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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, 2011
 COMMISSION FILE NUMBER 333-89756
 
 
 Alion Science and Technology Corporation
  DELAWARE
    
    54-2061691(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation of Organization)
    
    Identification No.)
 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, 2011
 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)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    44PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3. Defaults Upon Senior Securities
    
    
    45Item 4. Removed and Reserved
    
    
    45Item 5. Other Information
    
    
    45Item 6. Exhibits
    
    
    46Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements (unaudited)
 ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 Condensed Consolidated Balance Sheets


(unaudited)
 As of March 31, 2011 and September 30, 2010
 March 31,
    
    
    September 30,2011
    
    
    2010(In thousands, except shareand per share information)Current assets:Cash and cash equivalents
    
    $
    20,647
    
    
    $
    26,695Accounts receivable, net
    
    
    178,380
    
    
    
    174,032Receivable due from ESOP Trust
    
    
    
    
    
    
    1,896Prepaid expenses and other current assets
    
    
    6,563
    
    
    
    5,159Total current assets
    
    
    205,590
    
    
    
    207,782Property, plant and equipment, net
    
    
    9,249
    
    
    
    10,798Intangible assets, net
    
    
    14,190
    
    
    
    17,694Goodwill
    
    
    398,921
    
    
    
    398,921Other assets
    
    
    11,285
    
    
    
    11,107Total assets
    
    $
    639,235
    
    
    $
    646,302Current liabilities:Interest payable
    
    $
    17,313
    
    
    $
    17,217Trade accounts payable
    
    
    50,287
    
    
    
    44,486Accrued liabilities
    
    
    41,917
    
    
    
    43,145Accrued payroll and related liabilities
    
    
    35,827
    
    
    
    40,221Billings in excess of revenue earned
    
    
    2,604
    
    
    
    2,917Total current liabilities
    
    
    147,948
    
    
    
    147,986Senior secured notes
    
    
    283,387
    
    
    
    275,831Senior unsecured notes
    
    
    244,593
    
    
    
    246,126Accrued compensation and benefits, excluding current portion
    
    
    6,538
    
    
    
    6,174Non-current portion of lease obligations
    
    
    8,074
    
    
    
    7,848Deferred income taxes
    
    
    40,694
    
    
    
    37,207Redeemable common stock, $0.01 par value, 8,000,000 shares
authorized, 5,792,360 and 5,658,234 shares issued and outstanding
at March 31, 2011 and September 30, 2010
    
    
    157,263
    
    
    
    150,792Common stock warrants
    
    
    20,785
    
    
    
    20,785Accumulated other comprehensive loss
    
    
    (177
    )
    
    
    (177
    )Accumulated deficit
    
    
    (269,870
    )
    
    
    (246,270
    )Total liabilities, redeemable common stock and accumulated deficit
    
    $
    639,235
    
    
    $
    646,302
 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 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands, except share and per share information)Contract revenue
    
    $
    202,551
    
    
    $
    203,546
    
    
    $
    403,319
    
    
    $
    409,284Direct contract expense
    
    
    155,002
    
    
    
    156,049
    
    
    
    310,516
    
    
    
    315,045Gross profit
    
    
    47,549
    
    
    
    47,497
    
    
    
    92,803
    
    
    
    94,239Operating expenses:Indirect contract expense
    
    
    10,721
    
    
    
    9,982
    
    
    
    20,355
    
    
    
    19,268General and administrative
    
    
    15,782
    
    
    
    18,775
    
    
    
    32,085
    
    
    
    35,043Rental and occupancy expense
    
    
    7,799
    
    
    
    8,298
    
    
    
    15,529
    
    
    
    16,284Depreciation and amortization
    
    
    2,814
    
    
    
    4,212
    
    
    
    5,804
    
    
    
    8,443Loss on sale of subsidiary
    
    
    (148
    )
    
    
    
    
    
    
    (148
    )
    
    
    Total operating expenses
    
    
    36,968
    
    
    
    41,267
    
    
    
    73,625
    
    
    
    79,038Operating income
    
    
    10,581
    
    
    
    6,230
    
    
    
    19,178
    
    
    
    15,201Other income (expense):Interest income
    
    
    10
    
    
    
    12
    
    
    
    30
    
    
    
    57Interest expense
    
    
    (18,418
    )
    
    
    (14,097
    )
    
    
    (36,822
    )
    
    
    (30,983
    )Other
    
    
    (97
    )
    
    
    87
    
    
    
    (158
    )
    
    
    (24
    )Gain on debt extinguishment
    
    
    
    
    
    
    50,749
    
    
    
    460
    
    
    
    50,749Total other income (expense)
    
    
    (18,505
    )
    
    
    36,751
    
    
    
    (36,490
    )
    
    
    19,799(Loss) income before taxes
    
    
    (7,924
    )
    
    
    42,981
    
    
    
    (17,312
    )
    
    
    35,000Income tax expense
    
    
    (1,743
    )
    
    
    (33,816
    )
    
    
    (3,487
    )
    
    
    (33,776
    )Net (loss) income
    
    $
    (9,667
    )
    
    $
    9,165
    
    
    $
    (20,799
    )
    
    $
    1,224Basic and diluted earnings
(loss) per share
    
    
    (1.74
    )
    
    
    1.69
    
    
    
    (3.71
    )
    
    
    0.23Basic and weighted average
common shares outstanding
    
    
    5,540,869
    
    
    
    5,411,342
    
    
    
    5,598,766
    
    
    
    5,417,756
 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 EndedMarch 31,2011
    
    
    2010(In thousands)Cash flows from operating activities:Net (loss) income
    
    $
    (20,799
    )
    
    $
    1,224Adjustments to reconcile net (loss) income to net cash used in operating activities:Depreciation and amortization
    
    
    5,804
    
    
    
    8,443Depreciation charged to direct costs
    
    
    35
    
    
    
    Paid in kind interest
    
    
    3,134
    
    
    
    155Amortization of debt issuance costs
    
    
    5,017
    
    
    
    2,223Change in fair value of redeemable common stock warrants
    
    
    
    
    
    
    (160
    )Incentive and stock-based compensation
    
    
    1,071
    
    
    
    303Gain on debt extinguishment
    
    
    (460
    )
    
    
    (50,749
    )Deferred income taxes
    
    
    3,487
    
    
    
    33,818Other gains and losses
    
    
    24
    
    
    
    (1
    )Changes in assets and liabilities:Accounts receivable
    
    
    (4,348
    )
    
    
    (7,691
    )Other assets
    
    
    (1,030
    )
    
    
    (754
    )Trade accounts payable
    
    
    5,801
    
    
    
    10,539Accrued liabilities
    
    
    (1,209
    )
    
    
    5,675Interest payable
    
    
    96
    
    
    
    (3,944
    )Other liabilities
    
    
    (104
    )
    
    
    839Net cash used in operating activities
    
    
    (3,481
    )
    
    
    (80
    )Cash flows from investing activities:Cash paid for acquisition-related obligations
    
    
    
    
    
    
    (50
    )Capital expenditures
    
    
    (773
    )
    
    
    (1,271
    )Asset sale proceeds
    
    
    11
    
    
    
    5Net cash used in investing activities
    
    
    (762
    )
    
    
    (1,316
    )Cash flows from financing activities:Sale of secured notes
    
    
    
    
    
    
    281,465Sale of common stock warrants
    
    
    
    
    
    
    20,785Payment of debt issue costs
    
    
    (710
    )
    
    
    (16,710
    )Repayment of secured notes
    
    
    (1,510
    )
    
    
    (236,596
    )Repurchase of Subordinated Note and related warrants
    
    
    
    
    
    
    (25,000
    )Revolver borrowings
    
    
    
    
    
    
    84,200Revolver repayments
    
    
    
    
    
    
    (84,200
    )Loan to ESOP Trust
    
    
    (776
    )
    
    
    (5,323
    )ESOP loan repayment
    
    
    776
    
    
    
    5,323Redeemable common stock purchased from ESOP Trust
    
    
    (3,209
    )
    
    
    (7,561
    )Redeemable common stock sold to ESOP Trust
    
    
    3,624
    
    
    
    2,128Net cash (used in) provided by financing activities
    
    
    (1,805
    )
    
    
    18,511Net (decrease) increase in cash and cash equivalents
    
    
    (6,048
    )
    
    
    17,115Cash and cash equivalents at beginning of period
    
    
    26,695
    
    
    
    11,185Cash and cash equivalents at end of period
    
    $
    20,647
    
    
    $
    28,300Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    28,604
    
    
    $
    32,759Cash paid for taxes
    
    
    
    
    
    
    (42
    )Non-cash financing activities:Common stock issued to ESOP Trust in satisfaction of employer contribution
liability
    
    $
    5,150
    
    
    $
    5,268
 See accompanying notes to condensed consolidated financial statements.
  3




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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
  Reclassifications
   4




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Revenue Recognition
 Revenue
Recognition .
     Income Taxes
     5




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Cash and Cash Equivalents
  Accounts Receivable and Billings in Excess of Revenue Earned
  Property, Plant and Equipment
  Goodwill
  Intangibles, Goodwill and Other Assets
   6




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      Intangible Assets
  Purchased contracts
    
    1  13 yearsInternal use software and engineering designs
    
    2  3 yearsNon-compete agreements
    
    3  6 years
  7




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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
 Redeemable Alion common stock.
 Recently Issued Accounting Pronouncements
 Goodwill and Other Intangibles  When to
Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying
Amounts Goodwill and Other Intangibles
  8




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   (3) Employee Stock Ownership Plan (ESOP) and ESOP Trust
  (4) Earnings (Loss) Per Share
  (5) Redeemable Common Stock Owned by ESOP Trust
     9




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   (6) Accounts Receivable
  March 31,
    
    
    September 30,2011
    
    
    2010(In thousands)Billed receivables
    
    $
    85,290
    
    
    $
    94,662Unbilled receivables:Amounts currently billable
    
    
    34,728
    
    
    
    36,021Revenues recorded in excess of milestone billings on fixed price contracts
    
    
    2,588
    
    
    
    2,917Revenues recorded in excess of estimated contract value or funding
    
    
    36,779
    
    
    
    24,952Retainages and other amounts billable upon contract completion
    
    
    22,499
    
    
    
    19,278Allowance for doubtful accounts
    
    
    (3,504
    )
    
    
    (3,798
    )Total Accounts Receivable
    
    $
    178,380
    
    
    $
    174,032
  (7) Property, Plant and Equipment
 March 31,
    
    
    September 30,2010
    
    
    2010(In thousands)Leasehold improvements
    
    $
    10,888
    
    
    $
    10,862Equipment and software
    
    
    34,226
    
    
    
    33,693Total cost
    
    
    45,114
    
    
    
    44,555Less: accumulated depreciation and amortization
    
    
    (35,865
    )
    
    
    (33,757
    )Net Property, Plant and Equipment
    
    $
    9,249
    
    
    $
    10,798
  10




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (8) Goodwill and Intangible Assets
   March 31, 2011
    
    
    September 30, 2010Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetPurchased contracts
    
    $
    111,635
    
    
    $
    (97,628
    )
    
    $
    14,007
    
    
    $
    111,635
    
    
    $
    (94,228
    )
    
    $
    17,407Internal use software and
engineering designs
    
    
    2,155
    
    
    
    (1,972
    )
    
    
    183
    
    
    
    2,155
    
    
    
    (1,868
    )
    
    
    287Total
    
    $
    113,790
    
    
    $
    (99,600
    )
    
    $
    14,190
    
    
    $
    113,790
    
    
    $
    (96,096
    )
    
    $
    17,694
  (In thousands)2011 (for the remainder of fiscal year)
    
    $
    3,3382012
    
    
    5,7662013
    
    
    3,2462014
    
    
    8792015
    
    
    7372016
    
    
    141Thereafter
    
    
    83$
    14,190
 (9) Long-Term Debt
  Credit Agreement
    11




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     Period
    
    Minimum Consolidated EBITDAJune 30, 2010 through March 31, 2011
    
    $52.5 millionApril 1, 2011 through September 30, 2011
    
    $55.0 millionOctober 1, 2011 through September 30, 2012
    
    $60.0 millionOctober 1, 2012 through September 30, 2013
    
    $62.5 millionOctober 1, 2013 through August 22, 2014
    
    $65.0 million
  
    
    consolidated interest expense;
 
    
    provision for income taxes;
 
    
    depreciation and amortization;
 
    
    cash contributed to the ESOP in respect of Alions repurchase liability;
 
    
    non-cash stock-based and incentive compensation expense;
 
    
    non-cash ESOP contributions;
 
    
    any extraordinary losses; and
 
    
    nonrecurring charges and adjustments included in ESOP valuation reports as prepared
by an independent third party.
  
    
    all cash payments on account of reserves, restructuring charges or other non-cash
charges added to net income pursuant to the list above in a previous period;
 
    
    any extraordinary gains; and
 
    
    all non-cash items of income.
 Secured Notes
   12




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   Unsecured Notes
   Retired Term B Senior Credit Agreement
   Retired Subordinated Note
    13




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Interest Payable
  March 31,
    
    
    September 30,2011
    
    
    2010(In thousands)Unsecured Notes
    
    $
    4,239
    
    
    $
    4,271Secured Notes
    
    
    13,074
    
    
    
    12,946Total
    
    $
    17,313
    
    
    $
    17,217
  Fiscal Year:
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    TotalSecured Notes and PIK Interest(1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    339,788
    
    
    $
    339,788Unsecured Notes(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,000
    
    
    
    248,000Total Principal Payments
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    587,788
    
    
    $
    587,788
 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, 2011, the $283.4 million carrying value on the face of the balance sheet
included $310 million in principal, $6.4 million in accrued PIK interest and is net of
$33.0 million in aggregate unamortized debt issue costs. Initial debt issue costs consist
of $7.7 million in original issue discount, $13.5 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 $248 million in principal
and $3.4 million in unamortized debt issue costs as of March 31, 2011 (initially $7.1
million). (10) Fair Value Measurement
 Fair Value Measurements and Disclosures
     14




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    As of March 312011
    
    
    2010Redeemable Common StockWarrantsBalance, beginning of period
    
    $
    
    
    
    $
    (32,557
    )Total realized and unrealized gains and
(losses)
    
    
    
    
    
    
    14,724Included in interest expense
    
    
    
    
    
    
    (160
    )Issuances and settlements
    
    
    
    
    
    
    17,993Balance, end of period
    
    $
    
    
    
    $
    
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  (11) Redeemable Common Stock Warrants
    15




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Derivatives
 (12) Secured Note Common Stock Warrants
    (13) Leases
  Lease Payments for Fiscal Years Ending
    
    (In thousands)2011 (for the remainder of fiscal year)
    
    $
    13,8862012
    
    
    25,6432013
    
    
    23,8932014
    
    
    22,7232015
    
    
    22,6742016
    
    
    19,185And thereafter
    
    
    32,282Gross lease payments
    
    $
    160,286Less: non-cancelable subtenant receipts
    
    
    (1,652
    )Net lease payments
    
    $
    158,634
 Composition of Total Rent Expense
 March 31,2011
    
    
    2010(In thousands)Minimum rentals
    
    $
    11,055
    
    
    $
    11,649Less: Sublease rental income
    
    
    (956
    )
    
    
    (958
    )Total rent expense, net
    
    $
    10,099
    
    
    $
    10,691
  16




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (14) Long Term Incentive Compensation Plan
   (15) Stock Based Compensation
 SAR Plan
  Phantom Stock Plans
   (16) Segment Information and Customer Concentration
   (17) Income Taxes
 Deferred Taxes
   17




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   March 31,
    
    
    September 30,2011
    
    
    2010(in thousands)Current deferred tax asset
    
    $
    9,327
    
    
    $
    11,175Noncurrent deferred tax asset
    
    
    37,845
    
    
    
    25,754Valuation allowance
    
    
    (47,172
    )
    
    
    (36,929
    )Noncurrent deferred tax liability
    
    
    (40,694
    )
    
    
    (37,207
    )Net deferred tax liability
    
    $
    (40,694
    )
    
    $
    (37,207
    )
 Tax Uncertainties
   (18) Debt Extinguishment
   (19) Commitments and Contingencies
 Earn-Out and Hold-Back Commitments
   18




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Legal Proceedings
   Government Audits
  (20) Guarantor/Non-guarantor Condensed Consolidated Financial Information
    19




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet as of March 31, 2011
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Current assets:Cash and cash equivalents
    
    $
    20,699
    
    
    $
    (69
    )
    
    $
    17
    
    
    $
    
    
    
    $
    20,647Accounts receivable, net
    
    
    175,154
    
    
    
    2,935
    
    
    
    291
    
    
    
    
    
    
    
    178,380Prepaid expenses and other current
assets
    
    
    6,501
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    6,563Total current assets
    
    
    202,354
    
    
    
    2,928
    
    
    
    308
    
    
    
    
    
    
    
    205,590Property, plant and equipment, net
    
    
    9,204
    
    
    
    36
    
    
    
    9
    
    
    
    
    
    
    
    9,249Intangible assets, net
    
    
    14,190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,190Goodwill
    
    
    398,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,921Investment in subsidiaries
    
    
    21,168
    
    
    
    
    
    
    
    
    
    
    
    (21,168
    )
    
    
    Intercompany receivables
    
    
    1,321
    
    
    
    20,653
    
    
    
    
    
    
    
    (21,974
    )
    
    
    Other assets
    
    
    11,268
    
    
    
    14
    
    
    
    3
    
    
    
    
    
    
    
    11,285Total assets
    
    $
    658,426
    
    
    $
    23,631
    
    
    $
    320
    
    
    $
    (43,142
    )
    
    $
    639,235Current liabilities:Interest payable
    
    
    17,313
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,313Trade accounts payable
    
    
    49,978
    
    
    
    308
    
    
    
    1
    
    
    
    
    
    
    
    50,287Accrued liabilities
    
    
    41,694
    
    
    
    171
    
    
    
    52
    
    
    
    
    
    
    
    41,917Accrued payroll and related liabilities
    
    
    34,925
    
    
    
    857
    
    
    
    45
    
    
    
    
    
    
    
    35,827Billings in excess of revenue earned
    
    
    2,599
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    2,604Total current liabilities
    
    
    146,509
    
    
    
    1,341
    
    
    
    98
    
    
    
    
    
    
    
    147,948Intercompany payables
    
    
    20,653
    
    
    
    
    
    
    
    1,321
    
    
    
    (21,974
    )
    
    
    Senior secured notes
    
    
    283,387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283,387Senior unsecured notes
    
    
    244,593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244,593Accrued compensation and benefits,
excluding current portion
    
    
    6,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,538Non-current portion of lease obligations
    
    
    8,052
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    8,074Deferred income taxes
    
    
    40,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,694Redeemable common stock
    
    
    157,263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157,263Common stock warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,785Common stock of subsidiaries
    
    
    
    
    
    
    2,801
    
    
    
    
    
    
    
    (2,801
    )
    
    
    Accumulated other comprehensive loss
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177
    )Accumulated deficit
    
    
    (269,871
    )
    
    
    19,467
    
    
    
    (1,099
    )
    
    
    (18,367
    )
    
    
    (269,870
    )Total liabilities, redeemable common
stock and accumulated deficit
    
    $
    658,426
    
    
    $
    23,631
    
    
    $
    320
    
    
    $
    (43,142
    )
    
    $
    639,235
  20




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet as of September 30, 2010
(In thousands)
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    26,770
    
    
    $
    (75
    )
    
    $
    
    
    
    $
    
    
    
    $
    26,695Accounts receivable, net
    
    
    170,676
    
    
    
    3,312
    
    
    
    44
    
    
    
    
    
    
    
    174,032Receivable due from ESOP Trust
    
    
    1,896
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,896Prepaid expenses and other current
assets
    
    
    5,112
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    5,159Total current assets
    
    
    204,454
    
    
    
    3,284
    
    
    
    44
    
    
    
    
    
    
    
    207,782Property, plant and equipment, net
    
    
    10,755
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    10,798Intangible assets, net
    
    
    17,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,694Goodwill
    
    
    398,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,921Investment in subsidiaries
    
    
    18,844
    
    
    
    
    
    
    
    
    
    
    
    (18,844
    )
    
    
    Intercompany receivables
    
    
    1,054
    
    
    
    18,235
    
    
    
    
    
    
    
    (19,289
    )
    
    
    Other assets
    
    
    11,091
    
    
    
    13
    
    
    
    3
    
    
    
    
    
    
    
    11,107Total assets
    
    $
    662,813
    
    
    $
    21,575
    
    
    $
    47
    
    
    $
    (38,133
    )
    
    $
    646,302Interest payable
    
    $
    17,217
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    17,217Trade accounts payable
    
    
    44,065
    
    
    
    421
    
    
    
    
    
    
    
    
    
    
    
    44,486Accrued liabilities
    
    
    42,865
    
    
    
    271
    
    
    
    9
    
    
    
    
    
    
    
    43,145Accrued payroll and related liabilities
    
    
    39,277
    
    
    
    924
    
    
    
    20
    
    
    
    
    
    
    
    40,221Billings in excess of revenue earned
    
    
    2,882
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    2,917Total current liabilities
    
    
    146,306
    
    
    
    1,651
    
    
    
    29
    
    
    
    
    
    
    
    147,986Intercompany payables
    
    
    18,236
    
    
    
    
    
    
    
    1,053
    
    
    
    (19,289
    )
    
    
    Senior secured notes
    
    
    275,831
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275,831Senior unsecured notes
    
    
    246,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    246,126Accrued compensation and benefits,
excluding current portion
    
    
    6,174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,174Non-current portion of lease obligations
    
    
    7,805
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    7,848Deferred income taxes
    
    
    37,207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,207Redeemable common stock
    
    
    150,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,792Common stock of subsidiaries
    
    
    
    
    
    
    2,801
    
    
    
    
    
    
    
    (2,801
    )
    
    
    Common stock warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,785Accumulated other comprehensive loss
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177
    )Accumulated deficit
    
    
    (246,272
    )
    
    
    17,080
    
    
    
    (1,035
    )
    
    
    (16,043
    )
    
    
    (246,270
    )Total liabilities, redeemable common
stock and accumulated deficit
    
    $
    662,813
    
    
    $
    21,575
    
    
    $
    47
    
    
    $
    (38,133
    )
    
    $
    646,302
  21




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Three Months Ended March 31, 2011
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    198,155
    
    
    
    4,157
    
    
    
    239
    
    
    
    
    
    
    $
    202,551Direct contract expense
    
    
    152,505
    
    
    
    2,337
    
    
    
    160
    
    
    
    
    
    
    
    155,002Gross profit
    
    
    45,650
    
    
    
    1,820
    
    
    
    79
    
    
    
    
    
    
    
    47,549Operating expenses:Indirect contract expense
    
    
    10,028
    
    
    
    674
    
    
    
    19
    
    
    
    
    
    
    
    10,721General and administrative
    
    
    15,585
    
    
    
    132
    
    
    
    65
    
    
    
    
    
    
    
    15,782Rental and occupancy expense
    
    
    7,681
    
    
    
    106
    
    
    
    12
    
    
    
    
    
    
    
    7,799Depreciation and amortization
    
    
    2,810
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2,814Loss on sale of subsidiary
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )Total operating expenses
    
    
    35,956
    
    
    
    916
    
    
    
    96
    
    
    
    
    
    
    
    36,968Operating income
    
    
    9,694
    
    
    
    904
    
    
    
    (17
    )
    
    
    
    
    
    
    10,581Other income (expense):Interest income
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Interest expense
    
    
    (18,418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,418
    )Other
    
    
    (224
    )
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    (97
    )Equity in net income (loss)
of subsidiaries
    
    
    1,014
    
    
    
    
    
    
    
    
    
    
    
    (1,014
    )
    
    
    Total other expenses
    
    
    (17,618
    )
    
    
    127
    
    
    
    
    
    
    
    (1,014
    )
    
    
    (18,505
    )(Loss) income before taxes
    
    
    (7,924
    )
    
    
    1,031
    
    
    
    (17
    )
    
    
    (1,014
    )
    
    
    (7,924
    )Income tax expense
    
    
    (1,743
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,743
    )Net income (loss)
    
    $
    (9,667
    )
    
    
    1,031
    
    
    
    (17
    )
    
    
    (1,014
    )
    
    $
    (9,667
    )
  22




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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
    
    
    
    
    
    
    
    9,982General and administrative
    
    
    18,481
    
    
    
    204
    
    
    
    90
    
    
    
    
    
    
    
    18,775Rental 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 debt extinguishment
    
    
    50,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,749Equity in net income of
subsidiaries
    
    
    1,309
    
    
    
    
    
    
    
    
    
    
    
    (1,309
    )
    
    
    Total other expenses
    
    
    37,981
    
    
    
    79
    
    
    
    
    
    
    
    (1,309
    )
    
    
    36,751(Loss) income before taxes
    
    
    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
  23




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Six Months Ended March 31, 2011
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    393,916
    
    
    $
    8,973
    
    
    $
    430
    
    
    $
    
    
    
    $
    403,319Direct contract expense
    
    
    305,096
    
    
    
    5,126
    
    
    
    294
    
    
    
    
    
    
    
    310,516Gross profit
    
    
    88,820
    
    
    
    3,847
    
    
    
    136
    
    
    
    
    
    
    
    92,803Operating expenses:Indirect contract expense
    
    
    19,051
    
    
    
    1,284
    
    
    
    20
    
    
    
    
    
    
    
    20,355General and administrative
    
    
    31,715
    
    
    
    215
    
    
    
    155
    
    
    
    
    
    
    
    32,085Rental and occupancy expense
    
    
    15,308
    
    
    
    197
    
    
    
    24
    
    
    
    
    
    
    
    15,529Depreciation and amortization
    
    
    5,797
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    5,804Loss on sale of subsidiary
    
    
    (148
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148
    )Total operating expenses
    
    
    71,723
    
    
    
    1,703
    
    
    
    199
    
    
    
    
    
    
    
    73,625Operating income
    
    
    17,097
    
    
    
    2,144
    
    
    
    (63
    )
    
    
    
    
    
    
    19,178Other income (expense):Interest income
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30Interest expense
    
    
    (36,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,822
    )Other
    
    
    (400
    )
    
    
    242
    
    
    
    
    
    
    
    
    
    
    
    (158
    )Gain on debt extinguishment
    
    
    460
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    460Equity in net income of
subsidiaries
    
    
    2,323
    
    
    
    
    
    
    
    
    
    
    
    (2,323
    )
    
    
    Total other expenses
    
    
    (34,409
    )
    
    
    242
    
    
    
    
    
    
    
    (2,323
    )
    
    
    (36,490
    )(Loss) income before taxes
    
    
    (17,312
    )
    
    
    2,386
    
    
    
    (63
    )
    
    
    (2,323
    )
    
    
    (17,312
    )Income tax expense
    
    
    (3,487
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,487
    )Net (loss) income
    
    $
    (20,799
    )
    
    $
    2,386
    
    
    $
    (63
    )
    
    $
    (2,323
    )
    
    $
    (20,799
    )
  24




---



##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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
    
    
    
    
    
    
    
    94,239Indirect contract expense
    
    
    17,394
    
    
    
    1,856
    
    
    
    18
    
    
    
    
    
    
    
    19,268General and administrative
    
    
    34,519
    
    
    
    369
    
    
    
    155
    
    
    
    
    
    
    
    35,043Rental 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 debt extinguishment
    
    
    50,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,749Equity in net income (loss)
of subsidiaries
    
    
    3,040
    
    
    
    
    
    
    
    
    
    
    
    (3,040
    )
    
    
    Total other expenses
    
    
    22,689
    
    
    
    150
    
    
    
    
    
    
    
    (3,040
    )
    
    
    19,799Income (loss) before taxes
    
    
    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
  25




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows for the Six Months Ended March 31, 2011
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Consolidated(In thousands)Net cash (used in) provided by operating activities
    
    $
    (3,513
    )
    
    $
    6
    
    
    $
    26
    
    
    $
    (3,481
    )Cash flows from investing activities:Capital expenditures
    
    
    (764
    )
    
    
    
    
    
    
    (9
    )
    
    
    (773
    )Proceeds from sale of assets
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Net cash used in investing activities
    
    
    (753
    )
    
    
    
    
    
    
    (9
    )
    
    
    (762
    )Cash flows from financing activities:Payment of debt issue costs
    
    
    (710
    )
    
    
    
    
    
    
    
    
    
    
    (710
    )Repayment of secured notes
    
    
    (1,510
    )
    
    
    
    
    
    
    
    
    
    
    (1,510
    )Loan to ESOP Trust
    
    
    (776
    )
    
    
    
    
    
    
    
    
    
    
    (776
    )ESOP loan repayment
    
    
    776
    
    
    
    
    
    
    
    
    
    
    
    776Redeemable common stock purchased from ESOP Trust
    
    
    (3,209
    )
    
    
    
    
    
    
    
    
    
    
    (3,209
    )Redeemable common stock sold to ESOP Trust
    
    
    3,624
    
    
    
    
    
    
    
    
    
    
    
    3,624Net cash used in financing activities
    
    
    (1,805
    )
    
    
    
    
    
    
    
    
    
    
    (1,805
    )Net (decrease) increase in cash and cash equivalents
    
    
    (6,071
    )
    
    
    6
    
    
    
    17
    
    
    
    (6,048
    )Cash and cash equivalents at beginning of period
    
    
    26,771
    
    
    
    (75
    )
    
    
    (1
    )
    
    
    26,695Cash and cash equivalents at end of period
    
    $
    20,700
    
    
    $
    (69
    )
    
    $
    16
    
    
    $
    20,647
  26




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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) provided by operating activities
    
    $
    (73
    )
    
    $
    (10
    )
    
    $
    3
    
    
    $
    (80
    )Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Capital expenditures
    
    
    (1,255
    )
    
    
    (16
    )
    
    
    
    
    
    
    (1,271
    )Asset sale proceeds
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Net cash used in investing activities
    
    
    (1,300
    )
    
    
    (16
    )
    
    
    
    
    
    
    (1,316
    )Cash flows from financing activities:Sale of secured notes
    
    
    281,465
    
    
    
    
    
    
    
    
    
    
    
    281,465Sale of common stock warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    20,785Payment of debt issue costs
    
    
    (16,710
    )
    
    
    
    
    
    
    
    
    
    
    (16,710
    )Repayment of secured notes
    
    
    (236,596
    )
    
    
    
    
    
    
    
    
    
    
    (236,596
    )Repurchase of subordinated note and related warrants
    
    
    (25,000
    )
    
    
    
    
    
    
    
    
    
    
    (25,000
    )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
    
    
    (7,561
    )
    
    
    
    
    
    
    
    
    
    
    (7,561
    )Redeemable common stock sold to ESOP Trust
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128Net cash provided by financing activities
    
    
    18,511
    
    
    
    
    
    
    
    
    
    
    
    18,511Net increase (decrease) in cash and cash equivalents
    
    
    17,138
    
    
    
    (26
    )
    
    
    3
    
    
    
    17,115Cash and cash equivalents at beginning of period
    
    
    11,404
    
    
    
    (215
    )
    
    
    (4
    )
    
    
    11,185Cash and cash equivalents at end of period
    
    $
    28,542
    
    
    $
    (241
    )
    
    $
    (1
    )
    
    $
    28,300
  27




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward Looking Statements
   
    
    Any future inability to maintain adequate internal control over financial reporting;
 
    
    Limits on financial and operational flexibility given our substantial debt and debt
covenants;
 
    
    ERISA law changes related to the KSOP;
 
    
    Tax law changes that could affect tax liabilities or Alions 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;
 
    
    U.S. government shutdowns;
 
    
    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 from operations and attendant risks of fines, liabilities, penalties,
suspension and/or debarment;
 
    
    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 prior covenant compliance disclosures;
 
    
    Material changes in laws or regulations affecting our businesses; and
 
    
    Other risk factors discussed in Alions annual report on Form 10-K for the year ended
September 30, 2010 filed with the SEC on December 14, 2010 and any subsequent reports.
  Overview
   28




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##### Table of Contents



For the Six Months Ended March 31,Revenue by Contract Type
    
    2011
    
    
    2010(In thousands)Cost-reimbursement
    
    $
    327,307
    
    
    
    81.1
    %
    
    $
    297,478
    
    
    
    72.6
    %Fixed-price
    
    
    31,008
    
    
    
    7.7
    %
    
    
    50,565
    
    
    
    12.4
    %Time-and-material
    
    
    45,004
    
    
    
    11.2
    %
    
    
    61,241
    
    
    
    15.0
    %Total
    
    $
    403,319
    
    
    
    100.0
    %
    
    $
    409,284
    
    
    
    100.0
    %
  For the Six Months Ended March 31,Revenue by Customer Type
    
    2011
    
    
    2010(In thousands)U.S. Department of Defense
    
    $
    372,032
    
    
    
    92.2
    %
    
    $
    376,861
    
    
    
    92.1
    %Other Federal Civilian Agencies
    
    
    18,622
    
    
    
    4.6
    %
    
    
    21,036
    
    
    
    5.1
    %Commercial / State / Local and International
    
    
    12,665
    
    
    
    3.1
    %
    
    
    11,387
    
    
    
    2.8
    %Total
    
    $
    403,319
    
    
    
    100.0
    %
    
    $
    409,284
    
    
    
    100.0
    %
    For the Six Months Ended March 31,Core Business Area
    
    2011
    
    
    2010(In thousands)Naval Architecture and Marine Engineering
    
    $
    167,936
    
    
    
    41.7
    %
    
    $
    178,599
    
    
    
    43.7
    %Defense Operations
    
    
    98,814
    
    
    
    24.5
    %
    
    
    100,865
    
    
    
    24.6
    %Modeling and Simulation
    
    
    78,376
    
    
    
    19.4
    %
    
    
    70,810
    
    
    
    17.3
    %Technology Integration
    
    
    23,849
    
    
    
    5.9
    %
    
    
    23,622
    
    
    
    5.8
    %Energy and Environmental Sciences
    
    
    17,815
    
    
    
    4.4
    %
    
    
    19,303
    
    
    
    4.7
    %Information Technology and Wireless
Communications
    
    
    16,529
    
    
    
    4.1
    %
    
    
    16,085
    
    
    
    3.9
    %Total
    
    $
    403,319
    
    
    
    100.0
    %
    
    $
    409,284
    
    
    
    100.0
    %
 Backlog .
  29




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##### Table of Contents



Results of Operations
 Quarter Ended March 31, 2011 Compared to Quarter Ended March 31, 2010
 Consolidated Operations of AlionQuarter Ended March 31,2011
    
    
    2010(Dollars in thousands)% of
    
    
    
    
    
    
    % ofSelected Financial Information
    
    
    
    
    
    revenue
    
    
    
    
    
    
    revenueTotal contract revenue
    
    $
    202,551
    
    
    
    
    
    
    $
    203,546Total direct contract costs
    
    
    155,002
    
    
    
    76.5
    %
    
    
    156,049
    
    
    
    76.7
    %Direct labor costs
    
    
    67,520
    
    
    
    33.3
    %
    
    
    68,976
    
    
    
    33.9
    %Material and subcontract costs
    
    
    83,275
    
    
    
    41.1
    %
    
    
    82,424
    
    
    
    40.5
    %Other direct costs
    
    
    4,207
    
    
    
    2.1
    %
    
    
    4,649
    
    
    
    2.3
    %Gross profit
    
    
    47,549
    
    
    
    23.5
    %
    
    
    47,497
    
    
    
    23.3
    %Total operating expense
    
    
    36,968
    
    
    
    18.3
    %
    
    
    41,267
    
    
    
    20.3
    %Major components of operating expense:Indirect expenses and facilities costs
    
    
    18,520
    
    
    
    9.1
    %
    
    
    18,280
    
    
    
    9.0
    %General and administrative
    
    
    15,782
    
    
    
    7.8
    %
    
    
    18,775
    
    
    
    9.2
    %Depreciation and amortization
    
    
    2,814
    
    
    
    1.4
    %
    
    
    4,212
    
    
    
    2.1
    %Income from operations
    
    $
    10,581
    
    
    
    5.2
    %
    
    $
    6,230
    
    
    
    3.1
    %
 Revenue.
    Direct Contract Expense and Gross Profit.
 Operating Expenses.
  30




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##### Table of Contents



Income from Operations.
 Other Expense.
  Three Months Ended March 31,2011
    
    
    2010(In thousands)Cash Pay InterestRevolver
    
    $
    123
    
    
    $
    94Senior Term Loan
    
    
    
    
    
    
    5,308Secured Notes
    
    
    7,845
    
    
    
    775Unsecured Notes
    
    
    6,355
    
    
    
    6,406Subordinated Note
    
    
    
    
    
    
    (793
    )Other cash pay interest and fees
    
    
    28
    
    
    
    2,679Sub-total cash pay interest
    
    
    14,351
    
    
    
    14,469Deferred and Non-cash InterestSecured Notes PIK interest
    
    
    1,570
    
    
    
    155Debt issue costs and other non-cash items
    
    
    2,497
    
    
    
    650Subordinated Note interest
    
    
    
    
    
    
    (1,177
    )Sub-total non-cash interest
    
    
    4,067
    
    
    
    (372
    )Total interest expense
    
    $
    18,418
    
    
    $
    14,097
 Debt Extinguishment.
  Income Tax Expense.
   31




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##### Table of Contents



Net Income
 Six Months Ended March 31, 2011 Compared to Six Months Ended March 31, 2010
 Consolidated Operations of AlionSix Months Ended March 31,2011
    
    
    2010(Dollars in thousands)% of
    
    
    
    
    
    
    % ofSelected Financial Information
    
    
    
    
    
    revenue
    
    
    
    
    
    
    revenueTotal contract revenue
    
    $
    403,319
    
    
    
    
    
    
    $
    409,284Total direct contract costs
    
    
    310,516
    
    
    
    77.0
    %
    
    
    315,045
    
    
    
    77.0
    %Direct labor costs
    
    
    130,119
    
    
    
    32.3
    %
    
    
    136,103
    
    
    
    33.3
    %Material and subcontract costs
    
    
    171,943
    
    
    
    42.6
    %
    
    
    170,567
    
    
    
    41.7
    %Other direct costs
    
    
    8,454
    
    
    
    2.1
    %
    
    
    8,375
    
    
    
    2.0
    %Gross profit
    
    
    92,803
    
    
    
    23.0
    %
    
    
    94,239
    
    
    
    23.0
    %Total operating expense
    
    
    73,625
    
    
    
    18.3
    %
    
    
    79,038
    
    
    
    19.3
    %Major components of operating expense:Indirect expenses including facilities costs
    
    
    35,884
    
    
    
    8.9
    %
    
    
    35,552
    
    
    
    8.7
    %General and administrative
    
    
    32,085
    
    
    
    8.0
    %
    
    
    35,043
    
    
    
    8.6
    %Depreciation and amortization
    
    
    5,804
    
    
    
    1.4
    %
    
    
    8,443
    
    
    
    2.1
    %Income from operations
    
    $
    19,178
    
    
    
    4.8
    %
    
    $
    15,201
    
    
    
    3.7
    %
 Revenue
   32




---



##### Table of Contents



Direct Contract Expense and Gross Profit.
 Operating Expenses.
 Income from Operations.
 Other Expense.
 Six Months Ended March 31,2011
    
    
    2010(In thousands)Cash Pay InterestRevolver
    
    $
    235
    
    
    $
    98Senior Term Loan
    
    
    
    
    
    
    11,047Secured Notes
    
    
    15,663
    
    
    
    775Unsecured Notes
    
    
    12,732
    
    
    
    12,813Other cash pay interest and fees
    
    
    41
    
    
    
    4,032Sub-total cash pay interest
    
    
    28,671
    
    
    
    28,765Deferred and Non-cash InterestSecured Notes PIK interest
    
    
    3,134
    
    
    
    155Debt issue costs and other non-cash items
    
    
    5,017
    
    
    
    2,223Subordinated Note warrants
    
    
    
    
    
    
    (160
    )Sub-total non-cash interest
    
    
    8,151
    
    
    
    2,218Total interest expense
    
    $
    36,822
    
    
    $
    30,983
 Debt Extinguishment.
    33




---



##### Table of Contents



Income Tax Expense.
    Net Income
 Liquidity and Capital Resources
  Cash Flows
   34




---



##### Table of Contents



st
     Cash flow effects and risks associated with equity-related obligations
      35




---



##### Table of Contents



Discussion of Debt Structure
  Credit Agreement
       Period
    
    Minimum Consolidated EBITDAJune 30, 2010 through March 31, 2011
    
    $52.5 millionApril 1, 2011 through September 30, 2011
    
    $55.0 millionOctober 1, 2011 through September 30, 2012
    
    $60.0 millionOctober 1, 2012 through September 30, 2013
    
    $62.5 millionOctober 1, 2013 through August 22, 2014
    
    $65.0 million
  
    
    consolidated interest expense;
 
    
    provision for income taxes;
 
    
    depreciation and amortization;
 
    
    cash contributed to the ESOP in respect of Alions repurchase liability
 
    
    non-cash stock-based and incentive compensation expense;
 
    
    non-cash ESOP contributions;
 
    
    any extraordinary losses; and
 
    
    nonrecurring charges and adjustments included in ESOP valuation reports as prepared
by an independent third party.
  36




---



##### Table of Contents




    
    all cash payments on account of reserves, restructuring charges or other non-cash
charges added to net income pursuant to the list above in a previous period;
 
    
    any extraordinary gains; and
 
    
    all non-cash items of income.
  
    
    incur additional debt other than permitted additional debt;
 
    
    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 our assets;
 
    
    pay dividends or distributions other than distributions required by the ESOP Plan or by
certain legal requirements;
 
    
    enter into certain transactions with our shareholders and affiliates;
 
    
    change lines of business;
 
    
    repay subordinated debt before it is due and redeem or repurchase certain equity;
 
    
    enter into certain transactions not permitted under ERISA;
 
    
    make more than $8 million in capital expenditures in any fiscal year;
 
    
    pay certain earn-outs in connection with permitted acquisitions; or
 
    
    change our fiscal year.
  
    
    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 Alion or any
subsidiary arising from a government investigation;
 
    
    unstayed judgments in excess of an agreed amount;
 
    
    failure of any Credit Agreement guarantee 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;
 
    
    a borrowing which would cause us to exceed a certain cash balance limit, or
 
    
    change of control (as defined below).
   37




---



##### Table of Contents



Secured Notes
      
    
    Debt pursuant to certain agreements up to $25 million;
 
    
    Permitted inter-company debt;
 
    
    The Secured Notes and any public notes exchanged for those notes;
 
    
    Debt pre-dating the Secured Notes;
 
    
    Permitted debt of acquired subsidiaries;
 
    
    Permitted refinancing debt;
 
    
    Hedging agreement debt;
 
    
    Performance, bid, appeal and surety bonds and completion guarantees;
 
    
    Ordinary course insufficient funds coverage;
 
    
    Permitted refinancing debt guarantees;
 
    
    Working capital debt of non-U.S. subsidiaries;
 
    
    Debt for capital expenditures, and capital and synthetic leases up to $25 million in
the aggregate $25 million and 2.5% of Alions Total Assets;
 
    
    Permitted subordinated debt of Alion or any Restricted Subsidiary to finance a permitted
acquisition, certain permitted ESOP transactions and refinancing debt of acquired non-U.S.
subsidiaries up to $35 million in the aggregate;
 
    
    Letter of credit reimbursement obligations;
 
    
    Certain agreements in connection with acquiring a business provided liabilities
incurred in connection therewith are not reflected on the Companys balance sheet;
 
    
    Certain deferred compensation agreements; and
 
    
    Certain other debt up to $20 million.
  
    
    Such payments out of substantially concurrent contributions of equity and substantially
concurrent incurrences of permitted debt;
 
    
    Certain limited and permitted dividends;
 
    
    Certain repurchases of the Companys equity securities deemed to occur upon exercise of
stock options or warrants;
  38




---



##### Table of Contents




    
    Cash payments in lieu of issuing fractional shares for the exercise of warrants, options
or other securities convertible into or exchangeable for our equity securities;
 
    
    The required Secured Note premium payable on a change of control;
 
    
    Certain permitted inter-company subordinated obligations;
 
    
    Certain repurchases and redemptions of subordination obligations of the Company or a
Subsidiary Guarantor from Net Available Cash;
 
    
    Repurchases of subordinated obligations in connection with an asset sale to the extent
required by the Secured Note Indenture;
 
    
    Certain permitted ESOP transactions;
 
    
    Long-term incentive plan payments to our directors, officers and employees, subject to a
$3 million annual cap that may increase annually;
 
    
    Any purchase, repurchase, redemption, defeasance or other acquisition or retirement for
value of the Unsecured Notes, up to an aggregate amount of $10 million; and
 
    
    Certain other payments not exceeding $10 million in the aggregate.
   
    
    Payment default;
 
    
    Uncured covenant breaches;
 
    
    Default under an acceleration of certain other debt exceeding $30 million;
 
    
    Certain bankruptcy and insolvency events;
 
    
    Judgment for payment in excess of $30 million entered against Alion or any material
subsidiary that remains outstanding for a period of 60 days and is not discharged, waived
or stayed;
 
    
    Failure of any Secured Note guarantee to be in effect or any subsidiary guarantors
denial or disaffirmation of its guaranty obligations; and
 
    
    Failure of any Secured Note security interest to constitute a valid and perfected lien
with its applicable priority after a permitted cure period.
  
    
    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 March 22, 2010, cease for any
reason to constitute a majority of the Companys board of directors;
 
    
    Adoption of a plan relating to Alions liquidation or dissolution; and
 
    
    Subject to certain exceptions, Alions merger or consolidation with or into another
person or the merger of another person with or into Alion, or the sale of all or
substantially all our assets to another person.
    39




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##### Table of Contents



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
    %
 Unsecured Notes
     
    
    Debt pursuant to our now terminated Term B Senior Credit Facility and certain other
contracts up to $360 million less principal repayments made under that debt;
 
    
    Permitted inter-company debt;
 
    
    The Unsecured Notes;
 
    
    Debt pre-dating the Unsecured Notes;
 
    
    Permitted debt of acquired subsidiaries;
 
    
    Permitted refinancing debt;
 
    
    Hedging agreement debt;
 
    
    Performance, bid, appeal and surety bonds and completion guarantees;
 
    
    Ordinary course insufficient funds coverage;
 
    
    Permitted refinancing debt guarantees;
 
    
    Working capital debt of non-U.S. subsidiaries;
 
    
    Debt for capital expenditures, and capital and synthetic leases up to $25 million in
the aggregate $25 million and 2.5% of Alions Total Assets;
 
    
    Permitted subordinated debt of Alion or any Restricted Subsidiary to finance a permitted
acquisition, certain permitted ESOP transactions and refinancing debt of acquired non-U.S.
subsidiaries up to $35 million in the aggregate;
 
    
    Letter of credit reimbursement obligations;
 
    
    Certain agreements in connection with acquiring a business provided liabilities
incurred in connection therewith are not reflected on the Companys balance sheet;
 
    
    Certain deferred compensation agreements; and
 
    
    Certain other debt up to $35 million.
  
    
    Such payments out of substantially concurrent contributions of equity and substantially
concurrent incurrences of permitted debt;
 
    
    Certain limited and permitted dividends;
  40




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##### Table of Contents




    
    Certain repurchases of the Companys equity securities deemed to occur upon exercise of
stock options or warrants;
 
    
    Cash payments in lieu of issuing fractional shares for the exercise of warrants, options
or other securities convertible into or exchangeable for our equity securities;
 
    
    The required Unsecured Note premium payable on a change of control;
 
    
    Certain permitted inter-company subordinated obligations;
 
    
    Certain repurchases and redemptions of subordination obligations of the Company or a
Subsidiary Guarantor from Net Available Cash;
 
    
    Repurchases of subordinated obligations in connection with an asset sale to the extent
required by the Indenture;
 
    
    Repurchase of common stock from former Alion Joint Spectrum Center employees;
 
    
    Certain permitted transactions with the ESOP not exceeding $25 million in the aggregate;
and
 
    
    Certain other payments not exceeding $30 million in the aggregate.
   
    
    Payment default;
 
    
    Uncured covenant breaches;
 
    
    Default under an acceleration of certain other debt exceeding $30 million;
 
    
    Certain bankruptcy and insolvency events;
 
    
    Judgment for payment in excess of $30 million entered against Alion or any material
subsidiary that remains outstanding for a period of 60 days and is not discharged, waived
or stayed; and
 
    
    Failure of any Unsecured Note guarantee to be in effect or any subsidiary guarantors
denial or disaffirmation of its guaranty obligations.
  
    
    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 February 8, 2007, cease for
any reason to constitute a majority of the Companys board of directors;
 
    
    Adoption of a plan relating to Alions liquidation or dissolution; and
 
    
    Subject to certain exceptions, Alions merger or consolidation with or into another
person or the merger of another person with or into Alion, or the sale of all or
substantially all our assets to another person.
  Period
    
    Redemption Price2011
    
    
    105.125
    %2012
    
    
    102.563
    %2013 and thereafter
    
    
    100.000
    %
 Revolving Credit Agreement  Covenant Compliance
    41




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##### Table of Contents



(In thousands)Fiscal Year:
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Bank revolving credit facility(1)- Interest
    
    $
    222
    
    
    $
    445
    
    
    $
    444
    
    
    $
    396
    
    
    $
    Secured Notes(2)- Interest
    
    
    15,689
    
    
    
    31,851
    
    
    
    32,491
    
    
    
    33,144
    
    
    
    16,821- Principal and PIK Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,788Unsecured Notes(3)- Interest
    
    
    12,710
    
    
    
    25,420
    
    
    
    25,420
    
    
    
    25,420
    
    
    
    12,710- Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,000Total cash  pay interest
    
    
    28,621
    
    
    
    57,716
    
    
    
    58,355
    
    
    
    58,960
    
    
    
    29,531Total cash  pay principal and
PIK Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    587,788Total
    
    $
    28,621
    
    
    $
    57,716
    
    
    $
    58,355
    
    
    $
    58,960
    
    
    $
    617,319
 (1)
    
    We expect we will occasionally use our $35.0 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.(3)
    
    The Senior Unsecured Notes bear interest at 10.25% and mature February 1, 2015. Contingent Obligations
 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.
   42




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##### Table of Contents



Number ofShares
    
    
    
    
    
    
    Total ValueDate
    
    Repurchased
    
    
    Share Price
    
    
    Purchased(In thousands)December 2009
    
    
    745
    
    
    $
    34.50
    
    
    $
    26March 2010
    
    
    218,408
    
    
    $
    34.50
    
    
    
    7,535April 2010
    
    
    52
    
    
    $
    28.00
    
    
    
    1May 2010
    
    
    108
    
    
    $
    28.00
    
    
    
    3June 2010
    
    
    62,875
    
    
    $
    28.00
    
    
    
    1,760July 2010
    
    
    145
    
    
    $
    28.00
    
    
    
    4August 2010
    
    
    89
    
    
    $
    28.00
    
    
    
    2September 2010
    
    
    209
    
    
    $
    28.00
    
    
    
    6December 2010
    
    
    119,945
    
    
    $
    26.65
    
    
    
    3,196February 2011
    
    
    322
    
    
    $
    26.65
    
    
    
    9March 2011
    
    
    136
    
    
    $
    26.65
    
    
    
    4Total
    
    
    403,034
    
    
    
    
    
    
    $
    12,545
     Recently Issued Accounting Pronouncements
 Goodwill and Other Intangibles  When to
Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying
Amounts Goodwill and Other Intangibles
    43




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##### Table of Contents



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.
  44




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
  Alion depends heavily on federal government contracts and a delay in the federal budget
process or a federal government shutdown may delay procurement of the products, services and
solutions the Company provides and adversely affect the Companys sales and gross margins,
operating results and cash flows.
     
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Removed and Reserved
 
 Item 5.
    
    Other Information
   45




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##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNo.
    
    Description10.33
    
    
    Incremental Assumption Agreement and Amendment No. 2 dated as of March 11, 2011, by and
among the Company, the lenders party thereto, Credit Suisse AG, Cayman Islands Branch, as
administrative agent, Alion  CATI Corporation, Alion  METI Corporation, Alion  JJMA
Corporation, Alion  BMH Corporation, Washington Consulting, Inc., Alion  MA&D Corporation,
Alion  IPS Corporation, Alion Canada (US) Corporation, and Washington Consulting Government
Services, Inc., related to the Credit Agreement and incorporating by reference therein the
Amended and Restated Credit Agreement. (1)10.34
    
    
    Amended and Restated Credit Agreement dated as of March 11, 2011 by and among the Company,
the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative
agent. (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.
 (1)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 16, 2011.  46




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##### Table of Contents



SIGNATURES
  ALION SCIENCE AND TECHNOLOGY CORPORATIONBy:
    
    /s/ Michael J. AlberName:
    
    Michael J. AlberTitle:
    
    Principal Financial Officer and Duly Authorized Officer
   47