##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2010
 Alion Science and Technology Corporation
  Delaware
    
    333-89756
    
    54-2061691(State or Other Jurisdiction of 
Organization)
    
    (Commission File Number)
    
    (IRS Employer Incorporation or
Identification No.)
 
 
 
 
 o Yes þ No
 not required þ Yes o No
 o þ
 o o
 þ
  Large accelerated Filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o Yes þ No




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##### 



ALION SCIENCE AND TECHNOLOGY CORPORATION
FORM 10-K
TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    11Item 1B. Unresolved Staff Comments
    
    
    21Item 2. Properties
    
    
    21Item 3. Legal Proceedings
    
    
    22Item 4. [Removed and Reserved]
    
    
    22PART IIItem 5. Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
    
    
    22Item 6. Selected Financial Data
    
    
    23Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 8. Financial Statements and Supplementary Data
    
    
    44Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    78Item 9A. Controls and Procedures
    
    
    78Item 9B. Other Information
    
    
    78PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    79Item 11. Executive Compensation
    
    
    86Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
    
    
    103Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    104Item 14. Principal Accountant Fees and Services
    
    
    104PART IVItem 15. Exhibits and Financial Statement Schedule
    
    
    105Exhibit 12Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I
 
 Item 1.
    
    Business
   
    
    ERISA law changes affecting the Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan;
    
    tax law changes affecting treatment and deductibility of goodwill;
    
    costs to comply with the Dodd-Frank Act, including changes in to SEC rules and
corporate governance requirements;
    
    government customer failures to exercise contract options;
    
    government project funding decisions;
    
    government contract procurement risks, such as award protests and contract
terminations;
    
    competitive pricing pressures and/or difficulty in hiring and retaining employees;
    
    current and/or future legal or government agency proceedings arising from our
operations or our contracts and the risk of potential fines, penalties and contract
liabilities, suspension or debarment;
    
    any future inability to maintain adequate control over financial reporting;
    
    limits on our financial and operational flexibility given our substantial amount of
debt;
    
    business acquisitions that increase costs or liabilities, are disruptive or which we
fail to integrate;
    
    material changes in other laws or regulations affecting our business;
    
    additional debt and financing terms and availability;
    
    general volatility in the debt and securities markets;
    
    our ability to meet existing and future debt covenants;
    
    private securities litigation risks, regulatory proceedings or government
enforcement actions related to our prior debt covenant compliance disclosures; as well
as
    
    other risks discussed elsewhere in this annual report.
  Overview
    1




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##### Table of Contents



Revenue by Fiscal YearCore Business Area
    
    2010
    
    
    2009
    
    
    2008(In thousands)Naval Architecture and Marine Engineering
    
    $
    363,209
    
    
    
    43.6
    %
    
    $
    365,917
    
    
    
    45.6
    %
    
    $
    325,631
    
    
    
    44.1
    %Defense Operations
    
    
    194,940
    
    
    
    23.4
    %
    
    
    203,859
    
    
    
    25.4
    %
    
    
    220,539
    
    
    
    29.8
    %Modeling and Simulation
    
    
    152,420
    
    
    
    18.3
    %
    
    
    99,420
    
    
    
    12.4
    %
    
    
    67,119
    
    
    
    9.1
    %Technology Integration
    
    
    50,512
    
    
    
    6.1
    %
    
    
    50,762
    
    
    
    6.3
    %
    
    
    51,294
    
    
    
    6.9
    %Energy and Environmental Sciences
    
    
    40,041
    
    
    
    4.8
    %
    
    
    39,914
    
    
    
    5.0
    %
    
    
    37,108
    
    
    
    5.0
    %Information Technology and Wireless
Communications
    
    
    32,866
    
    
    
    3.8
    %
    
    
    42,353
    
    
    
    5.3
    %
    
    
    37,791
    
    
    
    5.1
    %Total
    
    $
    833,988
    
    
    
    100.0
    %
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
 Naval Architecture and Marine Engineering .
 
    
    We provide total ship design services for military and commercial customers including
defining requirements, analyzing concepts, and studying feasibility. We provide contract
design, detail design and production support.
 
    
    We provide systems engineering/design integration, hull form development and performance
analysis, structural design and analysis, weight engineering and intact and damage
stability analysis.
 
    
    We design and engineer ship systems including propulsion, electrical, fluids/piping,
auxiliary, HVAC, deck machinery, and machinery automation and control systems. We provide
expertise for machinery integration, test and trials, failure analysis, modeling and
simulation, and integrated logistics support.
 
    
    We provide mission and threat analysis, evaluate candidate warfare and combat systems,
and develop specifications and installation drawings for topside and below-deck interface
requirements, and ship modernizations.
 
    
    We furnish acquisition planning, business and financial management, configuration and
data management, test and evaluation support, and production analysis and management in all
life cycle phases of equipment, systems and ships.
 Defense Operations.
 (a)
    
    We analyze major programs and issues related to joint warfare training, mission
rehearsal, experimentation and other transformational activities. We develop net-centric
initiatives and integrate C4I (command, control, communication, and computer intelligence)
initiatives.
 
    
    We support DoD strategic planning efforts and operational exercises. We analyze, plan
and implement base realignments and assess the defense industrial base.
 
    
    We provide program, systems and legislative analyses to Office of the Secretary of the
Air Force.
 
    
    We help develop department-wide DoD education programs. We develop technology, compile
courseware and translate it into electronic and web-based distance learning media.
 
    
    We provide the tools and support to assess vulnerabilities and protect infrastructure
such as ports, power plants and communications nodes.
 
    
    We collaborate with DoD communities of interest and produce Joint Capabilities
Integration and Development System analysis and capabilities documents.
 
    
    We provide DoD requirements and concepts integration analysis (futures analysis).
  2




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Modeling and Simulation .
 
    
    We design and conduct strategic and operations analytic war games to evaluate future
operational concepts and force transformation initiatives. We create and implement
multi-dimensional simulation system tactical training scenarios for the multi-national
experiment series.
 
    
    We manage the DoD Modeling and Simulation Information Analysis Center. We develop
modeling and simulation tools to support integration and federation of stand-alone
simulator-based training and large scale distributed training events.
 
    
    We develop phenomenological models for nuclear, chemical, biological and electromagnetic
environments.
 
    
    We develop multi-dimensional visualization files to simultaneously display actual
improvised explosive device events, terrain databases and scenario scripts to replay events
and allow units to adjust tactics, techniques, and procedures.
 
    
    We use current industry gaming technology to develop proprietary and open source
solutions for customers who use serious gaming for training and education.
 
    
    We maintain a threat generation library to support world-wide Air Force and Joint
training and mission rehearsal operations.
 
    
    We provide modeling and simulation, C4I and operational support for the U.S. Navys
Fleet Synthetic Training and its Continuous Training Environment which delivers
distributed, on-demand training.
 Technology Integration .
 
    
    We use technology, re-engineering, and materials selection to enhance production,
improve performance, reduce cost, and extend the life of engineered systems.
 
    
    We develop and integrate processes and equipment for rapid prototype production and
flexible manufacturing. We maintain our own rapid prototyping and limited production
manufacturing facilities.
 
    
    We provide engineering, architectural, construction management, logistics, design
oversight, and inspection services.
 
    
    We apply reliability engineering methods to improve system availability and enhance
maintainability and supportability.
 
    
    We support numerous research and development activities focused on taking advantage of
new and emerging technologies. These include the Armys Night Vision and Electronic Sensors
Directorate, the Army, Air Force, and Navy Research Laboratories, and system developers
throughout DoD.
 
    
    We develop human systems integration products and provide technical services to ensure
Army, Air Force and Navy staff and force structures can operate, support and maintain their
complex integrated systems.
 Information Technology and Wireless Communications
 
    
    We provide management and information technology consulting services focused on
developing and implementing innovative business solutions and management services for
military, civilian and commercial customers.
 
    
    We provide project management, earned value management, change management and process
design and improvement services.
 
    
    We provide information management, enterprise architecture, service oriented
architecture, web portals and business intelligence.
 
    
    We offer a full range of spectrum management, planning, and operational support services
to determine radio frequency propagation and coverage profiles for networks to operate free
of interference, cover desired geographic areas and perform as designed.
 
    
    We deliver optimized information systems designs through advanced wireless design and
evaluation techniques using modeling and simulation, prototyping, experimentation, and
field testing.
 
    
    We develop detailed data architectures and enhance data visualization to enable our
customers to design, document, test and deploy complex integrated systems that support
efficient data mining, data flow and knowledge management.
 
    
    We provide wireless security, logistics and asset tracking technologies to support and
maximize fielded systems operational capabilities.
  3




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Energy and Environmental Sciences .
 
    
    We conduct, develop, and improve processes and equipment for generating power and
providing alternative energy sources.
 
    
    We provide nuclear safety and other performance-related analyses to the U.S. Department
of Energy, National Laboratories, and the commercial power industry.
 
    
    We develop and evaluate methods for detecting chemical, biological, and other toxic
agents.
 
    
    We develop, test and implement methods for measuring air quality.
 
    
    We operate laboratory facilities that determine the constituents and properties of
wastes and effluents, develop and validate analytical methods and instruments, and
determine the potential health effects of various substances for the U.S. Environmental
Protection Agency and the National Institutes of Health.
 Corporate History
  The Alion ESOP
  
    
    rolling over an eligible retirement account balance from another plan into the ESOP
when initially hired;
 
    
    transferring funds to the ESOP from the non-ESOP component of the KSOP during
semi-annual election periods; and/or
 
    
    directing a portion of pre-tax earnings to the ESOP.
     4




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Business Strategy
  Broaden existing core competencies.
 Expand market share by leveraging experience and reputation.
 Improve financial performance and increase sales.
 Market and Industry Background
     5




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We are primarily a government contractor.
   Contract Types.
  6




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For the Years Ended September 30,Contract Type
    
    2010
    
    
    2009
    
    
    2008(In thousands)Cost-reimbursement
    
    $
    636,232
    
    
    
    76.3
    %
    
    $
    567,284
    
    
    
    70.8
    %
    
    $
    517,760
    
    
    
    70.0
    %Fixed-price
    
    
    87,610
    
    
    
    10.5
    %
    
    
    91,797
    
    
    
    11.4
    %
    
    
    70,078
    
    
    
    9.5
    %Time-and-material
    
    
    110,146
    
    
    
    13.2
    %
    
    
    143,144
    
    
    
    17.8
    %
    
    
    151,644
    
    
    
    20.5
    %Total
    
    $
    833,988
    
    
    
    100.0
    %
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
    Government Oversight.
 Backlog.
  7




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September 30,2010
    
    
    2009
    
    
    2008(In millions)Backlog:Funded
    
    $
    407.8
    
    
    $
    376.5
    
    
    $
    340.5Unfunded
    
    
    6,205.9
    
    
    
    6,008.4
    
    
    
    4,475.8Total
    
    $
    6,613.7
    
    
    $
    6,384.9
    
    
    $
    4,816.3
  September 30,2010
    
    
    2009
    
    
    2008(In millions)In-process
    
    $
    280.0
    
    
    $
    361.0
    
    
    $
    529.0Submitted
    
    
    1,715.0
    
    
    
    1,491.0
    
    
    
    1,057.0Total
    
    $
    1,995.0
    
    
    $
    1,852.0
    
    
    $
    1,586.0
 Corporate Culture, Employees and Recruiting
     8




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Our Customers
  September 30,2010
    
    
    2009
    
    
    2008(In thousands)U.S. Department of Defense
    
    $
    771,835
    
    
    
    92.5
    %
    
    $
    735,304
    
    
    
    91.7
    %
    
    $
    660,969
    
    
    
    89.4
    %Other Federal Civilian Agencies
    
    
    41,413
    
    
    
    5.0
    %
    
    
    38,474
    
    
    
    4.8
    %
    
    
    33,168
    
    
    
    4.5
    %Commercial and International
    
    
    20,740
    
    
    
    2.5
    %
    
    
    28,447
    
    
    
    3.5
    %
    
    
    45,345
    
    
    
    6.1
    %Total
    
    $
    833,988
    
    
    
    100.0
    %
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
 Competition
     Change in Tax Status
   9




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Redeemable Common Stock Warrants
 Business Development and Promotional Activities
     Resources
  Patents and Proprietary Information
   10




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Foreign Operations
  Company Information Available on the Internet
  Environmental Matters
    
 Item 1A.
    
    Risk Factors
 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;
  11




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
    
    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
 
    
    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 First Indenture, the new revolving credit facility and the Second 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.
    12




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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.
    13




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Risks Related to Internal Controls
 We could incur adverse effects from our prior disclosures relating to our failures to comply with
prior financial covenants.
   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.
   Risks Related to Our Business and Operations
 We expect to experience net losses in at least our next four years of operation.
  Our ability to meet our financial and other future obligations depends on our future operating
results. We cannot be sure we will be able to meet these obligations as they come due.
  
    
    when and how much of our contract backlog our customers fund;
    
    how much time our customers take to pay us;
    
    when and whether we win new contracts and how we perform on our contracts;
    
    whether we can increase annual revenue and/or operating income;
    
    how much in payroll deferrals and rollovers our employees spend to purchase our common
stock ;
    
    how much we have to spend to repurchase our stock from current and former employees;
    
    current economic conditions and conditions in the defense contracting industry;
    
    U.S. government spending levels, both generally and by our particular customers;
    
    failure by Congress to timely approve budgets for federal departments and agencies we
support;
    
    operating difficulties, operating costs or pricing pressures;
    
    new legislation or regulatory developments that adversely affect us; and
    
    any delays in implementing strategic projects.
    14




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We face intense competition from many companies that have greater resources than we do. This could
cause price reductions, reduced profitability, and loss of market share.
    15




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Historically, a few contracts have provided most of our revenue. If we do not retain or replace
these contracts our operations will suffer.
  1.
    
    Modeling and Simulation Information Analysis Center for the Defense Information Systems
Agency (13.0%, 6.8%)2.
    
    Seaport Multiple Award Contract for the Naval Sea Systems Command (NAVSEA) (12.7%,
14.3%)3.
    
    Technical and Analytical Support for the U.S. Air Force (10.3%, 9.5%)4.
    
    Seaport E Multiple Award Contract for NAVSEA (9.2%, 5.2%)5.
    
    Weapons System Information Analysis Center for the Defense Information Systems Agency
(6.0%, 5.5%)6.
    
    Engineering, Financial and Program Management Support Services to the U.S. Navy Virtual
SYSCOM (5.0%, 7.0%)
  If we are unable to manage our growth, our business could be adversely affected.
  Acquisitions could increase our costs or liabilities or be disruptive.
  We depend on key management and may not be able to retain those employees due to competition for
their services.
  Our business could suffer if we fail to attract, train and retain skilled employees.
   16




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In order to succeed, we will have to keep up with rapid technological changes in a number of
industries. Various factors could affect our ability to keep pace with these changes.
  A continued economic downturn could harm our business.
  Adverse changes in market conditions, the stock market or the merger and acquisition environment in
our industry could adversely affect the value of our goodwill which could cause us to recognize an
impairment charge.
  Our employees may engage in misconduct or other improper activities, which could harm our business.
  The interests of the ESOP Trust may not be aligned with the interests of participants in the ESOP
component of the KSOP.
  Environmental laws and regulations and our use of hazardous materials may subject us to significant
liabilities.
   17




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On March 22, 2010, our S corporation election automatically terminated and we became a C
corporation for U.S. federal income tax purposes. As a C corporation we are subject to federal and
state income tax at regular corporate rates. The increase in our effective tax rate could reduce
cash available to pay our debt and other financial obligations and to invest in our operations.
  The Internal Revenue Service (IRS) could successfully challenge the validity of our S corporation
election for tax periods prior to March 22, 2010, and we could possibly owe additional U.S. federal
and state income tax.
  Risks Related to Our Industry
 We depend on U.S. government contracts for substantially all of our revenue. Changes in the
contracting or fiscal policies of the U.S. government could adversely affect our business,
financial condition or results of operations.
  
    
    budgetary constraints affecting U.S. government spending generally, or specific
departments or agencies in particular;
 
    
    changes in U.S. government fiscal policies or available funding;
 
    
    changes in U.S. government programs or requirements;
 
    
    U.S. government curtailment of its use of technology services firms;
 
    
    adoption of new laws or regulations;
 
    
    technological developments;
 
    
    U.S. government shutdowns (such as that which occurred during the U.S. governments
1996 fiscal year);
 
    
    Competition and consolidation in the information industry; and
 
    
    General economic conditions.
    18




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Failure by Congress to timely approve budgets for the federal agencies we support could delay or
reduce spending and cause us to lose revenue.
  We may not realize the full amount of our backlog, which could lower future revenue.
  Many of our U.S. government customers procure goods and services through ID/IQ, GWAC or GSA
Schedule contracts under which we must compete for post-award orders.
  U.S. government contracts contain termination provisions that are unfavorable to us.
  If we do not accurately estimate the expenses, time and resources necessary to meet our contractual
obligations, our contract profits will be lower than expected.
    19




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Our operating margins and operating results may suffer if cost-reimbursement contracts increase in
proportion to our total contract mix.
  If our fixed-price contract revenue declines in total or as a proportion of our total business, or
if profit rates on these contracts deteriorate, our operating margins and operating results may
suffer.
  Our subcontractors failure to perform contractual obligations could damage our reputation as a
prime contractor and our ability to obtain future business.
  Because U.S. government contracts are subject to government audits, contract payments are subject
to adjustment and repayment which may result in lower than expected contract revenue.
  If we fail to recover at- risk contract costs, we may have reduced fees or losses.
  Actual or perceived conflicts of interest may prevent us from being able to bid on or perform
contracts.
  As a U.S. government contractor, we must comply with complex procurement laws and regulations and
our failure to do so could have a negative impact upon our business.
   20




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We derive significant revenue from U.S. government contracts awarded through competitive bidding
which is an inherently unpredictable process.
  
    
    the frequent need to bid on programs in advance of the completion of their design,
which can result in unforeseen technological difficulties and/or cost overruns;
 
    
    the substantial time and effort, including design, development and promotional
activities, required to prepare bids and proposals for contracts we may not win; and
 
    
    the rapid rate of technological advancement and design complexity of most of our
research offerings.
  Our failure to obtain and maintain necessary security clearances may limit our ability to carry out
confidential work for U.S. government customers, which could cause our revenue to decline.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
    21




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Item 3.
    
    Legal Proceedings
   
 Item 4.
    
    [Removed and Reserved]
 
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  ShareValuation Date
    
    PriceSeptember 30, 2010
    
    $
    26.65March 31, 2010
    
    $
    28.00September 30, 2009
    
    $
    34.50March 31, 2009
    
    $
    34.30
  Dividend Policy
   22




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Item 6.
    
    Selected Financial Data
  Selected Financial Data of Alion Science and Technology CorporationFor Years Ended September 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(In thousands, except share and per share data)Consolidated Operating Data:Contract revenue
    
    $
    833,988
    
    
    $
    802,225
    
    
    $
    739,482
    
    
    $
    737,587
    
    
    $
    508,628Direct contract expenses
    
    
    638,000
    
    
    
    615,700
    
    
    
    566,408
    
    
    
    562,139
    
    
    
    381,467Operating expenses
    
    
    157,068
    
    
    
    148,960
    
    
    
    152,117
    
    
    
    161,283
    
    
    
    129,466Operating income (loss)
    
    
    38,920
    
    
    
    37,565
    
    
    
    20,957
    
    
    
    14,165
    
    
    
    (2,305
    )Interest expense (a)
    
    
    (67,613
    )
    
    
    (55,154
    )
    
    
    (47,382
    )
    
    
    (51,226
    )
    
    
    (29,691
    )Net loss
    
    $
    (15,232
    )
    
    $
    (17,041
    )
    
    $
    (25,334
    )
    
    $
    (42,770
    )
    
    $
    (31,115
    )Basic and diluted loss per share
    
    $
    (2.81
    )
    
    $
    (3.25
    )
    
    $
    (5.01
    )
    
    $
    (8.35
    )
    
    $
    (6.19
    )Basic and diluted
weighted-average common shares
outstanding
    
    
    5,427,979
    
    
    
    5,246,227
    
    
    
    5,057,337
    
    
    
    5,121,033
    
    
    
    5,029,670Consolidated Balance SheetData at End of Period:Net accounts receivable
    
    $
    174,032
    
    
    $
    180,157
    
    
    $
    168,451
    
    
    $
    186,660
    
    
    $
    150,412Total assets
    
    
    646,302
    
    
    
    647,498
    
    
    
    655,946
    
    
    
    683,970
    
    
    
    650,969Working capital
    
    
    59,796
    
    
    
    27,833
    
    
    
    33,275
    
    
    
    60,880
    
    
    
    52,284Current portion of long-term
debt and interest(b)
    
    
    17,217
    
    
    
    14,428
    
    
    
    11,932
    
    
    
    14,541
    
    
    
    2,816Long-term debt, excluding
current portion(b)
    
    
    521,957
    
    
    
    535,822
    
    
    
    528,774
    
    
    
    556,943
    
    
    
    478,859Common stock warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redeemable common stock warrants
    
    
    
    
    
    
    32,717
    
    
    
    39,996
    
    
    
    33,610
    
    
    
    35,234Redeemable common stock
    
    
    150,792
    
    
    
    187,137
    
    
    
    200,561
    
    
    
    200,768
    
    
    
    213,719Accumulated deficit
    
    
    (246,270
    )
    
    
    (274,559
    )
    
    
    (276,876
    )
    
    
    (260,147
    )
    
    
    (221,009
    )Other Data:Depreciation and amortization
    
    $
    16,732
    
    
    $
    18,959
    
    
    $
    20,715
    
    
    $
    21,824
    
    
    $
    16,566Cash flows provided by (used in):Operating activities
    
    $
    2,396
    
    
    $
    8,995
    
    
    $
    29,320
    
    
    $
    (5,008
    )
    
    $
    (15,678
    )Investing activities
    
    
    (2,147
    )
    
    
    (2,347
    )
    
    
    (12,152
    )
    
    
    (25,438
    )
    
    
    (284,423
    )
 (b)
    
    Interest expense includes interest payable in cash, non-cash expenses for amortizing
original issue discount and debt issue costs, and changes in the fair value of redeemable
stock warrants.(c)
    
    Debt, current and long-term, includes senior and subordinated debt and accrued interest
and is net of unamortized debt issue costs and original issue discount.   23




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  About This Managements Discussion and Analysis
  Overview
  For the Years Ended September 30,2010
    
    
    2009
    
    
    2008(In thousands)Revenue
    
    $
    833,988
    
    
    $
    802,225
    
    
    $
    739,482Net loss
    
    $
    (15,232
    )
    
    $
    (17,041
    )
    
    $
    (25,334
    )
 September 30,2010
    
    
    2009
    
    
    2008(In millions)Backlog:Funded
    
    $
    407.8
    
    
    $
    376.5
    
    
    $
    340.5Unfunded
    
    
    6,205.9
    
    
    
    6,008.4
    
    
    
    4,475.8Total
    
    $
    6,613.7
    
    
    $
    6,384.9
    
    
    $
    4,816.3
  September 30,2010
    
    
    2009
    
    
    2008(In thousands)U.S. Department of Defense
    
    $
    771,835
    
    
    
    92.5
    %
    
    $
    735,304
    
    
    
    91.7
    %
    
    $
    660,969
    
    
    
    89.4
    %Other Federal Civilian Agencies
    
    
    41,413
    
    
    
    5.0
    %
    
    
    38,474
    
    
    
    4.8
    %
    
    
    33,168
    
    
    
    4.5
    %Commercial and International
    
    
    20,740
    
    
    
    2.5
    %
    
    
    28,447
    
    
    
    3.5
    %
    
    
    45,345
    
    
    
    6.1
    %Total
    
    $
    833,988
    
    
    
    100.0
    %
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
  24




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##### Table of Contents



For the Years Ended September 30,Contract Type
    
    2010
    
    
    2009
    
    
    2008(In thousands)Cost-reimbursement
    
    $
    636,232
    
    
    
    76.3
    %
    
    $
    567,284
    
    
    
    70.8
    %
    
    $
    517,760
    
    
    
    70.0
    %Fixed-price
    
    
    87,610
    
    
    
    10.5
    %
    
    
    91,797
    
    
    
    11.4
    %
    
    
    70,078
    
    
    
    9.5
    %Time-and-material
    
    
    110,146
    
    
    
    13.2
    %
    
    
    143,144
    
    
    
    17.8
    %
    
    
    151,644
    
    
    
    20.5
    %Total
    
    $
    833,988
    
    
    
    100.0
    %
    
    $
    802,225
    
    
    
    100.0
    %
    
    $
    739,482
    
    
    
    100.0
    %
 Results of Operations
   25




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##### Table of Contents



Year ended September 30, 2010 Compared to Year ended September 30, 2009
  Year Ended September 30,2010
    
    
    2009%
    
    
    
    
    
    
    %Selected Financial Information
    
    
    
    
    
    Revenue
    
    
    
    
    
    
    Revenue(In thousands)Total revenue
    
    $
    833,988
    
    
    
    
    
    
    $
    802,225Total direct contract costs
    
    
    638,000
    
    
    
    76.5
    %
    
    
    615,700
    
    
    
    76.7
    %Direct labor costs
    
    
    272,015
    
    
    
    32.6
    %
    
    
    272,148
    
    
    
    33.9
    %Material and subcontract costs
    
    
    348,437
    
    
    
    41.8
    %
    
    
    316,957
    
    
    
    39.5
    %Other direct costs
    
    
    17,548
    
    
    
    2.1
    %
    
    
    26,595
    
    
    
    3.3
    %Gross profit
    
    
    195,988
    
    
    
    23.5
    %
    
    
    186,525
    
    
    
    23.3
    %Total operating expense
    
    
    157,068
    
    
    
    18.8
    %
    
    
    148,960
    
    
    
    18.6
    %Major components of operating expense:Indirect expenses including facilities costs
    
    
    71,238
    
    
    
    8.5
    %
    
    
    68,457
    
    
    
    8.5
    %General and administrative
    
    
    70,976
    
    
    
    8.5
    %
    
    
    60,867
    
    
    
    7.6
    %Depreciation and amortization
    
    
    16,732
    
    
    
    2.0
    %
    
    
    18,959
    
    
    
    2.4
    %Income from operations
    
    $
    38,920
    
    
    
    4.7
    %
    
    $
    37,565
    
    
    
    4.7
    %
 Contract Revenue.
 Direct Contract Expenses and Gross Profit.
 Operating Expenses.
   26




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##### Table of Contents



Operating Income.
 Other Expense.
  Year Ended September 30,2010
    
    
    2009(In millions)Cash Pay InterestRevolver
    
    $
    320
    
    
    $
    1,005Senior Term Loan
    
    
    11,047
    
    
    
    22,925Senior Secured Notes
    
    
    16,303
    
    
    
    Senior Unsecured Notes
    
    
    25,625
    
    
    
    25,625Subordinated Note
    
    
    
    
    
    
    2,447Other cash pay interest and fees
    
    
    4,023
    
    
    
    447Sub-total cash pay interest
    
    
    57,318
    
    
    
    52,449Deferred and Non- cash InterestDebt issue costs and other non-cash items
    
    
    7,192
    
    
    
    5,067Senior Secured Notes PIK Interest
    
    
    3,263
    
    
    
    Subordinated Note interest
    
    
    
    
    
    
    4,917Redeemable warrants
    
    
    (160
    )
    
    
    (7,279
    )Sub-total non-cash interest
    
    
    10,295
    
    
    
    2,705Total interest expense
    
    $
    67,613
    
    
    $
    55,154
 Debt Extinguishment.
   27




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##### Table of Contents



Income Tax Expense.
    Net Loss.
 Year ended September 30, 2009 Compared to Year ended September 30, 2008
  Year Ended September 30,2009
    
    
    2008%
    
    
    
    
    
    
    %Selected Financial Information
    
    
    
    
    
    Revenue
    
    
    
    
    
    
    Revenue(In thousands)Total revenue
    
    $
    802,225
    
    
    
    
    
    
    $
    739,482Total direct contract costs
    
    
    615,700
    
    
    
    76.7
    %
    
    
    566,408
    
    
    
    76.6
    %Direct labor costs
    
    
    272,148
    
    
    
    33.9
    %
    
    
    248,409
    
    
    
    33.6
    %Material and subcontract costs
    
    
    316,957
    
    
    
    39.5
    %
    
    
    295,122
    
    
    
    39.9
    %Other direct costs
    
    
    26,595
    
    
    
    3.3
    %
    
    
    22,877
    
    
    
    3.1
    %Gross profit
    
    
    186,525
    
    
    
    23.3
    %
    
    
    173,074
    
    
    
    23.4
    %Total operating expense
    
    
    148,960
    
    
    
    18.6
    %
    
    
    152,117
    
    
    
    20.6
    %Indirect personnel and facilities
    
    
    68,457
    
    
    
    8.5
    %
    
    
    70,930
    
    
    
    9.6
    %General and administrative expense
    
    
    60,867
    
    
    
    7.6
    %
    
    
    59,484
    
    
    
    8.0
    %Depreciation and amortization
    
    
    18,959
    
    
    
    2.4
    %
    
    
    20,715
    
    
    
    2.8
    %Income from operations
    
    $
    37,565
    
    
    
    4.7
    %
    
    $
    20,957
    
    
    
    2.8
    %
  28




---



##### Table of Contents



Contract Revenue.
 Direct Contract Expenses and Gross Profit.
 Operating Expenses.
 Operating Income.
  29




---



##### Table of Contents



Other Expense.
 Year EndedSeptember 30,2009
    
    
    2008(In millions)Cash Pay InterestRevolver
    
    $
    1,005
    
    
    $
    1,884Senior Term Loan
    
    
    22,925
    
    
    
    16,453Senior Unsecured Notes
    
    
    25,625
    
    
    
    25,625Subordinated Note
    
    
    2,447
    
    
    
    Other cash pay interest and fees
    
    
    447
    
    
    
    426Sub-total cash pay interest
    
    
    52,449
    
    
    
    44,388Deferred and Non-cash InterestDebt issue costs and other non-cash items
    
    
    5,067
    
    
    
    1,766Subordinated Note interest
    
    
    4,917
    
    
    
    3,978Redeemable warrants
    
    
    (7,279
    )
    
    
    (2,750
    )Sub-total non-cash interest
    
    
    2,705
    
    
    
    2,994Total interest expense
    
    $
    55,154
    
    
    $
    47,382
 Income Tax Expense.
 Net Loss.
 Liquidity and Capital Resources
  Cash Flows.
    30




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##### Table of Contents



31




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##### Table of Contents



Cash flow effects and risks associated with equity-related obligations
   Discussion of Debt Structure
  Credit Agreement
    Security.
 Guarantees
 Interest and Fees.
 Other Fees and Expenses.
   32




---



##### Table of Contents



Covenants.
 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 millionThereafter
    
    $65.0 million
  Senior Secured Notes
  Security . pari passu
 Guarantees
 Interest and Fees.
 Covenants.
  
    
    Indebtedness incurred pursuant to the Credit Agreement and certain other contracts up to
$25 million less principal repayments made under that indebtedness;
 
    
    Permitted inter-company indebtedness;
 
    
    The Companys 12% notes ;
 
    
    Indebtedness pre-existing the issuance of the Companys 12% notes;
 
    
    Permitted Indebtedness of acquired subsidiaries;
  33




---



##### Table of Contents




    
    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 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 $20 million.
  
    
    Restricted 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 Senior Unsecured 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;
 
    
    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.
   34




---



##### Table of Contents



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 Senior Unsecured Notes to be in effect or the denial or
disaffirmation by any subsidiary guarantor 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.
 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 Senior 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
    %
  Senior Unsecured Notes
  Interest and Fees.
  35




---



##### Table of Contents



Covenants.
  
    
    Indebtedness incurred pursuant to the Senior Credit Facility and certain other contracts
up to $360 million less principal repayments made under that indebtedness;
 
    
    Permitted inter-company indebtedness;
 
    
    The Companys 10.25% notes ;
 
    
    Indebtedness pre-existing the issuance of the Companys 10.25% 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 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.
  
    
    Restricted 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 Senior Unsecured Notes in connection with a change
of control of the Company;
 
    
    Certain permitted inter-company subordinated obligations;
  36




---



##### Table of Contents




    
    Certain repurchases and redemptions of subordination obligations of the Company or a
Subsidiary Guarantor from Net Available Cash (as defined in the 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 Senior 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 Senior 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
  Period
    
    Redemption Price2011
    
    
    105.125
    %2012
    
    
    102.563
    %2013 and thereafter
    
    
    100.000
    %
   37




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##### Table of Contents



5-Fiscal Year Period ($ In thousands)2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Bank revolving credit facility- Interest(1)
    
    $
    444
    
    
    $
    445
    
    
    $
    444
    
    
    $
    396
    
    
    $
    Senior Secured Notes- Interest
    
    
    31,223
    
    
    
    31,850
    
    
    
    32,490
    
    
    
    33,144
    
    
    
    16,821- Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,788Senior Unsecured Notes- Interest
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    25,625
    
    
    
    12,813- Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Total cash  pay interest
    
    
    57,292
    
    
    
    57,920
    
    
    
    58,559
    
    
    
    59,165
    
    
    
    29,634Total cash  pay principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    589,788Total
    
    $
    57,292
    
    
    $
    57,920
    
    
    $
    58,559
    
    
    $
    59,165
    
    
    $
    619,422
 (1)
    
    Alion anticipates it will maintain its $25.0 million revolving credit facility to meet
working capital needs. The present revolving credit facility matures in August 2014. The
Company estimates the average utilized revolver balance will be minimal. Interest expense
represents estimated fees for the $25.0 million revolving credit facilitys unused balance. Contingent Obligations
 Earn-outs
  Other Contingent obligations which will impact the Companys cash flow
  Number ofShares
    
    
    
    
    
    
    Total ValueDate
    
    Repurchased
    
    
    Share Price
    
    
    PurchasedDecember 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
    
    
    127
    
    
    $
    38.35
    
    
    $
    5August 2009
    
    
    178
    
    
    $
    34.30
    
    
    $
    6September 2009
    
    
    55,282
    
    
    $
    34.30
    
    
    $
    ,896December 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
    
    
    $
    6Total
    
    
    527,749
    
    
    
    
    
    
    $
    18,511
  38




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##### Table of Contents



Payments Due by Fiscal Year (In thousands)Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterContractual Obligations:Long-term debt including
principal and interest
    
    $
    852,358
    
    
    $
    57,292
    
    
    $
    57,920
    
    
    $
    58,559
    
    
    $
    59,165
    
    
    $
    619,422
    
    
    $
    Lease Obligations
    
    
    129,251
    
    
    
    27,676
    
    
    
    24,081
    
    
    
    22,098
    
    
    
    15,443
    
    
    
    15,292
    
    
    
    24,661Total contractual
obligations
    
    $
    981,609
    
    
    $
    84,968
    
    
    $
    82,001
    
    
    $
    80,657
    
    
    $
    74,608
    
    
    $
    634,714
    
    
    $
    24,661
 Off-Balance Sheet Financing Arrangements
 Leases
 Summary of Critical Accounting Policies
 Revenue Recognition
   39




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##### Table of Contents



Revenue Recognition .
 Goodwill and Intangible Assets
  Intangibles, Goodwill and Other Assets
   40




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##### Table of Contents



Purchased contracts
    
    1  13 yearsInternal use software and engineering designs
    
    2  3 yearsNon-compete agreements
    
    3  6 years
  41




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##### Table of Contents



Redeemable Common Stock
    Recently Issued Accounting Pronouncements
 Revenue Recognition  Multiple Deliverable Revenue
Arrangements Revenue Recognition
 Certain Revenue Arrangements That Include Software
Elements Software  Revenue
Recognition
  42




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##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk
  Foreign currency risk
  Risk associated with value of Alion common stock
   43




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##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Consolidated Financial Statements of Alion Science and Technology Corporation
 Report of Independent Registered Public Accounting Firm
    
    
    45Consolidated Financial Statements:Consolidated Balance Sheets as of September 30, 2010 and 2009
    
    
    46Consolidated Statements of Operations for the years ended September 30, 2010, 2009 and 2008
    
    
    47Consolidated Statements of Redeemable Common Stock, Common Stock Warrants, and Accumulated
Deficit for the years ended September 30, 2010, 2009, and 2008
    
    
    48Consolidated Statements of Cash Flows for the years ended September 30, 2010, 2009, and 2008
    
    
    49Notes to Consolidated Financial Statements
    
    
    50Consolidated Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts
    
    
    106
  44




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45




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 September 30,2010
    
    
    2009(In thousands, except share andper share information)Current assets:Cash and cash equivalents
    
    $
    26,695
    
    
    $
    11,185Accounts receivable, net
    
    
    174,032
    
    
    
    180,157Receivable due from ESOP Trust
    
    
    1,896
    
    
    
    Prepaid expenses and other current assets
    
    
    5,159
    
    
    
    3,795Total current assets
    
    
    207,782
    
    
    
    195,137Property, plant and equipment, net
    
    
    10,798
    
    
    
    14,474Intangible assets, net
    
    
    17,694
    
    
    
    28,680Goodwill
    
    
    398,921
    
    
    
    398,921Other assets
    
    
    11,107
    
    
    
    10,286Total assets
    
    $
    646,302
    
    
    $
    647,498Current liabilities:Interest payable
    
    $
    17,217
    
    
    $
    9,039Current portion, senior term loan payable
    
    
    
    
    
    
    2,389Current portion of subordinated note payable
    
    
    
    
    
    
    3,000Trade accounts payable
    
    
    44,486
    
    
    
    60,707Accrued liabilities
    
    
    43,145
    
    
    
    45,475Accrued payroll and related liabilities
    
    
    40,221
    
    
    
    43,033Billings in excess of revenue earned
    
    
    2,917
    
    
    
    3,661Total current liabilities
    
    
    147,986
    
    
    
    167,304Senior secured notes
    
    
    275,831
    
    
    
    Senior unsecured notes
    
    
    246,126
    
    
    
    245,241Senior term loan payable, excluding current portion
    
    
    
    
    
    
    229,221Subordinated note payable
    
    
    
    
    
    
    46,932Accrued compensation and benefits, excluding current portion
    
    
    6,174
    
    
    
    6,457Non-current portion of lease obligations
    
    
    7,848
    
    
    
    7,286Deferred income taxes
    
    
    37,207
    
    
    
    Redeemable common stock warrants
    
    
    
    
    
    
    32,717Redeemable common stock, $0.01 par value, 8,000,000 shares
authorized, 5,658,234 and 5,424,274 shares issued and
outstanding at September 30, 2010 and September 30, 2009
    
    
    150,792
    
    
    
    187,137Common stock warrants
    
    
    20,785
    
    
    
    Accumulated other comprehensive loss
    
    
    (177
    )
    
    
    (238
    )Accumulated deficit
    
    
    (246,270
    )
    
    
    (274,559
    )Total liabilities, redeemable common stock, warrants and
accumulated deficit
    
    $
    646,302
    
    
    $
    647,498
 See accompanying notes to consolidated financial statements.
  46




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 Year Ended September 30,2010
    
    
    2009
    
    
    2008(In thousands, except share and per shareinformation)Contract revenue
    
    $
    833,988
    
    
    $
    802,225
    
    
    $
    739,482Direct contract expense
    
    
    638,000
    
    
    
    615,700
    
    
    
    566,408Gross profit
    
    
    195,988
    
    
    
    186,525
    
    
    
    173,074Operating expenses:Indirect contract expense
    
    
    40,034
    
    
    
    35,473
    
    
    
    40,050Research and development
    
    
    716
    
    
    
    677
    
    
    
    988General and administrative
    
    
    70,976
    
    
    
    60,867
    
    
    
    59,484Rental and occupancy expense
    
    
    31,204
    
    
    
    32,984
    
    
    
    30,880Depreciation and amortization
    
    
    16,732
    
    
    
    18,959
    
    
    
    20,715Loss on sale of subsidiary
    
    
    2,420
    
    
    
    
    
    
    
    Gain on sale of contracts
    
    
    (5,014
    )
    
    
    
    
    
    
    Total operating expenses
    
    
    157,068
    
    
    
    148,960
    
    
    
    152,117Operating income
    
    
    38,920
    
    
    
    37,565
    
    
    
    20,957Other income (expense):Interest income
    
    
    119
    
    
    
    91
    
    
    
    423Interest expense
    
    
    (67,613
    )
    
    
    (55,154
    )
    
    
    (47,382
    )Other
    
    
    (242
    )
    
    
    305
    
    
    
    655Gain on debt extinguishment
    
    
    50,749
    
    
    
    
    
    
    
    Total other income (expenses)
    
    
    (16,987
    )
    
    
    (54,758
    )
    
    
    (46,304
    )Income (loss) before income taxes
    
    
    21,933
    
    
    
    (17,193
    )
    
    
    (25,347
    )Income tax (expense) benefit
    
    
    (37,165
    )
    
    
    152
    
    
    
    13Net loss
    
    $
    (15,232
    )
    
    $
    (17,041
    )
    
    $
    (25,334
    )Basic and diluted loss per share
    
    $
    (2.81
    )
    
    $
    (3.25
    )
    
    $
    (5.01
    )Basic and diluted weighted average
common shares outstanding
    
    
    5,427,979
    
    
    
    5,246,227
    
    
    
    5,057,337
 See accompanying notes to consolidated financial statements.
  47




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK,
COMMON STOCK WARRANTS AND ACCUMULATED DEFICIT
 FOR THE YEARS ENDED SEPTEMBER 30, 2010, 2009, AND 2008
 CommonRedeemable Common Stock
    
    
    Stock
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Warrants
    
    
    Income
    
    
    Deficit(In thousands, except share and per share information)Balances at September 30, 2007
    
    
    5,012,934
    
    
    $
    200,768
    
    
    $
    
    
    
    $
    
    
    
    $
    (260,147
    )Redeemable common stock issued
    
    
    316,117
    
    
    
    12,449
    
    
    
    
    
    
    
    
    
    
    
    Redeemable common stock retired
    
    
    (99,295
    )
    
    
    (4,051
    )
    
    
    
    
    
    
    
    
    
    
    Change in common stock redemption value
    
    
    
    
    
    
    (8,605
    )
    
    
    
    
    
    
    
    
    
    
    8,605Postretirement medical plan actuarial cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    Net loss for year ended September 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,334
    )
    
    
    (25,334
    )Comprehensive loss for year ended
September 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,370
    )Balances at September 30, 2008
    
    
    5,229,756
    
    
    $
    200,561
    
    
    $
    
    
    
    $
    
    
    
    $
    (276,876
    )Redeemable common stock issued
    
    
    439,637
    
    
    
    15,109
    
    
    
    
    
    
    
    
    
    
    
    Redeemable common stock retired
    
    
    (245,119
    )
    
    
    (9,175
    )
    
    
    
    
    
    
    
    
    
    
    Change in common stock redemption value
    
    
    
    
    
    
    (19,358
    )
    
    
    
    
    
    
    
    
    
    
    19,358Postretirement medical plan actuarial cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (202
    )
    
    
    Net loss for
year ended September 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,041
    )
    
    
    (17,041
    )Comprehensive loss for year ended
September 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (17,243
    )Balances at September 30, 2009
    
    
    5,424,274
    
    
    $
    187,137
    
    
    $
    
    
    
    
    
    
    
    $
    (274,559
    )Redeemable common stock issued
    
    
    516,590
    
    
    
    14,124
    
    
    
    
    
    
    
    
    
    
    
    Redeemable common stock retired
    
    
    (282,630
    )
    
    
    (9,338
    )
    
    
    
    
    
    
    
    
    
    
    Common stock warrants issued
    
    
    
    
    
    
    
    
    
    
    20,785
    
    
    
    
    
    
    
    Change in common stock redemption value
    
    
    
    
    
    
    (41,131
    )
    
    
    
    
    
    
    
    
    
    
    41,131Postretirement medical plan actuarial
benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    Loss on sale of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,390Net loss for year ended September 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,232
    )
    
    
    (15,232
    )Comprehensive loss for year ended
September 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (15,171
    )
    
    
    Balances at September 30, 2010
    
    
    5,658,234
    
    
    $
    150,792
    
    
    $
    20,785
    
    
    
    
    
    
    $
    (246,270
    )
 See accompanying notes to consolidated financial statements.
  48




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended September 30,2010
    
    
    2009
    
    
    2008(In thousands)Cash flows from operating activities:Net loss
    
    $
    (15,232
    )
    
    $
    (17,041
    )
    
    $
    (25,334
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    16,777
    
    
    
    18,959
    
    
    
    20,715Bad debt expense
    
    
    
    
    
    
    1,014
    
    
    
    (578
    )Accretion of debt to face value
    
    
    3,263
    
    
    
    2,359
    
    
    
    1,146Amortization of debt issuance costs
    
    
    7,199
    
    
    
    2,708
    
    
    
    1,766Change in fair value of redeemable common stock warrants
    
    
    (160
    )
    
    
    (7,279
    )
    
    
    (3,895
    )Incentive compensation
    
    
    3,171
    
    
    
    (1,519
    )
    
    
    500Gain on debt extinguishment
    
    
    (50,749
    )
    
    
    
    
    
    
    Deferred income taxes
    
    
    37,207
    
    
    
    
    
    
    
    Loss on sale of subsidiary
    
    
    2,589
    
    
    
    
    
    
    
    Gain on sale of contracts
    
    
    (514
    )
    
    
    
    
    
    
    Other gains and losses
    
    
    (59
    )
    
    
    (370
    )
    
    
    (422
    )Changes in assets and liabilities:Accounts receivable, net
    
    
    6,624
    
    
    
    (12,718
    )
    
    
    18,941Other assets
    
    
    (1,287
    )
    
    
    (4,283
    )
    
    
    771Trade accounts payable
    
    
    (16,102
    )
    
    
    3,544
    
    
    
    11,059Accrued liabilities
    
    
    1,595
    
    
    
    14,340
    
    
    
    6,119Interest payable
    
    
    8,178
    
    
    
    2,496
    
    
    
    (5,568
    )Other liabilities
    
    
    (104
    )
    
    
    6,785
    
    
    
    4,100Net cash provided by operating activities
    
    
    2,396
    
    
    
    8,995
    
    
    
    29,320Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (50
    )
    
    
    (166
    )
    
    
    (7,946
    )Capital expenditures
    
    
    (2,207
    )
    
    
    (2,186
    )
    
    
    (4,986
    )Proceeds from sale of fixed assets
    
    
    110
    
    
    
    5
    
    
    
    780Net cash provided by (used in) investing activities
    
    
    (2,147
    )
    
    
    (2,347
    )
    
    
    (12,152
    )Cash flows from financing activities:Cash (paid for) received from interest rate swap
    
    
    
    
    
    
    (4,647
    )
    
    
    4,333Sale of Secured Notes
    
    
    281,465
    
    
    
    
    
    
    
    Sale of Common Stock Warrants
    
    
    20,785
    
    
    
    
    
    
    
    Payment of debt issuance cost
    
    
    (18,183
    )
    
    
    
    
    
    
    (500
    )Repayment of Term B Loan
    
    
    (236,596
    )
    
    
    
    
    
    
    Repurchase of Subordinated Note and related warrants
    
    
    (25,000
    )
    
    
    
    
    
    
    Payment of senior term loan principal
    
    
    
    
    
    
    (2,433
    )
    
    
    (6,474
    )Payment of Subordinated Note principal
    
    
    
    
    
    
    (3,000
    )
    
    
    Revolver borrowings
    
    
    84,200
    
    
    
    504,900
    
    
    
    450,505Revolver repayments
    
    
    (84,200
    )
    
    
    (504,900
    )
    
    
    (459,755
    )Loan to ESOP Trust
    
    
    (5,323
    )
    
    
    (5,936
    )
    
    
    (3,369
    )ESOP loan repayment
    
    
    5,323
    
    
    
    5,936
    
    
    
    3,369Redeemable common stock purchased from ESOP Trust
    
    
    (9,338
    )
    
    
    (9,174
    )
    
    
    (4,051
    )Redeemable common stock sold to ESOP Trust
    
    
    2,128
    
    
    
    7,504
    
    
    
    3,377Net cash provided by (used in) financing activities
    
    
    15,261
    
    
    
    (11,750
    )
    
    
    (12,565
    )Net increase (decrease) in cash and cash equivalents
    
    
    15,510
    
    
    
    (5,102
    )
    
    
    4,603Cash and cash equivalents at beginning of period
    
    
    11,185
    
    
    
    16,287
    
    
    
    11,684Cash and cash equivalents at end of period
    
    $
    26,695
    
    
    $
    11,185
    
    
    $
    16,287Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    49,161
    
    
    $
    49,953
    
    
    $
    49,909Cash paid (received) for taxes
    
    
    (41
    )
    
    
    (152
    )
    
    
    28Non-cash financing activities:Common stock issued to ESOP Trust in satisfaction of employer contribution
liability
    
    
    10,099
    
    
    
    10,273
    
    
    
    9,781
 See accompanying notes to consolidated financial statements.
  49




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ALION SCIENCE AND TECHNOLOGY CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Description and Formation of the Business
   (2) Summary of Significant Accounting Policies
 Basis of Presentation and Principles of Consolidation
  
    
    Innovative Technology Solution Corporation (ITSC)  acquired October 2003
 
    
    Alion  IPS Corporation (IPS)  acquired February 2004
 
    
    Alion  METI Corporation (METI)  acquired February 2005
 
    
    Alion  CATI Corporation (CATI)  acquired February 2005
 
    
    Alion Canada (US) Corporation  established February 2005
 
    
    Alion Science and Technology (Canada) Corporation  established February 2005
 
    
    Alion  JJMA Corporation (JJMA)  acquired April 2005
 
    
    Alion Technical Services Corporation (Virginia)  established July 2005
 
    
    Alion  BMH Corporation (BMH)  acquired February 2006
 
    
    Washington Consulting, Inc. (WCI)  acquired February 2006
 
    
    Alion  MA&D Corporation (MA&D)  acquired May 2006
 
    
    Alion Technical Services Corporation (Delaware)  established May 2006
 
    
    Washington Consulting Government Services, Inc. (WCGS)  established July 2007
 Fiscal, Quarter and Interim Periods
  Use of Estimates
  Summary of Critical Accounting Policies
 Revenue Recognition
   50




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Revenue Recognition .
 Goodwill and Intangible Assets
  Intangibles, Goodwill and Other Assets
   51




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       52




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Purchased contracts
    
    1  13 yearsInternal use software and engineering designs
    
    2  3 yearsNon-compete agreements
    
    3  6 years
 Redeemable Common Stock
    Income Taxes
     53




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Cash and Cash Equivalents
  Accounts Receivable and Billings in Excess of Revenue Earned
  Property, Plant and Equipment
  Postretirement Benefits
 Compensation  Retirement Benefits.
 Fair Value of Financial Instruments
    54




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Cash, cash equivalents, accounts payable and accounts receivable.
 Senior long-term debt.
 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) Business Combinations
 Fiscal Year 2010 Sale
    Fiscal Year 2008 Acquisition
   55




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4) Employee Stock Ownership Plan (ESOP) and ESOP Trust
   (5) Postretirement Benefits
  (6) Loss Per Share
  (7) Redeemable common stock owned by ESOP Trust
    56




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (8) Accounts Receivable
  September 30,2010
    
    
    2009(In thousands)Billed receivables
    
    $
    94,662
    
    
    $
    108,566Unbilled receivables:Amounts currently billable
    
    
    36,021
    
    
    
    22,954Revenues recorded in excess of milestone billings on fixed price contracts
    
    
    2,917
    
    
    
    3,757Revenues recorded in excess of estimated contract value or funding
    
    
    24,952
    
    
    
    36,327Retainages and other amounts billable upon contract completion
    
    
    19,278
    
    
    
    12,972Allowance for doubtful accounts
    
    
    (3,798
    )
    
    
    (4,419
    )Total Accounts Receivable
    
    $
    174,032
    
    
    $
    180,157
  (9) Property, Plant and Equipment
 September 30,2010
    
    
    2009(In thousands)Leasehold improvements
    
    $
    10,862
    
    
    $
    10,214Equipment and software
    
    
    33,693
    
    
    
    32,807Total cost
    
    
    44,555
    
    
    
    43,021Less: accumulated depreciation and amortization
    
    
    (33,757
    )
    
    
    (28,547
    )Net Property, Plant and Equipment
    
    $
    10,798
    
    
    $
    14,474
   57




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (10) Goodwill and Intangible Assets
 Intangibles
 Goodwill and Other
 Total(In thousands)Balance as of October 1, 2008
    
    $
    398,871Goodwill acquired during the year
    
    
    Adjustment to initial allocation (includes earn out obligations)
    
    
    50Balance as of September 30, 2009
    
    $
    398,921Goodwill acquired during the year
    
    
    Adjustment to initial allocation (includes earn out obligations)
    
    
    Balance as of September 30, 2010
    
    $
    398,921
  September 30, 2010
    
    
    September 30, 2009Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetPurchased contracts
    
    $
    111,635
    
    
    $
    (94,228
    )
    
    $
    17,407
    
    
    $
    111,635
    
    
    $
    (83,563
    )
    
    $
    28,072Internal use software and
engineering designs
    
    
    2,155
    
    
    
    (1,868
    )
    
    
    287
    
    
    
    2,155
    
    
    
    (1,568
    )
    
    
    587Non-compete agreements
    
    
    725
    
    
    
    (725
    )
    
    
    
    
    
    
    725
    
    
    
    (704
    )
    
    
    21Total
    
    $
    114,515
    
    
    $
    (96,821
    )
    
    $
    17,694
    
    
    $
    114,515
    
    
    $
    (85,835
    )
    
    $
    28,680
  Fiscal year endingSeptember 30,
    
    (In thousands)2011
    
    
    6,8422012
    
    
    5,7662013
    
    
    3,2462014
    
    
    8792015
    
    
    737Thereafter
    
    
    224$
    17,694
 (11) Long-Term Debt
   58




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Credit Agreement
    Security.
 Guarantees
 Interest and Fees.
 Other Fees and Expenses.
  Covenants.
 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 millionThereafter
    
        $
65.0 million
   59




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Secured Notes
  Security .
 Guarantees
 Interest and Fees.
 Unsecured Notes
  Guarantees
 Interest and Fees.
 Retired Term B Senior Credit Agreement
   60




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Retired Subordinated Note
    Interest Payable
   September 30,2010
    
    
    2009(In thousands)Unsecured Notes
    
    $
    4,271
    
    
    $
    4,271Secured Notes
    
    
    12,946
    
    
    
    Senior Term Loan
    
    
    
    
    
    
    3,975Subordinated Note Payable
    
    
    
    
    
    
    793Total
    
    $
    17,217
    
    
    $
    9,039
  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
 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 September 30, 2010, the $275.8 million carrying value on the face of the balance sheet
included $310 million in principal, $3.3 million in accrued PIK interest and is net of
$37.4 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 $250 million in principal
and $3.9 million in unamortized debt issue costs as of September 30, 2010 (initially $7.1
million).
  61




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (12) Fair Value Measurement
 Fair Value Disclosures
         62




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal Year Ended September 30,2010
    
    
    2009Redeemable Common StockWarrantsBalance, beginning of period
    
    $
    (32,717
    )
    
    $
    (39,996
    )Total realized and unrealized gains and (losses)
    
    
    14,564
    
    
    
    Included as a credit to interest expense
    
    
    160
    
    
    
    7,279Issuances and settlements
    
    
    17,993
    
    
    
    Balance, end of period
    
    $
    
    
    
    $
    (32,717
    )
 (13) Interest Rate Swap
  (14) Redeemable Common Stock Warrants
    Derivatives
  63




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (15) Secured Note Common Stock Warrants
    (16) Leases
  Lease Payments for Fiscal Years Ending
    
    (In thousands)2011
    
    $
    27,6762012
    
    
    24,0812013
    
    
    22,0982014
    
    
    15,4432015
    
    
    15,292And thereafter
    
    
    24,661Gross lease payments
    
    $
    129,251Less: non-cancelable subtenant receipts
    
    
    (2,382
    )Net lease payments
    
    $
    126,869
 Composition of Total Rent Expense
 September 30,2010
    
    
    2009
    
    
    2008(In thousands)Minimum rentals
    
    $
    22,100
    
    
    $
    25,742
    
    
    $
    24,794Less: Sublease rental income
    
    
    (1,829
    )
    
    
    (2,655
    )
    
    
    (3,559
    )Total rent expense, net
    
    $
    20,271
    
    
    $
    23,087
    
    
    $
    21,235
  64




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17) Stock-based Compensation
 SAR Plan
  Phantom Stock Plans
   (18) Long Term Incentive Plan
  (19) Income Taxes
    65




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       66




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  September 30,2010Current:Federal
    
    $
    State
    
    
    (2
    )Foreign
    
    
    (40
    )Total current provision
    
    
    (42
    )Deferred:Federal
    
    
    30,622State
    
    
    6,585Foreign
    
    
    Total deferred provision/(benefit)
    
    
    37,207Total provision for income taxes
    
    $
    37,165
  September 30,2010
    
    
    September 30,2010Expected federal income tax (benefit)
    
    
    35.0
    %
    
    $
    7,677State taxes (net of federal benefit)
    
    
    0.8
    %
    
    
    201Nondeductible expenses
    
    
    1.2
    %
    
    
    260Provision to return true-ups
    
    
    0.0
    %
    
    
    (2
    )Tax credits
    
    
    -0.2
    %
    
    
    (40
    )Deferred tax assets at conversion
    
    
    -161.2
    %
    
    
    (35,359
    )Deferred tax liabilities at conversion
    
    
    154.2
    %
    
    
    33,818Valuation allowance
    
    
    168.4
    %
    
    
    36,929S-Corp share
of pre-tax income
    
    
    -16.6
    %
    
    
    (3,638
    )Non-taxable debt extinguishment gain
    
    
    -12.2
    %
    
    
    (2,681
    )Income tax expense (benefit)
    
    
    169.4
    %
    
    $
    37,165
  September 30,
2010Deferred tax assets:Accrued expenses and reserves
    
    $
    11,083Intangible amortization
    
    
    13,650Deferred rent
    
    
    2,635Deferred wages
    
    
    4,329Depreciation and leases
    
    
    3,580Carryforwards and tax credits
    
    
    1,626Other
    
    
    25Gross deferred tax assets
    
    $
    36,929Less Valuation
    
    
    36,929Net Deferred Tax Assets
    
    $
    Deferred tax liabilities:Goodwill
    
    
    37,207Net deferred tax asset/(liability)
    
    $
    (37,207
    )
  67




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (20) Segment Information and Customer Concentration
   September 30,Government Agency
    
    Contract
    
    2010
    
    
    2009
    
    
    2008DoD  Defense Information Systems Agency (DISA)
    
    Modeling and Simulation Information Analysis Center for DISA
    
    
    13.0
    %
    
    
    6.8
    %
    
    
    4.7
    %DoD  U.S. Navy
    
    Seaport Multiple Award Contract for the Naval Sea Systems Command (NAVSEA)
    
    
    12.7
    %
    
    
    14.3
    %
    
    
    17.3
    %DoD  U.S. Air Force
    
    Technical and Analytical Support for the U.S. Air Force
    
    
    10.3
    %
    
    
    9.5
    %
    
    
    9.0
    %DoD  U.S. Navy
    
    Seaport E Multiple Award Contract for NAVSEA
    
    
    9.2
    %
    
    
    5.2
    %
    
    
    2.5
    %DoD  DISA
    
    Weapons System Information Analysis Center DISA
    
    
    6.0
    %
    
    
    5.5
    %
    
    
    5.0
    %DoD  U.S. Navy
    
    Engineering, Financial and Program Management Support Services to the U.S. Navy Virtual SYSCOM
    
    
    5.0
    %
    
    
    7.0
    %
    
    
    8.6
    %
 (21) Guarantor/Non-guarantor Condensed Consolidated Financial Information
   68




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet Information at September 30, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Current 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
    )
    
    $
    646,302Current liabilities:Interest 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 costs 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 surplus (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
  69




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ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Balance Sheet Information at September 30, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Current assets:Cash and cash equivalents
    
    $
    11,404
    
    
    $
    (215
    )
    
    $
    (4
    )
    
    $
    
    
    
    $
    11,185Accounts receivable, net
    
    
    174,456
    
    
    
    5,663
    
    
    
    38
    
    
    
    
    
    
    
    180,157Prepaid expenses and other current assets
    
    
    3,659
    
    
    
    133
    
    
    
    3
    
    
    
    
    
    
    
    3,795Total current assets
    
    
    189,519
    
    
    
    5,581
    
    
    
    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
    
    $
    659,570
    
    
    $
    21,661
    
    
    $
    40
    
    
    $
    (33,773
    )
    
    $
    647,498Current liabilities:Interest payable
    
    $
    9,039
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,039Current portion, senior term loan payable
    
    
    2,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,389Current portion, subordinated note payable
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Trade accounts payable
    
    
    59,742
    
    
    
    963
    
    
    
    2
    
    
    
    
    
    
    
    60,707Accrued liabilities
    
    
    44,034
    
    
    
    1,441
    
    
    
    
    
    
    
    
    
    
    
    45,475Accrued payroll and related liabilities
    
    
    41,642
    
    
    
    1,381
    
    
    
    10
    
    
    
    
    
    
    
    43,033Billings in excess of costs revenue earned
    
    
    3,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,661Total current liabilities
    
    
    163,507
    
    
    
    3,785
    
    
    
    12
    
    
    
    
    
    
    
    167,304Intercompany payables
    
    
    15,939
    
    
    
    
    
    
    
    702
    
    
    
    (16,641
    )
    
    
    Senior unsecured notes
    
    
    245,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245,241Senior term loan payable, excluding
current portion
    
    
    229,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229,221Subordinated note payable
    
    
    46,932
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,932Accrued compensation and benefits,
excluding current portion
    
    
    6,457
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,457Non-current portion of lease obligations
    
    
    7,216
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    7,286Redeemable common stock warrants
    
    
    32,717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,717Common stock of subsidiaries
    
    
    
    
    
    
    2,800
    
    
    
    
    
    
    
    (2,800
    )
    
    
    Redeemable common stock
    
    
    187,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,137Accumulated other comprehensive loss
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )Accumulated surplus (deficit)
    
    
    (274,559
    )
    
    
    15,006
    
    
    
    (674
    )
    
    
    (14,332
    )
    
    
    (274,559
    )Total liabilities, redeemable common
stock and accumulated deficit
    
    $
    659,570
    
    
    $
    21,661
    
    
    $
    40
    
    
    $
    (33,773
    )
    
    $
    647,498
  70




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Year Ended September 30, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    803,565
    
    
    $
    30,276
    
    
    $
    147
    
    
    $
    
    
    
    $
    833,988Direct contract expenses
    
    
    618,018
    
    
    
    19,864
    
    
    
    118
    
    
    
    
    
    
    
    638,000Gross profit
    
    
    185,547
    
    
    
    10,412
    
    
    
    29
    
    
    
    
    
    
    
    195,988Operating expenses:Indirect contract expense
    
    
    36,482
    
    
    
    3,505
    
    
    
    47
    
    
    
    
    
    
    
    40,034Research and development
    
    
    716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    716General and administrative
    
    
    69,732
    
    
    
    903
    
    
    
    341
    
    
    
    
    
    
    
    70,976Rental and occupancy expense
    
    
    30,619
    
    
    
    541
    
    
    
    44
    
    
    
    
    
    
    
    31,204Depreciation and amortization
    
    
    16,687
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    16,732Loss on sale of subsidiary
    
    
    (6,056
    )
    
    
    8,476
    
    
    
    
    
    
    
    
    
    
    
    2,420Gain (loss) on sale of contracts
    
    
    
    
    
    
    (5,014
    )
    
    
    
    
    
    
    
    
    
    
    (5,014
    )Total operating expenses
    
    
    148,180
    
    
    
    8,456
    
    
    
    432
    
    
    
    
    
    
    
    157,068Operating income (loss)
    
    
    37,367
    
    
    
    1,956
    
    
    
    (403
    )
    
    
    
    
    
    
    38,920Other income (expense):Interest income
    
    
    93
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    119Interest expense
    
    
    (67,613
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,613
    )Other
    
    
    (559
    )
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    (242
    )Gain on debt extinguishment
    
    
    50,749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,749Equity in net income of subsidiaries
    
    
    1,938
    
    
    
    
    
    
    
    
    
    
    
    (1,938
    )
    
    
    Total other income (expense)
    
    
    (15,392
    )
    
    
    343
    
    
    
    
    
    
    
    (1,938
    )
    
    
    (16,987
    )Income (loss) before income taxes
    
    
    21,975
    
    
    
    2,299
    
    
    
    (403
    )
    
    
    (1,938
    )
    
    
    21,933Income tax (expense) benefit
    
    
    (37,207
    )
    
    
    2
    
    
    
    40
    
    
    
    
    
    
    
    (37,165
    )Net income (loss)
    
    $
    (15,232
    )
    
    $
    2,301
    
    
    $
    (363
    )
    
    $
    (1,938
    )
    
    $
    (15,232
    )
  71




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Year Ended September 30, 2009
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    766,297
    
    
    $
    35,884
    
    
    $
    44
    
    
    $
    
    
    
    $
    802,225Direct contract expenses
    
    
    590,934
    
    
    
    24,737
    
    
    
    29
    
    
    
    
    
    
    
    615,700Gross profit
    
    
    175,363
    
    
    
    11,147
    
    
    
    15
    
    
    
    
    
    
    
    186,525Operating expenses:Indirect contract expense
    
    
    31,968
    
    
    
    3,509
    
    
    
    (4
    )
    
    
    
    
    
    
    35,473Research and development
    
    
    677
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    677General and administrative
    
    
    59,615
    
    
    
    998
    
    
    
    254
    
    
    
    
    
    
    
    60,867Rental and occupancy expense
    
    
    32,370
    
    
    
    592
    
    
    
    22
    
    
    
    
    
    
    
    32,984Depreciation and amortization
    
    
    18,907
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    18,959Total operating expenses
    
    
    143,537
    
    
    
    5,151
    
    
    
    272
    
    
    
    
    
    
    
    148,960Operating income
    
    
    31,826
    
    
    
    5,996
    
    
    
    (257
    )
    
    
    
    
    
    
    37,565Other income (expense):Interest income
    
    
    72
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    91Interest expense
    
    
    (55,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,154
    )Other
    
    
    (129
    )
    
    
    434
    
    
    
    
    
    
    
    
    
    
    
    305Equity in net income of subsidiaries
    
    
    6,300
    
    
    
    
    
    
    
    
    
    
    
    (6,300
    )
    
    
    Total other income (expense)
    
    
    (48,911
    )
    
    
    453
    
    
    
    
    
    
    
    (6,300
    )
    
    
    (54,758
    )Income (loss) before income taxes
    
    
    (17,085
    )
    
    
    6,449
    
    
    
    (257
    )
    
    
    (6,300
    )
    
    
    (17,193
    )Income tax benefit (expense)
    
    
    44
    
    
    
    (2
    )
    
    
    110
    
    
    
    
    
    
    
    152Net income (loss)
    
    $
    (17,041
    )
    
    $
    6,447
    
    
    $
    (147
    )
    
    $
    (6,300
    )
    
    $
    (17,041
    )
  72




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Operations for the Year Ended September 30, 2008
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Companies
    
    
    Companies
    
    
    Eliminations
    
    
    Consolidated(In thousands)Contract revenue
    
    $
    706,699
    
    
    $
    32,593
    
    
    $
    190
    
    
    $
    
    
    
    $
    739,482Direct contract expense
    
    
    542,674
    
    
    
    23,608
    
    
    
    126
    
    
    
    
    
    
    
    566,408Gross profit
    
    
    164,025
    
    
    
    8,985
    
    
    
    64
    
    
    
    
    
    
    
    173,074Operating expenses:Indirect contract expense
    
    
    34,779
    
    
    
    5,118
    
    
    
    153
    
    
    
    
    
    
    
    40,050Research and development
    
    
    944
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    988General and administrative
    
    
    58,582
    
    
    
    923
    
    
    
    (21
    )
    
    
    
    
    
    
    59,484Rental and occupancy expense
    
    
    30,869
    
    
    
    (13
    )
    
    
    24
    
    
    
    
    
    
    
    30,880Depreciation and amortization
    
    
    20,572
    
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    20,715Gain (loss) on sale of contracts
    
    
    (193
    )
    
    
    (463
    )
    
    
    1
    
    
    
    
    
    
    
    (655
    )Total operating expenses
    
    
    145,553
    
    
    
    5,708
    
    
    
    201
    
    
    
    
    
    
    
    151,462Operating income
    
    
    18,472
    
    
    
    3,277
    
    
    
    (137
    )
    
    
    
    
    
    
    21,612Other income (expense):Interest income
    
    
    412
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    423Interest expense
    
    
    (47,382
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,382
    )Equity in operations of
subsidiaries
    
    
    3,151
    
    
    
    
    
    
    
    
    
    
    
    (3,151
    )
    
    
    Total other income (expenses)
    
    
    (43,819
    )
    
    
    11
    
    
    
    
    
    
    
    (3,151
    )
    
    
    (46,959
    )Income (loss) before income taxes
    
    
    (25,347
    )
    
    
    3,288
    
    
    
    (137
    )
    
    
    (3,151
    )
    
    
    (25,347
    )Income tax benefit
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Net income (loss)
    
    $
    (25,334
    )
    
    $
    3,288
    
    
    $
    (137
    )
    
    $
    (3,151
    )
    
    $
    (25,334
    )
  73




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2010
 Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Consolidated(In thousands)Net cash provided by (used in) operating activities
    
    $
    2,250
    
    
    $
    143
    
    
    $
    3
    
    
    $
    2,396Cash flows from investing activities:Cash paid for acquisitions-related obligations
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Capital expenditures
    
    
    (2,205
    )
    
    
    (2
    )
    
    
    
    
    
    
    (2,207
    )Proceeds from sale of fixed assets
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    110Net cash provided by (used in) investing activities
    
    
    (2,145
    )
    
    
    (2
    )
    
    
    
    
    
    
    (2,147
    )Cash flows from financing activities:Sale of Secured Notes
    
    
    281,465
    
    
    
    
    
    
    
    
    
    
    
    281,465Sale of Common Stock Warrants
    
    
    20,785
    
    
    
    
    
    
    
    
    
    
    
    20,785Payment of debt issuance cost
    
    
    (18,183
    )
    
    
    
    
    
    
    
    
    
    
    (18,183
    )Repayment of Term B Loan
    
    
    (236,596
    )
    
    
    
    
    
    
    
    
    
    
    (236,596
    )Repurchase of Subordinated Note and related
warrants
    
    
    (25,000
    )
    
    
    
    
    
    
    
    
    
    
    (25,000
    )Revolver borrowings
    
    
    84,200
    
    
    
    
    
    
    
    
    
    
    
    84,200Revolver repayments
    
    
    (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
    
    
    (9,338
    )
    
    
    
    
    
    
    
    
    
    
    (9,338
    )Redeemable common stock sold to ESOP Trust
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128Net cash provided by (used in) financing activities
    
    
    15,261
    
    
    
    
    
    
    
    
    
    
    
    15,261Net increase (decrease) in cash and cash equivalents
    
    
    15,366
    
    
    
    141
    
    
    
    3
    
    
    
    15,510Cash and cash equivalents at beginning of period
    
    
    11,404
    
    
    
    (215
    )
    
    
    (4
    )
    
    
    11,185Cash and cash equivalents at end of period
    
    $
    26,770
    
    
    $
    (74
    )
    
    $
    (1
    )
    
    $
    26,695
  74




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2009
 Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Consolidated(In thousands)Net cash provided by (used in) operating activities
    
    $
    9,056
    
    
    $
    (63
    )
    
    $
    2
    
    
    $
    8,995Cash flows from investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    (166
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Capital expenditures
    
    
    (2,160
    )
    
    
    (22
    )
    
    
    (4
    )
    
    
    (2,186
    )Proceeds from sale of assets
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Net cash used in investing activities
    
    
    (2,321
    )
    
    
    (22
    )
    
    
    (4
    )
    
    
    (2,347
    )Cash inflows (outflows) from financing activities:Cash paid under interest rate swap
    
    
    (4,647
    )
    
    
    
    
    
    
    
    
    
    
    (4,647
    )Payment of senior term loan principal
    
    
    (2,433
    )
    
    
    
    
    
    
    
    
    
    
    (2,433
    )Payment of subordinated note principal
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Revolver borrowings
    
    
    504,900
    
    
    
    
    
    
    
    
    
    
    
    504,900Revolver repayments
    
    
    (504,900
    )
    
    
    
    
    
    
    
    
    
    
    (504,900
    )Loan to ESOP trust
    
    
    (5,936
    )
    
    
    
    
    
    
    
    
    
    
    (5,936
    )ESOP loan repayment
    
    
    5,936
    
    
    
    
    
    
    
    
    
    
    
    5,936Redeemable common stock from ESOP trust
    
    
    (9,175
    )
    
    
    
    
    
    
    
    
    
    
    (9,175
    )Redeemable common stock sold to ESOP Trust
    
    
    7,505
    
    
    
    
    
    
    
    
    
    
    
    7,505Net cash used in financing activities
    
    
    (11,750
    )
    
    
    
    
    
    
    
    
    
    
    (11,750
    )Net decrease in cash and cash equivalents
    
    
    (4,988
    )
    
    
    (112
    )
    
    
    (2
    )
    
    
    (5,102
    )Cash and cash equivalents at beginning of period
    
    
    16,392
    
    
    
    (103
    )
    
    
    (2
    )
    
    
    16,287Cash and cash equivalents at end of period
    
    $
    11,404
    
    
    $
    (215
    )
    
    $
    (4
    )
    
    $
    11,185
  75




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Condensed Consolidating Statement of Cash Flows
Year Ended September 30, 2008
 Non-Guarantor
    
    
    GuarantorParent

    
    
    Companies
    
    
    Companies
    
    
    Consolidated(In thousands)Net cash provided by (used in) operating activities
    
    $
    29,268
    
    
    $
    (9
    )
    
    $
    61
    
    
    $
    29,320Cash flows from investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    (7,946
    )
    
    
    
    
    
    
    
    
    
    
    (7,946
    )Capital expenditures
    
    
    (4,863
    )
    
    
    (20
    )
    
    
    (103
    )
    
    
    (4,986
    )Proceeds from sale of non-operating assets
    
    
    780
    
    
    
    
    
    
    
    
    
    
    
    780Net cash used in investing activities
    
    
    (12,029
    )
    
    
    (20
    )
    
    
    (103
    )
    
    
    (12,152
    )Cash flows from financing activities:Cash received from interest rate swap
    
    
    4,333
    
    
    
    
    
    
    
    
    
    
    
    4,333Payment of debt issuance costs
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Payment of senior term loan principal
    
    
    (6,474
    )
    
    
    
    
    
    
    
    
    
    
    (6,474
    )Revolver borrowings
    
    
    450,505
    
    
    
    
    
    
    
    
    
    
    
    450,505Revolver repayments
    
    
    (459,755
    )
    
    
    
    
    
    
    
    
    
    
    (459,755
    )Loan to ESOP Trust
    
    
    (3,369
    )
    
    
    
    
    
    
    
    
    
    
    (3,369
    )ESOP to loan repayment
    
    
    3,369
    
    
    
    
    
    
    
    
    
    
    
    3,369Redeemable common stock purchased from ESOP Trust
    
    
    (4,051
    )
    
    
    
    
    
    
    
    
    
    
    (4,051
    )Redeemable common stock sold to ESOP Trust
    
    
    3,377
    
    
    
    
    
    
    
    
    
    
    
    3,377Net cash used in financing activities
    
    
    (12,565
    )
    
    
    
    
    
    
    
    
    
    
    (12,565
    )Net increase (decrease) in cash and cash equivalents
    
    
    4,674
    
    
    
    (70
    )
    
    
    (1
    )
    
    
    4,603Cash and cash equivalents at beginning of period
    
    
    11,718
    
    
    
    (33
    )
    
    
    (1
    )
    
    
    11,684Cash and cash equivalents at end of period
    
    $
    16,392
    
    
    $
    (103
    )
    
    $
    (2
    )
    
    $
    16,287
 (22) Related Party Transactions
  (23) Commitments and Contingencies
 Earn-Out and Hold-Back Commitments
  Government Audits
   76




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##### Table of Contents



ALION SCIENCE AND TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Legal Proceedings
   (24) Interim Period (Unaudited, in thousands except per share information)
 2010 Quarters1st
    
    
    2nd
    
    
    3rd
    
    
    4thRevenue
    
    $
    205,738
    
    
    $
    203,546
    
    
    $
    213,309
    
    
    $
    211,395Gross profit
    
    $
    46,742
    
    
    $
    47,497
    
    
    $
    48,456
    
    
    $
    53,293Net income (loss)
    
    $
    (7,941
    )
    
    $
    9,165
    
    
    $
    (13,116
    )
    
    $
    (3,341
    )Income (loss) per share
    
    $
    (1.46
    )
    
    $
    1.69
    
    
    $
    (2.40
    )
    
    $
    (0.62
    )Current assets
    
    $
    189,760
    
    
    $
    221,579
    
    
    $
    201,674
    
    
    $
    207,782Current liabilities
    
    $
    169,588
    
    
    $
    171,138
    
    
    $
    156,967
    
    
    $
    147,986
 2009 Quarters1st
    
    
    2nd
    
    
    3rd
    
    
    4thRevenue
    
    $
    188,796
    
    
    $
    195,429
    
    
    $
    204,160
    
    
    $
    213,840Gross profit
    
    $
    43,474
    
    
    $
    46,294
    
    
    $
    46,494
    
    
    $
    50,263Net income (loss)
    
    $
    (2,540
    )
    
    $
    39
    
    
    $
    (9,437
    )
    
    $
    (5,103
    )Income (loss) per share
    
    $
    (0.49
    )
    
    $
    0.01
    
    
    $
    (1.80
    )
    
    $
    (0.97
    )Current assets
    
    $
    183,275
    
    
    $
    188,135
    
    
    $
    183,013
    
    
    $
    195,137Current liabilities
    
    $
    383,750
    
    
    $
    389,738
    
    
    $
    387,591
    
    
    $
    167,304
 (25) Subsequent Event
   77




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A.
    
    Controls and Procedures
 Disclosure Controls and Procedure.
 Limitations on the Effectiveness of Controls
 Managements Report on Internal Control Over Financial Reporting
 Internal
Control  Integrated Framework Internal Control  Integrated Framework
 Changes in Internal Control Over Financial Reporting.
 Scope of the Assessment
 
 Item 9B.
    
    Other Information
   78




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
 Information Regarding the Directors of the Registrant
  Term
    
    
    DirectorName
    
    Age
    
    
    Position
    
    Expires
    
    
    SinceBahman Atefi
    
    
    57
    
    
    President, Chief Executive Officer and Chairman
    
    
    2011
    
    
    
    2001Edward C. (Pete) Aldridge, Jr.
    
    
    72
    
    
    Director
    
    
    2012
    
    
    
    2003Leslie L. Armitage
    
    
    42
    
    
    Director
    
    
    2010
    
    
    
    2002Lewis Collens
    
    
    72
    
    
    Director
    
    
    2010
    
    
    
    2002Admiral (Ret.) Harold W. Gehman, Jr.
    
    
    67
    
    
    Director
    
    
    2010
    
    
    
    2002General (Ret.) Michael V. Hayden
    
    
    65
    
    
    Director
    
    
    2012
    
    
    
    2010General (Ret.) George A. Joulwan
    
    
    71
    
    
    Director
    
    
    2011
    
    
    
    2002General (Ret.) Michael E. Ryan
    
    
    68
    
    
    Director
    
    
    2011
    
    
    
    2002David J. Vitale
    
    
    64
    
    
    Director
    
    
    2012
    
    
    
    2009
   Bahman Atefi
  Edward C. (Pete) Aldridge, Jr.
  79




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##### Table of Contents



Leslie L. Armitage
  Lewis Collens
  Admiral (Ret.) Harold W. Gehman, Jr.
  General Michael V. Hayden
   80




---



##### Table of Contents



General (Ret.) George A. Joulwan
  General (Ret.) Michael E. Ryan
  David J. Vitale
  Establishment of Committees
  Committee
    
    Chairperson
    
    MembersAudit and Finance Committee
    
    Leslie Armitage
    
    Lewis Collens, Harold Gehman, Michael Ryan, David VitaleCompensation Committee
    
    Harold Gehman
    
    Pete Aldridge, Leslie Armitage, Lewis Collens, George JoulwanGovernance and Compliance
Committee
    
    Michael Ryan
    
    Bahman Atefi, Harold Gehman, Michael Hayden, George JoulwanSpecial Projects Committee
    
    Pete Aldridge
    
    George Joulwan, Michael Ryan
  81




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##### Table of Contents



Audit and Finance Committee
  
    
    professional services provided by our independent registered public accounting firm;
 
    
    independence of our independent registered public accounting firm from our
management;
 
    
    our quarterly and annual financial statements and our system of internal control
over financial reporting;
 
    
    our capital structure, including the issuance of equity and debt securities, the
incurrence of indebtedness, and related matters;
 
    
    general financial planning, including cash flow and working capital management,
capital budgeting and expenditures, tax planning and compliance and related matters;
 
    
    mergers, acquisitions and strategic transactions;
 
    
    investment policies, financial performance and funding of our employee benefit
plans; and
 
    
    other transactions or financial issues that the Board of Directors or management
presents to the committee to review.
  Compensation Committee
  
    
    determining the compensation of our Chief Executive Officer and reviewing and
approving the compensation of our other executive officers;
 
    
    exercising all rights, authority and functions under our KSOP, retirement and other
compensation plans;
 
    
    approving and making recommendations to the Board regarding non-employee director
compensation;
 
    
    preparing an annual report on executive compensation for inclusion in our annual
report on Form 10-K in accordance with the rules and regulations of the Securities and
Exchange Commission;
 
    
    establishing, implementing and monitoring adherence to the Companys compensation
philosophy; and
 
    
    evaluating performance and compensation to ensure that the Company maintains its
ability to attract and retain superior employees in key positions and that compensation
provided to key employees remains competitive relative to the compensation paid to
similarly situated executives of other companies.
  Corporate Governance and Compliance Committee
     82




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##### Table of Contents



Information Regarding the Executive Officers of the Registrant
  Name
    
    Age
    
    
    Office
    
    Position SinceBahman Atefi
    
    
    57
    
    
    President, Chief
Executive Officer and
Chairman of the Board
of Directors(1)
    
    December 2001Stacy Mendler
    
    
    47
    
    
    Chief Operating
Officer and Executive
Vice President(1)
    
    September 2006Michael Alber
    
    
    53
    
    
    Chief Financial
Officer, Senior Vice
President and
Treasurer
(1)
    
    November 2008Scott Fry
    
    
    61
    
    
    Sector Senior Vice
President 
Engineering and
Integration Solutions
Sector(1)
    
    October 2005Walter (Buck) Buchanan
    
    
    60
    
    
    Sector Senior Vice
President 
Engineering and
Information Technology
Sector
    
    June 2007David Ohle
    
    
    66
    
    
    Sector Senior Vice
President  Defense
Operations Integration
Sector
    
    November 2008Thomas McCabe
    
    
    55
    
    
    Senior Vice President,
General Counsel and
Secretary
    
    March 2010
 (1)
    
    Member of the ESOP committee
  83




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##### Table of Contents



Stacy Mendler
 Michael Alber
 Scott Fry
 Walter E. Buchanan III
  84




---



##### Table of Contents



David H. Ohle
 Thomas McCabe
  Code of Ethics
   85




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##### Table of Contents



Item 11.
    
    Executive Compensation
 Compensation Discussion and Analysis
 Objectives of Executive Compensation Program
   What Our Compensation Program is Designed to Reward
  Roles and Responsibilities for Our Compensation Program
 Role of the Compensation Committee
  Role of the Chief Executive Officer
  Role of the Compensation Consultant
  Elements of Companys Executive Compensation Plan
   86




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##### Table of Contents



Base Salary
   Named Executive Officer
    
    Fiscal 2010 Base SalaryBahman Atefi
    
    $
    700,000Stacy Mendler
    
    $
    400,000Michael Alber
    
    $
    325,000Scott Fry
    
    $
    350,000David Ohle
    
    $
    350,000James Fontana*
    
    $
    280,000
 *
    
    Mr. Fontana resigned as General Counsel and Secretary on December 8, 2009.
   
    
    market data provided by the Companys outside compensation consultant;
 
    
    the executives compensation, individually and relative to other officers;
 
    
    the executives individual performance; and
 
    
    Alions financial and operating results.
   Argon ST Inc.
    
    DynCorp International Inc.
    
    ManTech International Corp.
    
    Stanley, Inc.CACI International Inc.
    
    Harris Corp.
    
    Maximus Inc.
    
    VSE Corp.CIBER Inc.
    
    Heico Corp.
    
    NCI, Inc.Cubic Corp.
    
    ICF International, Inc.
    
    Orbital Sciences Corp.Dynamics Research Corp.
    
    IHS Inc.
    
    SRA International Inc.
  87




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##### Table of Contents



Annual Bonus
  Long-term Incentives/Awards
  Long-Term Incentive Plan
   
    
    provide certain employees an incentive for excellence in achieving certain Company and
business unit or departmental goals;
 
    
    facilitate key employee retention and recruitment;
 
    
    provide at-risk awards contingent on achievement of selected performance criteria over
an extended period; and
 
    
    provide a meaningful incentive to achieve long-term growth and improve profitability.
  
    
    selecting individuals to participate in the LTIP from certain of our key employees;
 
    
    determining the period during which a participant must achieve his or her performance
goals, (performance period);
 
    
    setting each participants award opportunities with respect to a given performance
period; and
 
    
    establishing the conditions for vesting of awards.
     88




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##### Table of Contents



Total2010 Category GName
    
    LTIP AwardsBahman Atefi
    
    $
    1,000,000Stacy Mendler
    
    $
    350,000Michael Alber
    
    $
    200,000Scott Fry
    
    $
    250,000David Ohle
    
    $
    150,000James Fontana
    
    
    
  Phantom Stock Plans
  Stock Appreciation Rights (SAR) Plan
 2004 SAR Plan.
 Severance/Change in Control and Provisions in Employment Agreements
   89




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##### Table of Contents



Change in Control
  Termination without Cause
  Health and Welfare Benefits
 .
 KSOP
  Compensation Risk Assessment
        90




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##### Table of Contents



Summary Compensation Table Fiscal Year 2010
  Long-TermIncentive
    
    
    Non-EquityName and Principal
    
    
    
    
    
    
    
    
    
    Plan
    
    
    Incentive Plan
    
    
    All otherPosition
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalBahman Atefi
    
    $
    718,940
    
    
    $
    
    
    
    $
    1,000,000
    
    
    $
    700,000
    
    
    $
    124,689
    
    
    $
    2,543,629Chief Executive
Officer and
PresidentStacy Mendler
    
    $
    411,601
    
    
    $
    
    
    
    $
    350,000
    
    
    $
    300,000
    
    
    $
    86,127
    
    
    $
    1,147,728Chief Operating
Officer and
Executive Vice
PresidentMichael Alber
    
    $
    320,735
    
    
    $
    50,000
    
    
    $
    200,000
    
    
    $
    200,000
    
    
    $
    53,916
    
    
    $
    824,651Senior Vice
President and 
Chief
Financial OfficerScott Fry
    
    $
    362,228
    
    
    $
    
    
    
    $
    250,000
    
    
    $
    220,000
    
    
    $
    60,777
    
    
    $
    893,005Engineering and
Integration
Solutions Sector,
Senior Vice
PresidentDavid Ohle
    
    $
    348,241
    
    
    $
    
    
    
    $
    150,000
    
    
    $
    220,000
    
    
    $
    52,233
    
    
    $
    770,473Defense Operations
Integration Sector,
Senior Vice
PresidentJames Fontana
    
    
    102,274
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    392,586
    
    
    $
    494,860Senior Vice
President, General
Counsel and
Secretary
    91




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All Other Compensation Fiscal Year 2010Company
    
    
    
    
    
    
    Long andMatching
    
    
    
    
    
    
    Short TermContributions
    
    
    Health and
    
    
    Disability
    
    
    ClubName and Principal
    
    Under Alions
    
    
    Welfare
    
    
    Paid by the
    
    
    MembershipPosition
    
    KSOP
    
    
    Benefits
    
    
    Company
    
    
    FeesBahman Atefi
    
    $
    15,925
    
    
    $
    67,249
    
    
    $
    5,130
    
    
    $
    5,490Stacy Mendler
    
    $
    15,925
    
    
    $
    41,794
    
    
    $
    3,354
    
    
    $
    Michael Alber
    
    $
    6,213
    
    
    $
    27,516
    
    
    $
    2,901
    
    
    $
    Scott Fry
    
    $
    11,129
    
    
    $
    20,231
    
    
    $
    3,069
    
    
    $
    David Ohle
    
    $
    6,125
    
    
    $
    23,767
    
    
    $
    3,066
    
    
    $
    James Fontana
    
    $
    1,408
    
    
    $
    19,917
    
    
    $
    1,109
    
    
    $
    
 
 All Other Compensation Fiscal Year 2010 (continued)Term LifeInsurance Paid
    
    
    
    
    
    
    TerminationName and Principal
    
    by the
    
    
    Leased
    
    
    RelatedPosition
    
    Company
    
    
    Cars
    
    
    Payment(1)
    
    
    TotalBahman Atefi
    
    $
    457
    
    
    $
    30,438
    
    
    $
    
    
    
    $
    124,689Stacy Mendler
    
    $
    359
    
    
    $
    24,695
    
    
    $
    
    
    
    $
    86,127Michael Alber
    
    $
    289
    
    
    $
    16,998
    
    
    $
    
    
    
    $
    53,916Scott Fry
    
    $
    318
    
    
    $
    26,030
    
    
    $
    
    
    
    $
    60,777David Ohle
    
    $
    318
    
    
    $
    18,957
    
    
    $
    
    
    
    $
    52,233James Fontana
    
    $
    153
    
    
    $
    
    
    
    $
    370,000
    
    
    $
    392,586
  92




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##### Table of Contents



Summary Compensation Table Fiscal Year 2009
  Long-Term
    
    
    Non-EquityIncentive
    
    
    IncentiveName and Principal
    
    
    
    
    
    
    
    
    
    Plan
    
    
    Plan
    
    
    All otherPosition
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalBahman Atefi
    
    $
    644,187
    
    
    $
    
    
    
    $
    1,000,000
    
    
    $
    650,000
    
    
    $
    103,866
    
    
    $
    2,398,053Chief Executive
Officer and PresidentStacy Mendler
    
    $
    367,307
    
    
    $
    
    
    
    $
    350,000
    
    
    $
    250,000
    
    
    $
    84,838
    
    
    $
    1,052,145Chief Operating
Officer and Executive
Vice PresidentMichael Alber
    
    $
    303,000
    
    
    $
    
    
    
    $
    200,000
    
    
    $
    200,000
    
    
    $
    44,277
    
    
    $
    747,277Senior Vice President
and 
Chief Financial
OfficerScott Fry
    
    $
    339,824
    
    
    $
    256,444
    
    
    $
    250,000
    
    
    $
    250,000
    
    
    $
    66,409
    
    
    $
    1,162,677Engineering and
Integration Solutions
Sector, Senior Vice
PresidentJames Fontana
    
    $
    288,803
    
    
    $
    637,176
    
    
    $
    
    
    
    $
    90,000
    
    
    $
    74,987
    
    
    $
    1,090,966Senior Vice
President, General
Counsel and Secretary
    93




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##### Table of Contents



All Other Compensation Fiscal Year 2009Company
    
    
    
    
    
    
    Long andMatching
    
    
    
    
    
    
    Short TermContributions
    
    
    Health and
    
    
    Disability
    
    
    ClubName and Principal
    
    Under Alions
    
    
    Welfare
    
    
    Paid by the
    
    
    MembershipPosition
    
    KSOP
    
    
    Benefits
    
    
    Company
    
    
    FeesBahman Atefi
    
    $
    14,950
    
    
    $
    52,228
    
    
    $
    5,234
    
    
    $
    5,410Stacy Mendler
    
    $
    14,950
    
    
    $
    37,572
    
    
    $
    3,574
    
    
    $
    1,647Michael Alber
    
    $
    5,750
    
    
    $
    15,074
    
    
    $
    3,119
    
    
    $
    1,029Scott Fry
    
    $
    14,242
    
    
    $
    19,107
    
    
    $
    3,385
    
    
    $
    James Fontana
    
    $
    15,391
    
    
    $
    33,918
    
    
    $
    3,031
    
    
    $
    500
 All Other Compensation Fiscal Year 2009 (continued)Term LifeInsurance Paid
    
    
    
    
    
    
    TerminationName and Principal
    
    by the
    
    
    Leased
    
    
    RelatedPosition
    
    Company
    
    
    Cars
    
    
    Payment(1)
    
    
    TotalBahman Atefi
    
    $
    810
    
    
    $
    25,234
    
    
    $
    
    
    
    $
    103,866Stacy Mendler
    
    $
    598
    
    
    $
    26,497
    
    
    $
    
    
    
    $
    84,838Michael Alber
    
    $
    475
    
    
    $
    18,830
    
    
    $
    
    
    
    $
    44,277Scott Fry
    
    $
    548
    
    
    $
    29,127
    
    
    $
    
    
    
    $
    66,409James Fontana
    
    $
    451
    
    
    $
    21,696
    
    
    $
    
    
    
    $
    74,987
  Minimum/Form of Award
    
    
    
    Performance
    
    MaximumAgreement
    
    Date of Grant
    
    Cycles
    
    Award Amount
    
    Vesting DateCategory A
    
    November 1, 2008
    
    November 1, 2008
until performance
goals achieved
    
    N/A
    
    Date performance
goals achievedCategory B
    
    November 1, 2008
    
    November 1, 2008-October 31, 2009
    
    80%/120%
    
    November 15, 2009Category C
    
    November 1, 2008
    
    November 1, 2008-October 31, 2009
    
    50%/150%
    
    November 15, 2010November 1, 2009-October 31, 2010Category D
    
    November 1, 2008
    
    November 1, 2008-October 31, 2009
    
    50%/150%
    
    November 15, 2011November 1, 2009-October 31, 2010November 1, 2010-October 31, 2011Category E
    
    November 1, 2008
    
    November 1, 2009-October 31, 2011
    
    50%/150%
    
    November 15, 2011Category F
    
    November 1, 2009
    
    November 1, 2009-October 31, 2012
    
    50%/150%
    
    November 15, 2012
  94




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##### Table of Contents



Name
    
    Category A
    
    
    Category B
    
    
    Category C
    
    
    Category D
    
    
    Category E
    
    
    Category FBahman Atefi
    
    $
    998,223
    
    
    $
    934,910
    
    
    $
    1,738,830
    
    
    
    
    
    
    $
    800,000
    
    
    $
    1,000,000Stacy Mendler
    
    $
    479,559
    
    
    $
    411,360
    
    
    $
    725,782
    
    
    
    
    
    
    $
    300,000
    
    
    $
    350,000Scott Fry
    
    
    
    
    
    $
    233,125
    
    
    $
    191,511
    
    
    
    
    
    
    $
    250,000
    
    
    $
    250,000Michael Alber
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    94,646
    
    
    $
    150,000
    
    
    $
    200,000
   95




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##### Table of Contents



Summary Compensation Table Fiscal Year 2008
  Summary Compensation Table Fiscal Year 2008
 Name and
    
    
    
    
    
    
    
    
    
    Phantom
    
    
    
    
    
    
    Non-EquityPrincipal
    
    
    
    
    
    
    
    
    
    Stock
    
    
    SAR
    
    
    Incentive Plan
    
    
    All otherPosition
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalBahman Atefi
    
    $
    604,749
    
    
    $
    
    
    
    $
    1,630,296
    
    
    $
    
    
    
    $
    500,000
    
    
    $
    146,488
    
    
    $
    2,881,533Chief Executive
Officer and
PresidentStacy Mendler
    
    $
    333,185
    
    
    $
    
    
    
    $
    759,346
    
    
    $
    
    
    
    $
    200,000
    
    
    $
    100,071
    
    
    $
    1,392,602Chief Operating
Officer and
Executive Vice
PresidentMichael Alber
    
    $
    220,000
    
    
    $
    95,000
    
    
    $
    15,836
    
    
    $
    3,000
    
    
    $
    150,000
    
    
    $
    29,910
    
    
    $
    513,746Senior Vice
President and Chief
Financial OfficerScott Fry
    
    $
    316,171
    
    
    $
    
    
    
    $
    183,937
    
    
    $
    
    
    
    $
    225,000
    
    
    $
    51,263
    
    
    $
    776,371Engineering and
Integration
Solutions Sector
Senior Vice
President
    96




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##### Table of Contents



All Other Compensation Fiscal Year 2008Company
    
    
    
    
    
    
    Long andMatching
    
    
    
    
    
    
    Short TermContributions
    
    
    Health and
    
    
    Disability
    
    
    ClubName and Principal
    
    Under Alions
    
    
    Welfare
    
    
    Paid by the
    
    
    MembershipPosition
    
    KSOP
    
    
    Benefits
    
    
    Company
    
    
    FeesBahman Atefi
    
    $
    14,625
    
    
    $
    94,337
    
    
    $
    4,840
    
    
    $
    5,120Stacy Mendler
    
    $
    14,625
    
    
    $
    55,208
    
    
    $
    3,210
    
    
    $
    Michael Alber
    
    $
    
    
    
    $
    12,530
    
    
    $
    2,421
    
    
    $
    Scott Fry
    
    $
    10,228
    
    
    $
    13,748
    
    
    $
    3,108
    
    
    $
    
 
 All Other Compensation Fiscal Year 2008 (continued)Term LifeInsuranceName and Principal
    
    Paid by the
    
    
    LeasedPosition
    
    Company
    
    
    Cars
    
    
    Settlement
    
    
    TotalBahman Atefi
    
    $
    735
    
    
    $
    26,831
    
    
    $
    
    
    
    $
    146,488Stacy Mendler
    
    $
    531
    
    
    $
    26,497
    
    
    $
    
    
    
    $
    100,071Michael Alber
    
    $
    356
    
    
    $
    14,603
    
    
    $
    
    
    
    $
    29,910Scott Fry
    
    $
    512
    
    
    $
    23,667
    
    
    $
    
    
    
    $
    51,263
 Phantom Stock Plans
 Executive Phantom Stock Plan
 
 Vesting.
 Payments.
 Amendment.
  97




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##### Table of Contents



Director Phantom Stock Plan
  Vesting.
 Payments.
   
    
    Date of grant;
 
    
    Number of shares of the phantom stock awarded; and
 
    
    Provisions governing vesting of the phantom stock awarded.
      98




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##### Table of Contents



Cumulative SharesAuthorized under allDate of Issuance
    
    Shares Issued
    
    
    Cumulative Shares Issued
    
    
    PlansNovember 2007
    
    
    6,993
    (1)
    
    
    20,779
    
    
    
    2,000,000
    (1)
 (1)
    
    Number of shares authorized under the Executive and Director Phantom
Stock Plans as periodically amended and approved by the Compensation Committee of
Alions Board of Directors.
  Number ofName
    
    shares
    
    
    Grant Date
    
    Grant Type
    
    Full vesting period
    
    Period(s) until payoutBahman Atefi
    
    
    17,478
    
    
    November 2007
    
    Retention
    
    November 2010 (1)
    
    November 2010 (1) (4)Michael Alber
    
    
    1,248
    
    
    January 2008
    
    Retention
    
    January 2011 (1)
    
    January 2011 (1) (4)1,219
    
    
    May 2008
    
    Retention
    
    May 2011 (1)
    
    May 2011 (1) (4)Stacy Mendler
    
    
    4,994
    
    
    November 2007
    
    Retention
    
    November 2010 (1)
    
    November 2010 (1) (4)Robert Goff
    
    
    4,994
    
    
    November 2007
    
    Retention
    
    November 2010 (1)
    
    November 2010 (1)Scott Fry
    
    
    4,994
    
    
    November 2007
    
    Retention
    
    November 2010 (1)
    
    November 2010 (1) (4)Jim Fontana
    
    
    2,497
    
    
    February 2007
    
    Retention
    
    November 2010 (1)
    
    November 2010 (1) (4)
 (1)
    
    The Second Phantom Stock Plan, permits performance- and/or retention-based phantom stock
awards. Performance-based phantom stock vested three years after the grant date;
retention-based phantom stock vested as specified in individual agreements. Performance- and
retention-based phantom stock awards for vested shares were paid as specified in individual
agreements.(2)
    
    Phantom Stock grants issued in February and November 2003 fully vested on the fifth year from
the grant date(3)
    
    Initially, recipients were to be paid commencing on the fifth year from the grant date. In
November 2005, the Phantom Stock Plan was amended to permit employees to make a one-time
election to receive payment for phantom shares as they vested each year or when fully vested.
Dr. Atefi and Ms. Mendler made this election; Mr. Goff did not.(4)
    
    In December 2008, Dr. Atefi, Ms. Mendler, Mr. Fry and Mr. Fontana forfeited their right to
receive payment for certain vested, unpaid phantom stock awards. Along with Mr. Alber, they
also forfeited all phantom stock awards that had not yet vested.
  99




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##### Table of Contents



Stock Appreciation Rights (SAR) Plans
 2004 SAR Plan
  Vesting
 Payments
  Amendment
 Grants of Plan-Based Awards
  Outstanding Equity Awards at Fiscal Year-End
  Number of
    
    
    Number ofsecurities
    
    
    securitiesunderlying
    
    
    underlyingunexercised
    
    
    unexercisedSARs (#)
    
    
    SARs (#)
    
    
    SAR exercise
    
    
    SAR expirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    price ($)
    
    
    dateMike Alber (1)
    
    
    
    
    
    
    5,000
    
    
    
    40.05
    
    
    
    12/13/13
 (1)
    
    In December 2007, Mr. Alber was awarded 5,000 SARs at the exercise price of $40.05 per
share, all of which were outstanding as of September 30, 2010.
  100




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##### Table of Contents



SAR Exercises
  SAR AwardsNumber ofshares
    
    
    Value realizedacquired on
    
    
    onexercise
    
    
    exerciseName
    
    (#)
    
    
    ($)Scott Fry
    
    
    4,000
    
    
    $
    58,240
  Deferred Compensation Plans
     Executive
    
    
    Registrant
    
    
    Aggregate
    
    
    Aggregate
    
    
    AggregateContributions
    
    
    Contributions
    
    
    Earnings in
    
    
    Withdrawals/
    
    
    Balance at Lastin Last FY
    
    
    in Last FY
    
    
    Last FY
    
    
    Distributions
    
    
    FYEName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Scott Fry
    
    $
    
    
    
    $
    
    
    
    $
    31,191
    
    
    $
    
    
    
    $
    352,442
 Other Potential Post-Termination Payments
  Employment Agreements.
 Long Term Incentive and Deferred Compensation Plans.
  101




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##### Table of Contents



Termination by the Company without Cause;
Termination by Executive based upon Constructive Termination;
Termination in the event of Death or Disability;
Termination upon Expiration of the Employment Agreement due to Company Election Not to
Extend; Change in Control
 EarlyVesting ofSeverance
    
    
    LTIPName
    
    Amount
    
    
    Awards
    
    
    Other
    
    
    Total(a)
    
    
    (b)
    
    
    (c)
    
    
    (d)Bahman Atefi
    
    $
    2,870,000
    
    
    $
    786,667
    
    
    $
    25,000
    
    
    $
    3,681,667Stacy Mendler
    
    $
    1,087,500
    
    
    $
    295,000
    
    
    $
    25,000
    
    
    $
    1,407,500Michael Alber
    
    $
    535,000
    
    
    $
    242,607
    
    
    $
    25,000
    
    
    $
    802,607Scott Fry
    
    $
    580,000
    
    
    $
    247,917
    
    
    $
    25,000
    
    
    $
    852,917
 (a)
    
    Based on a percentage of the executives annual salary and bonus he or she would
have earned as of such date based upon the bonus actually paid for fiscal 2010
performance.
 Name
    
    Salary
    
    
    BonusBahman Atefi
    
    
    200
    %
    
    
    200
    %Stacy Mendler
    
    
    150
    %
    
    
    150
    %Michael Alber
    
    
    100
    %
    
    
    100
    %Scott Fry
    
    
    100
    %
    
    
    100
    %
 (b)
    
    This is the value as of September 2010 of vested LTIP awards not yet payable and LTIP not yet
vested. This does not include unvested Category F and G awards as no Named Executive Officer
has yet completed 18 months of post-award service. These amounts would be paid if termination
were to occur within one year after execution of a definitive change in control agreement if
such transaction were subsequently consummated.(c)
    
    This is the value of outplacement services (not to exceed $25,000) to be provided by a firm
selected and paid by the Alion. No such outplacement services will be provided beyond
December 31 of the second calendar year following the calendar year in which the executive
separates from service.Alion is also obligated to pay the executive, if he or she is eligible for and elects to
receive, medical and/or dental benefits under COBRA for the individual and/or any qualifying
beneficiaries. Alion will pay the amount by which the COBRA premium exceeds the premium payable
by the executive for the same level of coverage immediately prior to termination.
 (1)
    
    This column represents the total fees including the annual retainer fee to non-employee
directors. The Companys employee directors do not receive any additional compensation for
their services as members of the Board of Directors. For the year ended September 30,
2010, the Companys non-employee directors received an annual retainer and compensation of
$70,000, payable in quarterly installments, for their services as members of the Board of
Directors. In addition, each director receives a fee of $2,500 for in-person attendance at
a Board of Directors meeting, and $1,000 for telephone attendance at a Board of Directors
meeting. The chairman of the Audit and Finance Committee receives $7,500 per year for each
year he or she serves in such capacity. The other board committee chairpersons receive
$5,000 per year for each year he or she serves in such capacity. Board committee members
receive $1,000 per committee meeting if the committee meeting occurs on a day other than
the day of a full Alion Board of Directors meeting. Alion reimburses directors for
reasonable travel expenses in connection with attendance at Board of Directors and board
committee meetings.
 (2)
    
    The amounts included in this column represent the amount paid by the Company for travel
expenses to attend Board of Directors meetings.
  102




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Compensation Committee Interlocks and Insider Participation
  Compensation Committee Report
  
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
  Amount ofNature of
    
    
    PercentageBeneficial
    
    
    of ClassName of Beneficial Owner
    
    Title of Class
    
    
    Ownership
    
    
    (1)Five Percent Security Holders:None
    
    Common Stock
    
    
    
    
    
    
    Directors (2) and Executive OfficersBahman Atefi
    
    Common Stock
    
    
    57,538
    (3)
    
    
    1.0Stacy Mendler
    
    Common Stock
    
    
    75,096
    (3)
    
    
    1.3Michael Alber
    
    Common Stock
    
    
    155
    (3)
    
    
    Scott Fry
    
    Common Stock
    
    
    5,679
    (3)
    
    
    0.1David Ohle
    
    Common Stock
    
    
    88
    (3)
    
    
    Jim Fontana
    
    Common Stock
    
    
    4,706
    (3)
    
    
    0.1All Directors and Executive Officers as a Group (5 persons)
    
    Common Stock
    
    
    138,555
    (3)
    
    
    2.5
 (1)
    
    Applicable percentages are based on 5,658,234 shares outstanding on September 30, 2010
excluding 602,614 shares of common stock subject to warrants. This table is based upon
information in the Companys possession and believed to be accurate. Unless indicated in the
footnotes to this table and subject to community property laws where applicable, the Company
believes that each of the shareholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
  103




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##### Table of Contents



(2)
    
    No directors (other than Dr. Atefi) are believed by the Company to be beneficial owners of its
common stock.(3)
    
    Includes beneficial ownership of shares of Alions common stock held by the Alion KSOP.
 Changes in Control
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
   Independent Directors
     
 Item 14. Principal Accountant Fees and Services
   104




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##### Table of Contents



Fee Category
 2010
    
    
    2009Audit Fees(1)
    
    $
    1,250,000
    
    
    $
    1,075,000Audit-Related Fees(2)
    
    
    317,000
    
    
    
    133,515Tax Fees and All Other Fees
    
    
    131,167
    
    
    
    196,088Total Fees
    
    $
    1,698,167
    
    
    $
    1,404,603
 (1)
    
    Audit fees include fees for auditing Alions financial statements, reviewing interim
financial statements included in quarterly reports on Form 10-Q, and providing other
professional services in connection with statutory and regulatory filings or engagements.(2)
    
    Audit-related fees are fees for assurance and similar services for employee benefit plan
audits and services provided in conjunction with acquisitions and accounting consultations.
These services were approved by the Audit and Finance Committee.
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
 Consolidated Financial Statements of Alion Science and Technology Corporation
 Report of Independent Registered Public Accounting Firm
    
    
    45Consolidated Financial Statements:Consolidated Balance Sheets as of September 30, 2010 and 2009
    
    
    46Consolidated Statements of Operations for the years ended September 30, 2010, 2009 and 2008
    
    
    47Consolidated Statements of Redeemable Common Stock and Accumulated Deficit for the years
ended September 30, 2010, 2009, and 2008
    
    
    48Consolidated Statements of Cash Flows for the years ended September 30, 2010, 2009, and 2008
    
    
    49Notes to Consolidated Financial Statements
    
    
    50Consolidated Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts
    
    
    106
  105




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts
 AdditionsBalance at
    
    
    Charged to
    
    
    
    
    
    
    Balance atAllowance for Doubtful
    
    Beginning
    
    
    Costs and
    
    
    
    
    
    
    EndAccounts Receivable
    
    of Year
    
    
    Expenses
    
    
    Deductions (1)
    
    
    of YearFiscal year ended 2010
    
    $
    4,419
    
    
    $
    
    
    
    $
    (621
    )
    
    $
    3,798Fiscal year ended 2009
    
    $
    3,962
    
    
    $
    1,014
    
    
    $
    (557
    )
    
    $
    4,419Fiscal year ended 2008
    
    $
    5,272
    
    
    $
    (578
    )
    
    $
    (732
    )
    
    $
    3,962
 (1)
    
    Accounts receivable written off against the allowance for doubtful accounts.
 AdditionsBalance at
    
    
    Charged to
    
    
    
    
    
    
    Balance atDeferred Tax Asset
    
    Beginning
    
    
    Costs and
    
    
    
    
    
    
    EndValuation
    
    of Year
    
    
    Expenses (2)
    
    
    Deductions
    
    
    of YearFiscal year ended 2010
    
    $
    
    
    
    $
    36,929
    
    
    $
    
    
    
    $
    36,929Fiscal year ended 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Fiscal year ended 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (2)
    
    Change in Alions tax status. Establish deferred tax assets and corresponding full valuation allowance.
  106




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##### Table of Contents



(c) Exhibits
 ExhibitNo.
    
    Description3.1
    
    
    Third Amended and Restated Certificate of Incorporation of Alion Science and Technology Corporation. (1)3.2
    
    
    Amended and Restated By-laws of Alion Science and Technology Corporation. (2)4.1
    
    
    Indenture dated as of February 8, 2007, among Alion Science and Technology Corporation,
certain subsidiary guarantors and Wilmington Trust Company, as trustee. (3)4.2
    
    
    Form of 10.25% Senior Notes due 2015. (3)4.3
    
    
    Amended and Restated Alion Science and Technology Corporation Employee Ownership, Savings and
Investment Plan. (4)4.4
    
    
    First Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan. (5)4.5
    
    
    Second Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan. (6)4.6
    
    
    Third Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan. (7)4.7
    
    
    Fourth Amendment to Amended and Restated Alion Science and Technology Corporation Employee
Ownership, Savings and Investment Plan. (7)4.8
    
    
    Indenture, dated as of March 22, 2010, among the Company, certain subsidiary guarantors of
the Company and Wilmington Trust Company, as trustee. (2)4.9
    
    
    Form of 12% Senior Secured Notes due 2014. (2)4.10
    
    
    Form of Warrant. (2)4.11
    
    
    Form of Unit. (2)10.1
    
    
    Employment Agreement between Alion Science and Technology Corporation and Dr. Bahman Atefi. (8)*10.2
    
    
    Employment Agreement between Alion Science and Technology Corporation and Stacy Mendler. (9)*10.3
    
    
    Employment Agreement by and between Alion Science and Technology Corporation and Michael J.
Alber. * (10)10.4
    
    
    Separation Agreement and General Release with John M. Hughes. * (11)10.5
    
    
    Employment Agreement between Alion Science and Technology Corporation and Scott Fry. (12) *10.6
    
    
    Employment Agreement between Alion Science and Technology Corporation and Buck Buchanan. (12)*10.7
    
    
    Separation Agreement and General Release with Leroy R. Goff, III. (6)*10.8
    
    
    Settlement Agreement and General Release with John M. Hughes. (6)*10.9
    
    
    Alion Science and Technology Corporation Long-Term Incentive Plan. (6)*10.10
    
    
    Form of Alion Science and Technology Corporation Category A Long Term Incentive Plan Award
Agreement. (6)*10.11
    
    
    Form of Alion Science and Technology Corporation Category B Long Term Incentive Plan Award
Agreement. (6)*10.12
    
    
    Form of Alion Science and Technology Corporation Category C Long Term Incentive Plan Award
Agreement. (6)*10.13
    
    
    Form of Alion Science and Technology Corporation Category D Long Term Incentive Plan Award
Agreement. (6)*10.14
    
    
    Form of Alion Science and Technology Corporation Ongoing Long Term Incentive Plan Award
Agreement. (6)*10.15
    
    
    Separation Agreement dated as of December 8, 2009 between Alion Science and Technology
Corporation and James C. Fontana. (14)*10.16
    
    
    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. (15)10.17
    
    
    Purchase Agreement dated as of March 11, 2010, by and between the Company and Credit Suisse
Securities (USA) LLC. (2)10.18
    
    
    Warrant Agreement, dated as of March 22, 2010, by and between the Company and Wilmington
Trust Company, as warrant agent. (2)10.19
    
    
    Credit Agreement, dated as of March 22, 2010, by and among the Company, the lenders party
thereto and Credit Suisse AG, as administrative agent. (2)10.20
    
    
    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. (2)10.21
    
    
    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. (2)
  107




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##### Table of Contents



ExhibitNo.
    
    Description10.22
    
    
    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. (2)10.23
    
    
    Registration Rights Agreement, dated March 22, 2010, by and between the Company and Credit
Suisse Securities (USA) LLC. (2)10.24
    
    
    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. (2)10.25
    
    
    Alion Science and Technology Corporation 2004 Stock Appreciation Rights Plan, as amended and
restated effective January 1, 2007. (7)*10.26
    
    
    Alion Science and Technology Performance Shares and Retention Phantom Stock Plan, as amended
and restated effective November 1, 2007. (7)*10.27
    
    
    Alion Science and Technology Director Phantom Stock Plan, as amended and restated effective
January 1, 2007. (7)*10.28
    
    
    Alion Executive Deferred Compensation Plan, as amended and restated effective January 1,
2008. (7)*10.29
    
    
    Alion Director Deferred Compensation Plan, as amended and restated effective January 1,
2008. (7)*10.30
    
    
    First Amendment to Alion Science and Technology Corporation 2004 Stock Appreciation Rights
Plan (as amended and restated), dated as of January 22, 2010. (7)*10.31
    
    
    First Amendment to Alion Science and Technology Corporation Director Phantom Stock Plan (as
amended and restated), dated as of January 22, 2010. (7)*10.32
    
    
    First Amendment to Alion Science and Technology Corporation Long-Term Incentive Plan, dated
as of January 22, 2010. (7)*12
    
    
    Computation of Ratios21
    
    
    Subsidiaries of Alion Science and Technology Corporation are wholly-owned (either directly or
indirectly) by Alion Science and Technology Corporation:(i
    )
    
    Innovative Technology Solutions Corporation, incorporated in the State of New Mexico,(ii
    )
    
    Alion-IPS Corporation, incorporated in the Commonwealth of Virginia,(iii
    )
    
    Alion-METI Corporation, incorporated in the Commonwealth of Virginia,(iv
    )
    
    Alion-CATI Corporation, incorporated in the State of California,(v
    )
    
    Alion-JJMA Corporation, incorporated in the State of New York,(vi
    )
    
    Alion Technical Services Corporation, incorporated in the Commonwealth of Virginia,(vii
    )
    
    Alion Technical Services Corporation, incorporated in the State of Delaware,(vii
    )
    
    Alion Canada (U.S.), Inc., incorporated in the State of Delaware,(ix
    )
    
    Alion Science and Technology (Canada) Corporation, incorporated in the Province of Nova Scotia,(x
    )
    
    Alion-BMH Corporation, incorporated in the Commonwealth of Virginia,(xi
    )
    
    Washington Consulting, Inc., incorporated in the Commonwealth of Virginia,(xii
    )
    
    Alion-MA&D Corporation, incorporated in the State of Colorado, and(xiii
    )
    
    Washington Consulting Government Services, Inc., incorporated in the Commonwealth of Virginia.
  108




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##### Table of Contents



ExhibitNo.
    
    Description31.1
    
    
    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 10-Q filed with the SEC on May 13, 2005.(2)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 25, 2010.(3)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on February 8, 2007.(4)
    
    Incorporated by reference from the Companys Form S-4 filed with the SEC on April 30, 2007.(5)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on July 13, 2007.(6)
    
    Incorporated by reference from the Companys Form 10-K filed with the SEC on December 23,
2008.(7)
    
    Incorporated by reference from the Companys Form 10-Q filed with the SEC on May 14, 2010.(8)
    
    Incorporated by reference from the Companys Form S-4 (8-K) filed with the SEC on June 21,
2007.(9)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on July 20, 2007.(10)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on April 8, 2008.(11)
    
    Incorporated by reference from the Companys Form 10-Q filed with the SEC on August 13, 2008.(12)
    
    Incorporated by reference from the Companys Form 10-K filed with the SEC on December 28,
2007.(13)
    
    Incorporated by reference from the Companys Form 10-K filed with the SEC on December 24,
2009.(14)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on February 4, 2010.(15)
    
    Incorporated by reference from the Companys Form 8-K filed with the SEC on March 3, 2010.*
    
    Denotes management contract and/or compensatory plan/arrangement.
  109




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##### Table of Contents



SIGNATURES
  ALION SCIENCE AND TECHNOLOGY CORPORATION
(Registrant)Date: December 14, 2010By:
    /s/ BAHMAN ATEFIBahman AtefiChairman, Chief Executive Officer and Director  Signature
    
    Title
    
    Date/s/ Bahman Atefi

Bahman Atefi
    
    Chairman, Chief Executive
Officer and Director
    
    December 14, 2010/s/ Michael J. Alber

Michael J. Alber
    
    Senior Vice President and

Chief Financial Officer
    
    December 14, 2010/s/ Jeffrey L. Boyers

Jeffrey L. Boyers
    
    Corporate Vice President and 

Principal Accounting Officer
    
    December 14, 2010/s/ Edward C. Aldridge, Jr.

Edward C. (Pete) Aldridge, Jr.
    
    Director
    
    December 14, 2010/s/ Leslie L. Armitage

Leslie Armitage
    
    Director
    
    December 14, 2010/s/ Lewis Collens

Lewis Collens
    
    Director
    
    December 14, 2010/s/ Harold W. Gehman, Jr.

Harold Gehman
    
    Director
    
    December 14, 2010/s/ Michael V. Hayden

Michael V. Hayden
    
    Director
    
    December 14, 2010/s/ George A. Joulwan

George A. Joulwan
    
    Director
    
    December 14, 2010/s/ Michael E. Ryan

Michael E. Ryan
    
    Director
    
    December 14, 2010/s/ David J. Vitale

David J. Vitale
    
    Director
    
    December 14, 2010
 Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the
Act by Registrants which Have Not Registered Securities Pursuant to Section 12 of the Act
   110