain
subsidiaries of the Company and Credit Suisse AG, as administrative agent. (1)10.99
    
    
    Registration Rights Agreement, dated March 22, 2010, by and between the Company and Credit
Suisse Securities (USA) LLC. (1)10.100
    
    
    Amendment, dated as of March 22, 2010, to the Stock Purchase Agreement, dated as of December
20, 2002, between the Company and the Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Trust. (1)31.1
    
    
    Certification of Chief Executive Officer of Alion Science and Technology Corporation pursuant
to Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.31.2
    
    
    Certification of Chief Financial Officer of Alion Science and Technology Corporation pursuant
to 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.32.1
    
    
    Certification of Chief Executive Officer of Alion Science and Technology Corporation,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    
    Certification of Chief Financial Officer of Alion Science and Technology Corporation,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
  60




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##### Table of Contents



(1)
    
    Incorporated by reference from the Companys Form 8-K/A filed with the SEC on March 25,
2010.(2)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 3, 2010.(3)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on February 4, 2010.  61




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SIGNATURES
  ALION SCIENCE AND TECHNOLOGY CORPORATIONBy:
    /s/  Michael J. AlberName:
    Michael J. AlberTitle:
    Principal Financial Officer and Duly Authorized Officer   62