• | The terms of the exchange notes are substantially identical to the terms of the outstanding notes, except that we have registered the exchange notes with the Securities and Exchange Commission, which we refer to as the “SEC.” Because we have registered the exchange notes, they will not be subject to transfer restrictions and will not be entitled to certain registration rights. The exchange notes will represent the same debt as the outstanding notes, and will be issued under the same indenture. | |
• | The outstanding notes are, and the exchange notes will be, guaranteed by certain of our current domestic subsidiaries and certain of our future subsidiaries. | |
• | We will exchange any and all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes which are registered under the Securities Act of 1933, which we refer to as the “Securities Act”. | |
• | The exchange offer expires at 5:00 p.m., New York City time, on Thursday, September 2, 2010, unless extended. | |
• | Neither we nor any of our subsidiaries will receive any proceeds from the exchange offer. | |
• | Outstanding notes not exchanged in the exchange offer will remain outstanding and be entitled to the benefits of the indenture governing the secured notes, but, except under certain limited circumstances, will have no further exchange or registration rights under the registration rights agreement discussed in this prospectus. | |
• | We do not intend to list the exchange notes on any securities exchange or seek approval through any automated quotation system and no active market for the exchange notes is anticipated. |
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• | any future inability to maintain adequate control over financial reporting; | |
• | limits on our financial and operational flexibility given our substantial amount of debt; | |
• | failure of government customers to exercise options under contracts; | |
• | funding decisions relating to U.S. government projects; | |
• | government contract procurement risks, such as contract award protests and terminations; | |
• | competitive factors such as pricing pressuresand/or our ability to hire and retain employees; | |
• | the results of currentand/or future legal or government agency proceedings which may arise from our operations including our government contracts and the risk of fines, liabilities, penalties, suspensionand/or debarment; | |
• | undertaking acquisitions that could increase costs or liabilities or be disruptive; | |
• | taking on additional debt to fund acquisitions; | |
• | failure to adequately integrate acquired businesses; | |
• | changes to the Employee Retirement Income Security Act of 1974, as amended (ERISA) laws related to the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Plan; | |
• | changes to the tax laws relating to the treatment and deductibility of goodwill or any change in our effective tax rate; | |
• | risks associated with our debt including our ability to meet existing and future debt covenants; | |
• | risks from private securities litigation, regulatory proceedings or government enforcement actions relating to our prior disclosure regarding covenant compliance; and | |
• | material changes in other laws or regulations applicable to our business, as well as other risks discussed elsewhere in this prospectus, including all risk factors described in the section entitled “Risk Factors.” |
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• | do not reflect any cash capital expenditure requirements for assets being depreciated and amortized that may have to be replaced in the future; | |
• | do not reflect changes in, or cash requirements for, our working capital needs; and | |
• | do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt. |
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• | naval architecture and marine engineering; | |
• | defense operations; | |
• | modeling and simulation; | |
• | technology integration; | |
• | information technology and wireless communication; and | |
• | energy and environmental sciences. |
Revenue by Core Business Area 2009 (In thousands) | Revenue by Contract Type 2009 (In thousands) |
• | Enlisted Navy recruits must successfully pass Battle Stations 21 (BS-21), a training program where they are challenged with simulated floods, fires and mass casualty exercises in a DDG destroyer replica. To train these recruits, Alion developed the Damage Control Trainer (DCT), a 3D simulation game that |
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helps prepare them for transition to the fleet. DCT is built on an open source gaming engine, Delta3D, which Alion maintains for the Navy. |
• | Early detection of maritime threats is essential to protecting U.S. military vessels, but current sonar systems leave gaps in coverage. Alion engineers are continuing to develop technology called Continuous Active Sonar (CAS) that represents a paradigm shift in performance. At-sea testing has met or exceeded expectations, and the solution may ultimately lead to improved defenses for our ships and sailors. | |
• | Maintaining vehicles and other mechanical systems in a war zone is essential to troop safety and the success of the mission, but parts replacement can be challenging. Alion developed a solution called the Mobile Parts Hospital (MPH), a transportable factory where metal parts can be machined and delivered in just a few hours near the point of need. MPH units are currently active in Kuwait, Iraq and Afghanistan under the auspices of the Army’s Tank Automotive Research Development and Engineering Command, and more have been requisitioned. | |
• | Survivability is critical to naval vessels. What happens after a ship is attacked can now be modeled accurately using MOTISS, a software tool that shows the initial and resulting effects of a weapons strike against a ship or other structure. The system allows designers to evaluate the damage and determine design changes that can improve survivability. MOTISS allows the system designer, engineer or operator to locate and rank weaknesses quickly in order to allow for corrective action before those weaknesses are exploited in a real world scenario. |
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• | Prevail in today’s wars; | |
• | Prevent and deter conflict; | |
• | Prepare to defeat adversaries and succeed in a wide range of contingencies; and | |
• | Preserve and enhance the all-volunteer force. |
• | Increase the availability of rotary-wing assets; | |
• | Expand manned and unmanned aircraft systems (UASs) for intelligence, surveillance, and reconnaissance; | |
• | Expand intelligence, analysis and targeting capacity; | |
• | Improve counter-IED capabilities; | |
• | Expand and modernize the AC-130 fleet; | |
• | Increase key enabling assets for Special Operations; | |
• | Increase counterinsurgency (COIN), stability operations, and counter-terrorism (CT) competency and capacity in general purpose forces; | |
• | Expand civil affairs capacity; | |
• | Increase regional expertise for Afghanistan and Pakistan; and | |
• | Strengthen key supporting capabilities for strategic communication. |
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• | Defend the homeland against limited ballistic missile attack; | |
• | Defend against regional threats to U.S. forces, allies and partners; | |
• | Deploy new systems only after their effectiveness and reliability have been determined through testing under realistic conditions; | |
• | Develop new capabilities that are fiscally sustainable over the long-term; | |
• | Develop flexible capabilities that can adapt as threats change; and | |
• | Expand international cooperation. |
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Term B Senior Term Loan | Revolving Loan | |||||||
Fiscal Quarter | Payable Balance | Payable Balance | ||||||
(In thousands) | ||||||||
December 31, 2007 | $ | 237,962 | $ | 26,550 | ||||
March 31, 2008 | $ | 237,567 | $ | 22,850 | ||||
June 30, 2008 | $ | 237,171 | $ | 10,850 | ||||
December 31, 2008 | $ | 229,684 | — | |||||
March 31, 2009 | $ | 229,536 | $ | 4,720 | ||||
June 30, 2009 | $ | 229,387 | — |
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The Exchange Offer | We are offering to exchange for any outstanding notes a like principal amount of exchange notes. As of the date of this prospectus, outstanding notes representing $310,673,000 aggregate principal amount are outstanding. | |
The exchange notes will evidence the same debt as the outstanding notes, and the outstanding notes and the exchange notes will be governed by the same indenture. The exchange notes are described in detail under the heading “Description of the Notes.” | ||
Purpose of the Exchange Offer | On March 22, 2010, we sold the outstanding notes to Credit Suisse Securities (USA) LLC, the initial purchaser, in a transaction that was exempt from the registration requirements of the Securities Act. In connection with the sale, we entered into a registration rights agreement with the initial purchaser which grants the holders of the outstanding notes specified exchange and registration rights. The exchange notes are being offered to satisfy our obligations under the registration rights agreement. | |
Expiration Date | The exchange offer will expire at 5:00 p.m., New York City time on Thursday, September 2, 2010 or a later date and time if we extend it. | |
Conditions to the Exchange Offer | The exchange offer is not subject to material conditions such as the tender of a minimum aggregate principal amount of outstanding notes. The exchange offer is subject to customary conditions, including that it does not violate applicable law or any applicable interpretation of the staff of the SEC and that no litigation has been instituted or threatened that would impair our ability to proceed with the exchange offer. We reserve the right to waive any defects, irregularities or conditions to exchange as to particular outstanding notes. See “The Exchange Offer — Conditions of the Exchange Offer.” | |
Withdrawal | You may withdraw the tender of any outstanding notes pursuant to the exchange offer at any time prior to the expiration date. We will return, as promptly as practicable after the expiration or termination of the exchange offer, any outstanding notes not accepted for exchange for any reason without expense to you. | |
Procedures for Tendering Outstanding Notes | If you wish to accept the exchange offer, you must complete, sign and date the accompanying letter of transmittal in accordance with the instructions in the letter of transmittal, and deliver the letter of transmittal, along with the outstanding notes and any other required documentation, to the exchange agent. By executing the letter of transmittal, you will represent to us that, among other things: | |
• any exchange notes that you receive will be acquired in the ordinary course of your business, | ||
• you are not participating, and you have no arrangement or understanding with any person to participate, in the distribution of the exchange notes, | ||
• you are neither our “affiliate,” as defined in Rule 405 of the Securities Act, or if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, nor a broker-dealer tendering outstanding notes acquired directly from us for your own account, and |
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• if you are not a broker-dealer, you will also represent to us that you are not engaged in and do not intend to engage in a distribution of the exchange notes, and that you have no arrangement or understanding with any person to distribute the exchange notes. | ||
Alternatively, if you are a DTC participant, you may instruct DTC to accept the terms of the exchange offer by issuing an agent’s message to the exchange agent in accordance with DTC’s automated tender offer program procedures. | ||
Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes must represent to us that it acquired such outstanding notes as a result of its market-making activities or other trading activities and must represent to us that it will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.” | ||
If You Fail to Exchange Your Outstanding Notes | If you do not exchange your outstanding notes for exchange notes in the exchange offer, you will continue to be subject to the restrictions on transfer provided in the outstanding notes and the secured notes indenture. In general, you may not offer or sell your outstanding notes without registration under the federal securities laws or an exemption from the registration requirements of the federal securities laws and applicable state securities laws. You will not have dissenters’ rights or appraisal rights in connection with the exchange offer. See “The Exchange Offer — Appraisal Rights.” | |
U.S. Federal Income Tax Considerations | We believe the exchange of outstanding notes for exchange notes pursuant to the exchange offer will not constitute a sale or an exchange for federal income tax purposes. See “Certain United States Federal Income Tax Consequences.” | |
Use of Proceeds | We will not receive any proceeds from the exchange of notes pursuant to the exchange offer. | |
Exchange Agent | We have appointed Wilmington Trust Company as the exchange agent for the exchange offer. Wilmington Trust Company also serves as the trustee under the secured notes indenture. The mailing address and telephone number of the exchange agent are: Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE19890-1626, Attention: Corporate Trust Reorg, Telephone:(302) 636-6181, Facsimile:(302) 636-4139. See “The Exchange Offer — Exchange Agent.” | |
Resale | Under existing SEC interpretations, the exchange notes will be freely transferable by holders other than our affiliates after the exchange offer without further registration under the Securities Act if the holder of the exchange notes represents to us in the exchange offer that it is acquiring the exchange notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the exchange notes and that it is not an affiliate of the Company, as such terms are interpreted by the SEC; provided, however, that broker-dealers receiving exchange notes in the exchange offer will have a prospectus delivery requirement with respect to resales of such exchange notes. The SEC has taken the position that broker-dealers may fulfill their prospectus delivery requirements with respect to exchange notes (other than a resale of an unsold allotment from the original sale of the secured notes) with the prospectus contained in the exchange offer registration statement. |
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Issuer | Alion Science and Technology Corporation, a Delaware corporation. | |
Notes Offered | 12% Senior Secured Notes due 2014. | |
Maturity Date | November 1, 2014 | |
Interest | 12% per annum, payable semi-annually in arrears on May 1 and November 1, commencing on May 1, 2010, payable (1) 10% in cash and (2) 2% by increasing the principal amount of the exchange notes. Interest accrues on the exchange notes from the last interest payment date for the outstanding notes. | |
Guarantees | The exchange notes will be fully and unconditionally, and jointly and severally, guaranteed by certain of our current domestic subsidiaries and certain of our future subsidiaries. | |
Collateral | The exchange notes and the related guarantees will be secured by a pledge of the equity interests of all of our subsidiary guarantors and certain future subsidiaries of the Company and a lien on substantially all of our and all of our subsidiary guarantors’ existing and future assets, which pledge and lien also secure our new revolving credit facility on a pari passu basis subject to certain first out rights held by the revolving credit lenders. | |
Ranking | The exchange notes will: | |
• be senior secured obligations of the Company; | ||
• rankpari passuin right of payment with all existing and future senior indebtedness of the Company including the unsecured notes and indebtedness under, and which may in the future be borrowed pursuant to, the new revolving credit facility except as the intercreditor agreement provides for payment in certain events to be made to the lenders under the new revolving credit facility before payment is made under the exchange notes; | ||
• be senior in right of payment to existing and future subordinated indebtedness of the Company; | ||
• be effectively subordinate with respect to the proceeds of collateral pursuant to the intercreditor agreement. | ||
Voting | The outstanding notes and the exchange notes will vote together as a single class under the secured notes indenture. | |
Optional Redemption | Prior to April 1, 2013, we may redeem all, but not less than all, of the secured notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest plus a “make-whole” premium as set forth under “Description of the Notes — Optional Redemption.” We may redeem some or all of the secured notes at |
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any time and from time to time on or after April 1, 2013, at the redemption prices set forth under “Description of the Notes — Optional Redemption,” plus accrued and unpaid interest to the date of redemption. In addition, at any time prior to April 1, 2013, we may redeem up to 35% of the secured notes with the proceeds of certain equity offerings. In addition, not more than once in any twelve-month period prior to April 1, 2013, we will be entitled to redeem up to $31.0 million in principal amount of the secured notes at a redemption price of 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. | ||
Certain Covenants | The indenture governing the outstanding notes that will govern the exchange notes contains covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to: | |
• incur or guarantee additional indebtedness or issue certain mandatorily redeemable preferred stock; | ||
• pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness; | ||
• transfer or sell assets outside the ordinary course of business; | ||
• make investments; | ||
• incur liens and enter into sale/leaseback transactions; | ||
• enter into certain transactions with our affiliates; and | ||
• merge or consolidate with other companies or transfer all or substantially all of our assets. | ||
These covenants are subject to a number of important limitations and exceptions as described under “Description of the Notes — Certain Covenants.” | ||
Absence of Trading Market for Exchange Notes | We do not intend to apply for a listing of the exchange notes on any securities exchange, quotation system or on PORTAL. Accordingly, we cannot assure you that a liquid market for the exchange notes will develop or be maintained. | |
Separation | The exchange notes will trade separately from the warrants that were attached to the outstanding notes at the time we issued the outstanding notes and warrants together as units. |
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Quarter Ended | Six Months Ended | Fiscal Year Ended | ||||||||||||||||||||||
March 31, | March 31, | September 30, | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Statement of Operations: | ||||||||||||||||||||||||
Contract revenue | $ | 203,546 | $ | 195,429 | $ | 409,284 | $ | 802,225 | $ | 739,482 | $ | 737,587 | ||||||||||||
Direct contract expense | 156,049 | 149,135 | 315,045 | 615,700 | 566,408 | 562,139 | ||||||||||||||||||
Gross profit | 47,497 | 46,294 | 94,239 | 186,525 | 173,074 | 175,448 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Indirect contract expense | 9,982 | 9,332 | 19,268 | 35,473 | 40,050 | 43,972 | ||||||||||||||||||
Research and development | 309 | 78 | 570 | 677 | 988 | 2,379 | ||||||||||||||||||
General and administrative | 18,466 | 13,426 | 34,473 | 60,867 | 59,484 | 60,698 | ||||||||||||||||||
Rental and occupancy expense | 8,298 | 8,468 | 16,284 | 32,984 | 30,880 | 32,410 | ||||||||||||||||||
Depreciation and amortization | 4,212 | 4,700 | 8,443 | 18,959 | 20,715 | 21,824 | ||||||||||||||||||
Total operating expenses | 41,267 | 36,004 | 79,038 | 148,960 | 152,117 | 161,283 | ||||||||||||||||||
Operating income | 6,230 | 10,290 | 15,201 | 37,565 | 20,957 | 14,165 | ||||||||||||||||||
Interest Income | 12 | 25 | 57 | 91 | 423 | 319 | ||||||||||||||||||
Interest expense | (14,097 | ) | (10,244 | ) | (30,983 | ) | (55,154 | ) | (47,382 | ) | (51,226 | ) | ||||||||||||
Gain (loss) on debt extinguishment | 50,749 | — | 50,749 | — | — | (6,170 | ) | |||||||||||||||||
Other income (expense) | 87 | (87 | ) | (24 | ) | 305 | 655 | 132 | ||||||||||||||||
Pre-tax income (loss) | 42,981 | (16 | ) | 35,000 | (17,193 | ) | (25,347 | ) | (42,780 | ) | ||||||||||||||
Income tax (expense) benefit | (33,816 | ) | 55 | (33,776 | ) | 152 | 13 | 10 | ||||||||||||||||
Net income (loss) | $ | 9,165 | $ | 39 | $ | 1,224 | $ | (17,041 | ) | $ | (25,334 | ) | $ | (42,770 | ) | |||||||||
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Quarter Ended | Six Months Ended | Fiscal Year Ended | ||||||||||||||||||||||
March 31, | March 31, | September 30, | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Capital expenditures | $ | (457 | ) | $ | (669 | ) | $ | (1,271 | ) | $ | (2,186 | ) | $ | (4,986 | ) | $ | (10,687 | ) | ||||||
EBITDA(a) | 10,541 | 14,928 | 23,677 | 56,920 | 42,750 | 36,440 | ||||||||||||||||||
Adjusted EBITDA(a) | 14,598 | 14,644 | 31,033 | 60,016 | 52,177 | 64,230 |
At | At | |||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 28,300 | $ | — | $ | 11,185 | 16,287 | $ | 11,684 | |||||||||||
Working capital(b) | 50,441 | 32,653 | 27,833 | (196,556 | ) | (186,726 | ) | |||||||||||||
Total assets | 667,161 | 644,477 | 647,498 | 655,946 | 683,970 | |||||||||||||||
Total debt | 519,179 | (c) | 537,211 | (d) | 535,822 | 528,774 | 556,943 |
(a) | We believe EBITDA can be useful in assessing operating performance and in comparing our performance to other companies in the same industry. EBITDA is a common financial metric in the government contracting industry, in part because it excludes from performance the effects of a company’s capital structure, in particular taxes and interest. EBITDA is not a measure under U.S. GAAP. It does not measure operating income, profitability, cash flows or liquidity in accordance with U.S. GAAP. EBITDA has important limitations on its usefulness as an analytical tool. Adjusted EBITDA excludes certain non-cash expenses and non-recurring items in order to evaluate our ability to meet our obligations from our continuing operations. Adjusted EBITDA is not defined under U.S. GAAP and is not a measure of operating income, operating performance, profitability, cash flows or liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA has important limitations on its usefulness as an analytical tool. | |
(b) | Fiscal year 2008 and 2007 working capital is negative because we failed to comply with certain Term B Senior Credit Agreement debt covenants and were required to classify outstanding balances as current liabilities. | |
(c) | Total debt for the period ending March 31, 2010 consists of interest ($10.68 million) and principal net of debt issue costs, and original issue discount, related to the unsecured notes and the secured notes issued upon closing of the Transactions. | |
(d) | Historical total debt for periods ended on and before March 31, 2009 consists of interest and principal net of debt issue costs related to the previously existing Term B Senior Credit Agreement, the 10.25% senior unsecured notes and the junior subordinated notes. |
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Reconciliation of EBITDA and Adjusted EBITDA
Quarter Ended | Six Months Ended | Fiscal Year Ended | ||||||||||||||||||||||
March 31, | March 31, | September 30, | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Net income (loss) | $ | 9,165 | $ | 39 | $ | 1,224 | $ | (17,041 | ) | $ | (25,334 | ) | $ | (42,770 | ) | |||||||||
(Gain)/loss on debt extinguishment | (50,749 | ) | — | (50,749 | ) | — | — | (6,170 | ) | |||||||||||||||
Interest expense | 14,097 | 10,244 | 30,983 | 55,154 | 47,382 | 51,226 | ||||||||||||||||||
Income tax (benefit) expense | 33,816 | (55 | ) | 33,776 | (152 | ) | (13 | ) | (10 | ) | ||||||||||||||
Depreciation and amortization | 4,212 | 4,700 | 8,443 | 18,959 | 20,715 | 21,824 | ||||||||||||||||||
EBITDA | 10,541 | 14,928 | 23,677 | 56,920 | 42,750 | 36,440 | ||||||||||||||||||
Non-cash stock-based and incentive compensation(1) | 400 | (388 | ) | 858 | (2,119 | ) | 500 | 8,340 | ||||||||||||||||
Non-cash ESOP contribution expense(2) | 2,530 | 2,783 | 5,009 | 10,328 | 9,851 | 9,921 | ||||||||||||||||||
Interest rate swap expense | — | — | — | — | 295 | — | ||||||||||||||||||
Deduct: Bank fees included in interest | — | — | — | (427 | ) | (303 | ) | (317 | ) | |||||||||||||||
Deduct: Non-cash gain(3) | — | — | — | — | — | (3,320 | ) | |||||||||||||||||
Add backs allowed by Credit Agreement(4) | 2,174 | 218 | 2,921 | 1,662 | 8,019 | 22,844 | ||||||||||||||||||
Less: Cash paid for prior non-cash expenses(5) | 1,047 | 2,896 | 1,431 | (6,348 | ) | (8,935 | ) | (9,678 | ) | |||||||||||||||
Adjusted EBITDA | $ | 14,598 | $ | 14,645 | $ | 31,034 | $ | 60,016 | $ | 52,177 | $ | 64,230 | ||||||||||||
% margin | 7.2 | % | 7.5 | % | 7.6 | % | 7.5 | % | 7.1 | % | 8.7 | % |
(1) | Expense recognized for phantom stock, stock appreciation rights and long-term incentive compensation. | |
(2) | Expense recognized for employer 401(k) match and profit-sharing contributions to the ESOP Trust made in Alion common stock. | |
(3) | Gain on post-retirement benefit plan curtailment. | |
(4) | Includes expenses permitted to be added back pursuant to the Term B Senior Credit Agreement based on the nature and treatment of those expenses as follows: |
Quarter Ended | Six Months Ended | Fiscal Year Ended | ||||||||||||||||||||||
March 31, | March 31, | September 30, | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Financing costs and acquisition-related expenses | $ | 1,804 | $ | 9 | $ | 2,551 | $ | 935 | $ | 2,316 | $ | 10,438 | ||||||||||||
SOXstart-up costs | — | 209 | — | 495 | 585 | 780 | ||||||||||||||||||
Accelerated compensation and severance expense(a) | 370 | — | 370 | 224 | 3,493 | 300 | ||||||||||||||||||
Lease breakage, facilitystart-up and closure costs | — | — | — | — | 851 | 6,842 | ||||||||||||||||||
Contract protest legal fees(b) | — | — | — | — | 599 | 2,017 | ||||||||||||||||||
New business initiatives and acquisitionintegration(c) | — | — | — | 8 | 175 | 2,467 | ||||||||||||||||||
Total | $ | 2,174 | $ | 218 | $ | 2,921 | $ | 1,662 | $ | 8,019 | $ | 22,844 | ||||||||||||
(a) | Termination and severance costs for executive and senior officers. | |
(b) | Legal fees for protesting the loss of our material contract with the Joint Spectrum Center. | |
(c) | Expenses to integrate acquisitions and expand infrastructure. |
(5) | Cash settlements for stock appreciation rights, shares of phantom stock, long-term incentive compensation and ESOP related repurchase liability (4% 401(k) match and 1% retirement plan). |
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• | make it more difficult for us to satisfy our debt-related obligations; any failure to comply with any of our debt instrument obligations, including restrictive and financial covenants, could result in an event of default under our debt agreements; | |
• | make it more difficult for us to satisfy our repurchase obligations to ESOP participants; | |
• | increase our vulnerability to general adverse economic and industry conditions and make it more difficult for us to react to changing conditions; | |
• | limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, other business opportunities, new technologies or other general corporate requirements; | |
• | require a substantial portion of our operating cash flow to pay interest on our debt and reduce our ability to use our cash flow for future business needs; |
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• | 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. |
• | 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. |
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• | were insolvent; | |
• | were rendered insolvent by the issuance of the secured notes; | |
• | were engaged in a business or transaction for which our remaining assets after the secured notes issuance constituted unreasonably small capital; or | |
• | intended to incur, or believed or reasonably should have believed that we would incur, debts beyond our ability to pay such debts as they matured. |
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• | upon a sale, lease, transfer or other disposition of such collateral in accordance with the terms of the new revolving credit facility and the secured notes indenture (except certain permitted investments) to any person other than the Company or any restricted subsidiary; | |
• | upon the effectiveness of any consent to the release of the security interest granted in collateral pursuant to the new revolving credit facility and the secured notes indenture; | |
• | upon the release of any grantor from its guarantee, if any, in accordance with the terms of the new revolving credit facility and the secured notes indenture; and | |
• | upon the release of collateral under the new revolving credit facility or the secured notes indenture as permitted under the security documents or the secured notes indenture. See “Description of the Notes — Collateral — Releases.” |
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• | 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 revenueand/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; | |
• | interest rate changes; | |
• | 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. |
28
29
30
31
• | 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; | |
• | curtailment of the U.S. government’s 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); |
32
• | competition and consolidation in the information technology industry; and | |
• | general economic conditions. |
33
34
• | the frequent need to bid on programs in advance of the completion of their design, which can result in unforeseen technological difficultiesand/or cost overruns; | |
• | the substantial time and effort, including design, development and promotional activities, required to prepare bids and proposals for contracts that may not be awarded to us; and | |
• | the rapid rate of technological advancement and the design complexity of most of our research offerings. |
35
36
37
Computation of Ratio of Earnings to Fixed Charges
Six Months Ended | ||||||||||||||||||||||||
Years Ended September 30, | March 31, | |||||||||||||||||||||||
Actual Data | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||
Fixed Charges | ||||||||||||||||||||||||
Cash interest expense | $ | 9,328 | $ | 19,349 | $ | 33,609 | $ | 49,909 | $ | 52,022 | $ | 28,666 | ||||||||||||
Amortization of capitalized expenses related to indebtedness | 3,897 | 2,591 | 3,182 | 2,912 | 5,067 | 2,378 | ||||||||||||||||||
Total fixed charges | $ | 13,225 | $ | 21,940 | $ | 36,791 | $ | 52,821 | $ | 57,089 | $ | 31,044 | ||||||||||||
Earnings | ||||||||||||||||||||||||
Pre-tax earnings (loss) | $ | (40,172 | ) | $ | (31,089 | ) | $ | (42,780 | ) | $ | (25,334 | ) | $ | (17,041 | ) | $ | 35,000 | |||||||
Fixed charges | 13,225 | 21,940 | 36,791 | 52,821 | 57,089 | 31,044 | ||||||||||||||||||
Earnings before fixed charges | $ | (26,947 | ) | $ | (9,149 | ) | $ | (5,989 | ) | $ | 27,487 | $ | 40,048 | $ | 66,043 | |||||||||
Ratio of earnings to fixed charges | N/A | N/A | N/A | 0.52 | 0.70 | 2.13 | ||||||||||||||||||
(a | ) | (a | ) | (a | ) | (b | ) | (b | ) |
(a) | Earnings for fiscal 2005, 2006 and 2007 were inadequate to cover fixed charges in those years by $26.9 million, $9.1 million, $6.0 million. | |
(b) | Although the fixed charge coverage ratios for fiscal years 2008 and 2009 were positive, earnings were inadequate to cover fixed charges by $25.3 million in 2008 and by $17.0 million in 2009. |
38
March 31, 2010 | ||||
(In thousands) | ||||
Senior Secured $25 million Revolving Credit Facility | $ | — | ||
12% Senior Secured Notes due 2014 | 268,400 | |||
10.25% Senior Unsecured Notes due 2015 | 245,684 | |||
Total senior debt | 514,084 | |||
Warrants | 20,785 | |||
Total | 534,869 | |||
Redeemable common stock, $0.01 par value, 5,469,272 shares issued and outstanding at March 31, 2010 | 153,140 | |||
Accumulated other comprehensive loss | (238 | ) | ||
Accumulated deficit | (239,502 | ) | ||
Total Shareholder’s Deficit | (86,600 | ) | ||
Total Capitalization | $ | 448,269 | ||
39
Quarter Ended | Six Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
Consolidated Statement of Operations: | ||||||||||||||||
Contract revenue | $ | 203,546 | $ | 195,429 | $ | 409,284 | $ | 384,225 | ||||||||
Direct contract expense | 156,049 | 149,135 | 315,045 | 294,457 | ||||||||||||
Total Operating expenses | 41,267 | 36,004 | 79,038 | 67,914 | ||||||||||||
Operating income/(loss) | 6,230 | 10,290 | 15,201 | 21,854 | ||||||||||||
Depreciation and amortization | 4,212 | 4,700 | 8,443 | 9,506 | ||||||||||||
Interest expense(a) | 14,097 | 10,244 | 30,983 | 24,332 | ||||||||||||
Gain on debt extinguishment | 50,749 | — | 50,749 | — | ||||||||||||
Income tax expense (benefit) | 33,816 | (55 | ) | 33,776 | (51 | ) | ||||||||||
Net income (loss) | $ | 9,165 | $ | 39 | $ | 1,224 | $ | (2,501 | ) | |||||||
Basic and diluted loss per share | $ | 1.69 | $ | 0.01 | $ | 0.23 | $ | (0.48 | ) | |||||||
Basic and diluted weighted average shares outstanding | 5,411,342 | 5,227,835 | 5,417,756 | 5,228,787 |
40
Quarter Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Consolidated Balance Sheet Data(b): | ||||||||
Cash and cash equivalents | $ | 28,300 | $ | — | ||||
Net accounts receivable | 187,847 | 183,763 | ||||||
Total assets | 667,161 | 644,477 | ||||||
Working capital | 50,441 | 32,653 | ||||||
Current portion of long-term debt | — | 5,389 | ||||||
Long-term debt, excluding current portion | 514,084 | 517,981 | ||||||
Redeemable common stock junior warrants | — | 33,098 | ||||||
Redeemable common stock new warrants | 20,785 | — | ||||||
Redeemable common stock | 153,140 | 180,586 | ||||||
Accumulated deficit | (239,502 | ) | (258,964 | ) |
Six Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Consolidated Statement of Cash Flows: | ||||||||
Capital expenditures | $ | (1,271 | ) | $ | (1,076 | ) | ||
Net cash flows provided by (used in): | ||||||||
Operating activities | $ | (77 | ) | $ | (8,885 | ) | ||
Investing activities | (1,316 | ) | (1,242 | ) | ||||
Financing activities | 18,511 | (6,160 | ) | |||||
Other Data(b): | (In millions) | |||||||
Funded contract backlog | $ | 380 | $ | 411 | ||||
Unfunded contract backlog | 2,526 | 2,135 | ||||||
Ceiling backlog | $ | 3,710 | $ | 3,255 | ||||
Number of employees | 3,227 | 3,332 |
(a) | 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. | |
(b) | As of the end of the stated period. |
41
Fiscal Year Ended September 30, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||
Consolidated Statement of Operations: | ||||||||||||||||||||
Contract revenue | $ | 802,225 | $ | 739,482 | $ | 737,587 | $ | 508,628 | $ | 369,231 | ||||||||||
Direct contract expense | 615,700 | 566,408 | 562,139 | 381,467 | 267,241 | |||||||||||||||
Total Operating expenses | 148,960 | 152,117 | 161,283 | 129,466 | 104,081 | |||||||||||||||
Operating income/(loss) | 37,565 | 20,957 | 14,165 | (2,305 | ) | (2,091 | ) | |||||||||||||
Depreciation and amortization | 18,959 | 20,715 | 21,824 | 16,566 | 17,771 | |||||||||||||||
Interest expense(a) | 55,154 | 47,382 | 51,226 | 29,691 | 38,696 | |||||||||||||||
Loss on debt extinguishment | — | — | 6,170 | — | — | |||||||||||||||
Net loss | $ | (17,041 | ) | $ | (25,334 | ) | $ | (42,770 | ) | $ | (31,115 | ) | $ | (40,238 | ) | |||||
Basic and diluted loss per share | $ | (3.25 | ) | $ | (5.01 | ) | $ | (8.35 | ) | $ | (6.19 | ) | $ | (9.50 | ) | |||||
Basic and diluted weighted average shares outstanding | 5,246,227 | 5,057,337 | 5,121,033 | 5,029,670 | 4,235,947 | |||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 11,185 | $ | 16,287 | $ | 11,684 | $ | 2,755 | $ | 37,778 | ||||||||||
Net accounts receivable | 180,157 | 168,451 | 186,660 | 150,412 | 80,898 | |||||||||||||||
Total assets | 647,498 | 655,946 | 683,970 | 650,969 | 334,249 | |||||||||||||||
Working capital | 27,833 | (196,556 | ) | (186,726 | ) | (212,116 | ) | 59,775 | ||||||||||||
Current portion of long-term debt(b) | 14,428 | 241,763 | 262,147 | 267,216 | 1,404 | |||||||||||||||
Long-term debt, excluding current portion(b) | 521,394 | 287,011 | 285,546 | 199,343 | 180,833 | |||||||||||||||
Redeemable common stock warrants | 32,717 | 39,996 | 33,610 | 35,234 | 44,590 | |||||||||||||||
Redeemable common stock | 187,137 | 200,561 | 200,768 | 213,719 | 184,828 | |||||||||||||||
Accumulated deficit | (274,559 | ) | (276,876 | ) | (260,147 | ) | (221,009 | ) | (164,354 | ) | ||||||||||
Consolidated Statement of Cash Flows: | ||||||||||||||||||||
Capital expenditures | $ | (2,186 | ) | $ | (4,986 | ) | $ | (10,687 | ) | $ | (5,277 | ) | $ | (2,233 | ) | |||||
Net cash flows provided by (used in): | ||||||||||||||||||||
Operating activities | $ | 8,995 | $ | 29,320 | $ | (5,008 | ) | $ | (15,678 | ) | $ | 35,140 | ||||||||
Investing activities | (2,347 | ) | (12,152 | ) | (25,438 | ) | (284,423 | ) | (78,017 | ) | ||||||||||
Financing activities | (11,750 | ) | (12,565 | ) | 39,375 | 265,078 | (c) | 75,938 | ||||||||||||
Other Data(d): | ||||||||||||||||||||
Funded contract backlog | $ | 376,500 | $ | 340,500 | $ | 360,000 | $ | 386,000 | $ | 193,000 | ||||||||||
Unfunded contract backlog | 6,008,400 | 4,475,800 | 4,669,000 | 3,861,000 | 2,581,000 | |||||||||||||||
Number of employees | 3,380 | 3,266 | 3,400 | 3,575 | 2,508 |
(a) | 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. | |
(b) | Current and long-term debt include senior and subordinated debt and accrued interest, net of unamortized debt issue costs and original issue discount. Balances payable under the Term B Senior Credit Agreement are included in the current portion of long-term debt for the fiscal years ended September 30, 2008, 2007 and 2006 based on the Company’s failure to comply with required financial, negative and other covenants for those years. The Company reclassified $229.8 million for 2008; $247.6 million for 2007; and $264.4 million for 2006. See Note 11 to the accompanying audited financial statements. | |
(c) | In fiscal year 2006, one component of financing activities was $19.0 million of redeemable common stock purchased from the ESOP Trust. | |
(d) | As of the end of the stated period. |
42
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• | provide an overview of the business; | |
• | explainyear-over-year trends in the results of operations; | |
• | describe our liquidity and capital resources; | |
• | explain critical accounting policies; | |
• | explain other obligations; and | |
• | disclose market and other risks. |
For the Quarters Ended March 31, | For the Years Ended September 30, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenue | $ | 203,546 | $ | 195,429 | $ | 802,225 | $ | 739,482 | $ | 737,587 | ||||||||||
Net loss | $ | (6,230 | ) | $ | (10,290 | ) | $ | (17,041 | ) | $ | (25,334 | ) | $ | (42,770 | ) | |||||
As of March 31, | As of September 30, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
Backlog: | (In millions) | |||||||||||||||||||
Funded | $ | 380.0 | $ | 411.0 | 376.5 | $ | 340.5 | $ | 360.0 | |||||||||||
Unfunded | 6,236.0 | 5,392.0 | 6,008.4 | 4,475.8 | 4,669.0 | |||||||||||||||
Total | $ | 6,616 | $ | 5,803 | 6,384.9 | $ | 4,816.3 | $ | 5,029.0 | |||||||||||
43
For the Six Months Ended | ||||||||||||||||||||||||||||||||||||||||
March 31, | For the Years Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
U.S. Department of Defense | $ | 376,861 | 92.1 | % | $ | 351,542 | 91.9 | % | $ | 736,625 | 91.9 | % | $ | 660,270 | 89.3 | % | $ | 659,601 | 89.4 | % | ||||||||||||||||||||
Other Federal Civilian Agencies | 21,036 | 5.1 | % | 18,378 | 4.4 | % | 37,197 | 4.6 | % | 34,107 | 4.6 | % | 29,503 | 4.0 | % | |||||||||||||||||||||||||
Commercial and International | 11,387 | 2.8 | % | 14,305 | 3.7 | % | 28,403 | 3.5 | % | 45,105 | 6.1 | % | 48,483 | 6.6 | % | |||||||||||||||||||||||||
Total | $ | 409,284 | 100.0 | % | $ | 384,225 | 100.0 | % | $ | 802,225 | 100.0 | % | $ | 739,482 | 100.0 | % | $ | 737,587 | 100.0 | % | ||||||||||||||||||||
44
For the Six Months Ended | ||||||||||||||||||||||||||||||||||||||||
March 31, | For the Years Ended September 30, | |||||||||||||||||||||||||||||||||||||||
Contract Type | 2010 | 2009 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
Cost-reimbursement | $ | 297,478 | 72.6 | % | $ | 270,217 | 70.4 | % | $ | 567,294 | 70.7 | % | $ | 517,692 | 70.0 | % | $ | 512,587 | 69.5 | % | ||||||||||||||||||||
Fixed-price | 50,565 | 12.4 | % | 40,523 | 10.5 | % | 91,885 | 11.5 | % | 70,146 | 9.5 | % | 70,946 | 9.6 | % | |||||||||||||||||||||||||
Time-and-material | 61,241 | 15.0 | % | 73,485 | 19.1 | % | 143,046 | 17.8 | % | 151,644 | 20.5 | % | 154,054 | 20.9 | % | |||||||||||||||||||||||||
Total | $ | 409,284 | 100.0 | % | $ | 384,225 | 100.0 | % | $ | 802,225 | 100.0 | % | $ | 739,482 | 100.0 | % | $ | 737,587 | 100.0 | % | ||||||||||||||||||||
Consolidated Operations of Alion | ||||||||||||||||
Six Months Ended March 31, | ||||||||||||||||
Selected Financial Information | 2010 | 2009 | ||||||||||||||
Revenue % | Revenue % | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total contract revenue | $ | 409,284 | $ | 384,225 | ||||||||||||
Total direct contract costs | 315,045 | 77.0 | % | 294,457 | 76.6 | % | ||||||||||
Direct labor costs | 136,103 | 33.3 | % | 134,588 | 35.0 | % | ||||||||||
Material and subcontract costs | 170,567 | 41.7 | % | 147,849 | 38.5 | % | ||||||||||
Other direct costs | 8,375 | 2.0 | % | 12,020 | 3.1 | % | ||||||||||
Gross profit | 94,239 | 23.0 | % | 89,768 | 23.4 | % | ||||||||||
Total operating expense | 79,038 | 19.3 | % | 67,914 | 17.7 | % | ||||||||||
Major components of operating expense: | ||||||||||||||||
Indirect expenses including facilities costs | 35,552 | 8.7 | % | 34,563 | 9.0 | % | ||||||||||
General and administrative (excluding stock-based compensation) | 35,328 | 8.6 | % | 29,363 | 7.6 | % | ||||||||||
Stock-based compensation | (855 | ) | (0.21 | )% | (5,764 | ) | (1.5 | )% | ||||||||
Depreciation and amortization | 8,443 | 2.1 | % | 9,506 | 2.5 | % | ||||||||||
Income from operations | $ | 15,201 | 3.7 | % | $ | 21,854 | 5.7 | % |
45
46
Six Months Ended | ||||||||
March 31 | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Cash Pay Interest | ||||||||
Revolver | $ | 98 | $ | 522 | ||||
Senior Term Loan | 11,047 | 11,455 | ||||||
Secured Notes | 775 | — | ||||||
Unsecured Notes | 12,813 | 12,813 | ||||||
Subordinated Note | — | 870 | ||||||
Other cash pay interest and fees | 4,032 | 214 | ||||||
Sub-total cash pay interest | 28,765 | 25,874 | ||||||
Deferred and Non-cash Interest | ||||||||
Secured Notes PIK interest | 155 | — | ||||||
Debt issue costs and other non-cash items | 2,223 | 2,544 | ||||||
Subordinated Note interest | — | 2,812 | ||||||
Subordinated Note warrants | (160 | ) | (6,898 | ) | ||||
Sub-total non-cash interest | 2,218 | (1,542 | ) | |||||
Total interest expense | $ | 30,983 | $ | 24,332 | ||||
47
Year Ended September 30, | ||||||||||||||||
Selected Financial Information | 2009 | 2008 | ||||||||||||||
% Revenue | % Revenue | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total revenue | $ | 802,225 | $ | 739,482 | ||||||||||||
Total 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 | % | ||||||||||
Major components of operating expense: | ||||||||||||||||
Indirect expenses including facilities costs | 68,457 | 8.5 | % | 70,930 | 9.6 | % | ||||||||||
General and administrative (excluding stock-based compensation) | 66,082 | 8.2 | % | 58,984 | 8.0 | % | ||||||||||
Depreciation and amortization | 18,959 | 2.4 | % | 20,715 | 2.8 | % | ||||||||||
Income from operations | $ | 37,565 | 4.7 | % | $ | 20,957 | 2.8 | % |
48
Year Ended September 30, | ||||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Cash Pay Interest | ||||||||
Revolver | $ | 1,005 | $ | 1,884 | ||||
Senior Term Loan | 22,925 | 16,453 | ||||||
Existing Notes | 25,625 | 25,625 | ||||||
Junior Subordinated Note | 2,447 | — | ||||||
Other cash pay interest and fees | 447 | 426 | ||||||
Sub-total cash pay interest | 52,449 | 44,388 | ||||||
Deferred and Non-cash Interest | ||||||||
Debt issue costs and other non-cash items | 5,067 | 1,766 | ||||||
Junior Subordinated Note interest | 4,917 | 3,978 | ||||||
Redeemable warrants | (7,279 | ) | (2,750 | ) | ||||
Sub-total non-cash interest | 2,705 | 2,994 | ||||||
Total interest expense | $ | 55,154 | $ | 47,382 | ||||
49
Year Ended September 30, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Selected Financial Information | % Revenue | % Revenue | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total revenue | $ | 739,482 | $ | 737,587 | ||||||||||||
Total direct contract expenses | 566,408 | 76.6 | % | 562,139 | 76.2 | % | ||||||||||
Major components of direct contract expense: | ||||||||||||||||
Direct labor expense | 248,409 | 33.6 | % | 245,778 | 33.3 | % | ||||||||||
Material and subcontract expense | 295,122 | 39.9 | % | 295,099 | 40.0 | % | ||||||||||
Other direct expense | 22,877 | 3.1 | % | 21,261 | 2.9 | % | ||||||||||
Gross profit | 173,074 | 23.4 | % | 175,448 | 23.8 | % | ||||||||||
Total operating expense | 152,117 | 20.6 | % | 161,283 | 21.9 | % | ||||||||||
Major components of operating expense: | ||||||||||||||||
Indirect personnel and facilities | 70,930 | 9.6 | % | 76,382 | 10.4 | % | ||||||||||
General and administrative (excluding stock-based compensation) | 58,984 | 8.0 | % | 52,358 | 7.1 | % | ||||||||||
Stock-based compensation | 500 | 0.1 | % | 8,340 | 1.1 | % | ||||||||||
Depreciation and amortization | 20,715 | 2.8 | % | 21,824 | 3.0 | % | ||||||||||
Income from operations | $ | 20,957 | 2.8 | % | $ | 14,165 | 1.9 | % |
50
Year Ended September 30, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Cash Pay Interest | ||||||||
Revolver | $ | 1,884 | $ | 2,063 | ||||
Senior Term Loan | 16,453 | 19,573 | ||||||
Existing Notes | 25,625 | 16,585 | ||||||
Bridge Loan | — | 6,810 | ||||||
Other cash pay interest and fees | 426 | 286 | ||||||
Sub-total cash pay interest | 44,388 | 45,317 | ||||||
Deferred and Non-cash Interest | ||||||||
Debt issue costs and other non-cash items | 1,766 | 3,182 | ||||||
Junior Subordinated Note interest | 3,978 | 3,381 | ||||||
Redeemable warrants | (2,750 | ) | (654 | ) | ||||
Sub-total non-cash interest | 2,994 | 5,909 | ||||||
Total interest expense | $ | 47,382 | $ | 51,226 | ||||
51
52
53
• | Stock-based and long-term incentive compensation plan obligations; and |
54
• | ESOP share repurchase and diversification obligations. |
Number of | Total Value | |||||||||||
Date | Shares Repurchased | Share Price | Purchased | |||||||||
(In thousands) | ||||||||||||
October 2007 | 90 | $ | 40.05 | $ | 4 | |||||||
December 2007 | 210 | 40.05 | 8 | |||||||||
February 2008 | 648 | 40.05 | 26 | |||||||||
March 2008 | 19,961 | 40.05 | 799 | |||||||||
March 2008 | 10,011 | 41.00 | 410 | |||||||||
April 2008 | 60 | 40.05 | 2 | |||||||||
July 2008 | 306 | 41.00 | 13 | |||||||||
September 2008 | 68,009 | 41.00 | 2,788 | |||||||||
December 2008 | 233 | 38.35 | 9 | |||||||||
March 2009 | 189,038 | 38.35 | 7,250 | |||||||||
April 2009 | 122 | 34.30 | 4 | |||||||||
May 2009 | 38 | 34.30 | 1 | |||||||||
July 2009 | 100 | 34.30 | 3 | |||||||||
July 2009 | 127 | 38.35 | 5 | |||||||||
August 2009 | 178 | 34.30 | 6 | |||||||||
September 2009 | 55,282 | 34.30 | 1,896 | |||||||||
December 2009 | 745 | 34.50 | 26 | |||||||||
March 2010 | 218,408 | 34.50 | 7,535 | |||||||||
Total | 563,566 | $ | 20,785 | |||||||||
55
Payments Due by Fiscal Year | ||||||||||||||||||||||||||||
Total | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | ||||||||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||||||||||
Long-term debt including principal and interest | $ | 889,249 | $ | 36,458 | $ | 57,738 | $ | 58,368 | $ | 59,011 | $ | 59,667 | $ | 618,007 | ||||||||||||||
Lease obligations | 142,690 | 21,210 | 25,984 | 22,198 | 20,634 | 14,231 | 38,433 | |||||||||||||||||||||
Total contractual obligations | $ | 1,031,939 | $ | 57,668 | $ | 83,722 | $ | 80,566 | $ | 79,645 | $ | 73,898 | $ | 656,440 | ||||||||||||||
56
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58
Purchased contracts | 1-13 years | |||
Internal use software and engineering designs | 2-3 years | |||
Non-compete agreements | 3-6 years |
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• | naval architecture and marine engineering; | |
• | defense operations; | |
• | modeling and simulation; | |
• | technology integration; | |
• | information technology and wireless communication; and | |
• | energy and environmental sciences. |
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Revenue by Core Business Area 2009 (In thousands) | Revenue by Contract Type 2009 (In thousands) |
• | Enlisted Navy recruits must successfully pass Battle Stations 21 (BS-21), a training program where they are challenged with simulated floods, fires and mass casualty exercises in a DDG destroyer replica. To train these recruits, Alion developed the Damage Control Trainer (DCT), a 3D simulation game that helps prepare them for transition to the fleet. DCT is built on an open source gaming engine, Delta3D, which Alion maintains for the Navy. | |
• | Early detection of maritime threats is essential to protecting U.S. military vessels, but current sonar systems leave gaps in coverage. Alion engineers are continuing to develop a technology called Continuous Active Sonar (CAS) that represents a paradigm shift in performance. At-sea testing has met or exceeded expectations, and the solution may ultimately lead to improved defenses for our ships and sailors. | |
• | Maintaining vehicles and other mechanical systems in a war zone is essential to troop safety and the success of the mission, but parts replacement can be challenging. Alion developed a solution called the Mobile Parts Hospital (MPH), a transportable factory where metal parts can be machined and delivered in just a few hours near the point of need. MPH units are currently active in Kuwait, Iraq and Afghanistan under the auspices of the Army’s Tank Automotive Research Development and Engineering Command, and more have been requisitioned. |
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• | Survivability is critical to naval vessels. What happens after a ship is attacked can now be modeled accurately using MOTISS, a software tool that shows the initial and resulting effects of a weapons strike against a ship or other structure. The system allows designers to evaluate the damage and determine design changes that can improve survivability. MOTISS allows the system designer, engineer or operator to locate and rank weaknesses quickly in order to allow for corrective action before those weaknesses are exploited in a real world scenario. |
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• | Prevail in today’s wars; | |
• | Prevent and deter conflict; | |
• | Prepare to defeat adversaries and succeed in a wide range of contingencies; and | |
• | Preserve and enhance the all-volunteer force. |
• | Increase the availability of rotary-wing assets; | |
• | Expand manned and unmanned aircraft systems (UASs) for intelligence, surveillance, and reconnaissance (ISR); | |
• | Expand intelligence, analysis and targeting capacity; | |
• | Improve counter-IED capabilities; | |
• | Expand and modernize the AC-130 fleet; | |
• | Increase key enabling assets for Special Operations; | |
• | Increase counterinsurgency (COIN), stability operations, and counter-terrorism (CT) competency and capacity in general purpose forces; | |
• | Expand civil affairs capacity; | |
• | Increase regional expertise for Afghanistan and Pakistan; and | |
• | Strengthen key supporting capabilities for strategic communication. |
• | Defend the homeland against limited ballistic missile attack; | |
• | Defend against regional threats to U.S. forces, allies and partners; | |
• | Deploy new systems only after their effectiveness and reliability have been determined through testing under realistic conditions; | |
• | Develop new capabilities that are fiscally sustainable over the long-term; |
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• | Develop flexible capabilities that can adapt as threats change; and | |
• | Expand international cooperation. |
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Contract | ||||||||||
Contract | Description | Value | Years | |||||||
(Millions) | ||||||||||
SNIM | Provide software, networks, information, and modeling & simulation to a variety of customers under a multiple award ID/IQ contract. This is partly a follow-on to the MSIAC contract. | 1,200 | 5 | |||||||
Naval Sea Systems* Command, SEA05 | Provide NAVSEA with Naval architecture and marine engineering support to the Navy’s surface and submarine fleets. The contract calls for lifecycle support from concept design through disposal | $ | 433 | 5 | ||||||
DoD Logistics, Maintenance & Supply Support (LMSS)* | Provide total life cycle systems management support for business process services and solutions for logistics, maintenance, supply functions and associated technologies for DoD LMSS activities | $ | 188 | 5 | ||||||
ARDEC RPTI* | Army’s Rapid Prototyping and Technology Initiative to increase the Armament, Research, Development and Engineering Center’s responsiveness to meeting the soldier’s immediate field requirements in support of the global war on terror | $ | 158 | 5 | ||||||
CHINFO* | Worldwide public communication and media support services to the Chief of Naval Operations | $ | 97 | 5 | ||||||
U.S. Army Aviation & Missile Command (AMCOM) MPTMERD | Focuses on the Military’s urgent need for hard-to-acquire and problem parts and systems for sustainment and refurbishment of critical equipment | $ | 77 | 5 | ||||||
PEO Ships AM | Provide combat system acquisition management to PEO Ships AM Directorate to meet future Team Ships needs | $ | 72 | 5 | ||||||
SPAWAR | Space and Naval Warfare Systems Center (SPAWARSYSCEN) Atlantic Engineering and Technical Support Services for Modeling and Simulation | $ | 55 | 5 | ||||||
AFRL AFCENT | Operational planning, program management and technical consulting support to USAFCENT’s headquarters to enhance and improve mission responsibilities | $ | 51 | 5 | ||||||
AFRL IFU* | Information fusion and understanding services for the Air Force Research Lab | $ | 50 | 5 | ||||||
Torpedo System Technology | Development of an anti-torpedo defense system for the U.S. Navy | $ | 49 | 5 |
* | Multiple award contracts. |
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Customer/Title | Description | Years | ||||
PEO IWS 1.0 | Provide program support services to the Navy Warfare System Acquisition Programs. Includes program management, business/financial management and foreign military sales. | 5 | ||||
OPTARSS II | Provide operations, planning training and resource support services under an ID/IQ contract to FORSCOM. | 5 | ||||
U.S. Navy | Provide IT resource management, headquarters IT legacy operations, enterprise program management, enterprise NMCI/NGEN implementation and information dissemination to the CIO of NAVSEA. This is partly a follow-on for Alion. | 5 |
Total | ||||||||||||
Contract | ||||||||||||
Customer | Description of Program | End Date | Value | |||||||||
(Millions) | ||||||||||||
1. | NAVSEA — Seaport-e Ship Design Services* | Engineering and detailed design, analysis of alternatives and support from concept studies throughout various phases of ship design | 2013 | $ | 433 | |||||||
2. | NAVSEA — SHIPS F Program Management Support | Program management and engineering for in-service ships | 2016 | $ | 325 | |||||||
3. | NAVSEA — LPD-17 Program Management Support | Program management and waterfront support for acquisition of LPD-17 class | 2016 | $ | 163 | |||||||
4. | NAVSEA | Program management and waterfront support for acquisition of DDG-51 class | 2015 | $ | 118 | |||||||
5. | U.S. Air Force — Secretary of the Air Force Technical Analytical Support (SAFTAS) | Technical and programmatic support to: the Assistant Secretary of the Air Force for Acquisition, the Under Secretary for Space Acquisition and the Joint Strike Fighter Program Office | 2015 | $ | 962 | |||||||
6. | U.S. Department of Defense — Defense Technical Information Center* | Research, development, engineering and technical assistance to: Modeling and Simulation Information Analysis Center | Extending through 2013 | $ | 1,238 | |||||||
(IAC), Weapons Systems Technology IAC and Advanced Materials and Manufacturing Technologies IAC |
* | Multiple award contract |
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Six Months Ended March 31, | ||||||||||||||||
Core Business Area | 2010 | 2009 | ||||||||||||||
(In thousands) | ||||||||||||||||
Naval Architecture and Marine Engineering | $ | 178,599 | 43.7 | % | $ | 174,381 | 45.4 | % | ||||||||
Defense Operations | 100,865 | 24.6 | % | 68,806 | 17.9 | % | ||||||||||
Modeling and Simulation | 70,810 | 17.3 | % | 41,218 | 10.7 | % | ||||||||||
Technology Integration | 23,622 | 5.8 | % | 59,133 | 15.4 | % | ||||||||||
Information Technology and Wireless Communications | 16,085 | 3.9 | % | 13,209 | 3.4 | % | ||||||||||
Energy and Environmental Sciences | 19,303 | 4.7 | % | 27,478 | 7.2 | % | ||||||||||
Total | $ | 409,284 | 100.0 | % | $ | 384,225 | 100.0 | % | ||||||||
Year Ended September 30, | ||||||||||||||||||||||||
Core Business Area(1) | 2009 | 2008 | 2007 | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Naval Architecture and Marine Engineering | $ | 365,917 | 45.6 | % | $ | 325,611 | 44.0 | % | $ | 313,128 | 42.5 | % | ||||||||||||
Defense Operations | 203,859 | 25.4 | % | 220,298 | 29.8 | % | 226,546 | 30.7 | % | |||||||||||||||
Modeling and Simulation | 99,420 | 12.4 | % | 67,119 | 9.1 | % | 48,994 | 6.6 | % | |||||||||||||||
Technology Integration | 50,762 | 6.3 | % | 51,555 | 7.0 | % | 54,580 | 7.4 | % | |||||||||||||||
Information Technology and Wireless Communications | 42,353 | 5.3 | % | 37,791 | 5.1 | % | 46,757 | 6.3 | % | |||||||||||||||
Energy and Environmental Sciences | 39,914 | 5.0 | % | 37,108 | 5.0 | % | 47,582 | 6.5 | % | |||||||||||||||
Total | $ | 802,225 | 100.0 | % | $ | 739,482 | 100.0 | % | $ | 737,587 | 100.0 | % | ||||||||||||
(1) | Beginning in 2009 the descriptions of the core business areas were modified. The results for 2007 and 2008 have been re-categorized using the modified core business area descriptions. |
• | 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. |
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• | 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. | |
• | Our customers in this area include the U.S. Navy, the U.S. Coast Guard, international maritime agencies and commercial marine clients. |
• | 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 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). | |
• | Our customers in this area include the Office of the Secretary of Defense, Army Tank Automotive RDE Center, U.S. Central Command Air Forces and U.S. Army Forces Command. |
• | We design and conduct strategic and operations analytic war games to evaluate future operational concepts and force transformation initiatives. We create and implement training scenarios for multi-dimensional simulation systems. We support Joint Forces Command’s Multi-National Experiment series. | |
• | We manage the DoD Modeling and Simulation Information Analysis Center. We develop M&S tools to support integration and federation of stand-alone simulator based training and large scale distributed training events. | |
• | We use current industry gaming technology to develop proprietary and open source solutions for customers who use “serious” gaming for training and education. | |
• | We support world-wide Air Force and Joint training and mission rehearsal operations. | |
• | We provide M&S, C4I and operational support for the U.S. Navy’s Fleet Synthetic Training and its Continuous Training Environment which delivers distributed, on-demand training. | |
• | Our customers in this area include the Office of Naval Research, the U.S. Joint Forces Command, the Naval Warfare Development Center and the Defense Technical Information Center. |
• | 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 and maintain our own rapid prototyping and limited production manufacturing facilities. |
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• | 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 Research Laboratory, the Air Force Research Laboratory, the Navy Research Laboratory, and system developers throughout the Defense Department. | |
• | 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. | |
• | Our customers in this area include the Office of the Secretary of Defense, the U.S. Army, Navy, Army Aviation and Missile Command and Army Tank-automotive and Armaments Command. |
• | We provide management and information technology consulting services focused on developing and implementing innovative business solutions and management services for Defense, civilian and commercial customers. | |
• | Our Management Solutions practice specializes in project management, earned value management, change management and process design and improvement. | |
• | Our Technology Solutions practice specializes in 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. | |
• | Our customers in this area include the Department of Homeland Security, the Department of Education, the Office of Naval Research, the Defense Information Systems Agency and the Army Spectrum Management Office. |
• | 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. |
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• | 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. | |
• | Our wholly-owned subsidiary, Human Factors Applications, Inc., remediates sites that contain conventional explosive, toxic, radioactive, and chemical material; and decontaminates and demolishes buildings and equipment contaminated with explosives. | |
• | Our customers in this area include the Army Corps of Engineers, the EPA, commercial nuclear companies and civilian/international organizations. |
• | Frequency Assignment & Certification Engineering Tool (FACETtm): this software tool automates the assignment of radio frequencies, which we refer to as spectrum management, in a way that is designed to minimize interference between multiple users of the radio frequency spectrum. | |
• | Advanced Cosite Analysis Tool (ACATtm): this software tool is designed to permit co-location of numerous antennas on towers, rooftops and other platforms by predicting interference between the various systems and informing the user how to minimize interference. | |
• | Spectrum Monitoring Automatic Reporting and Tracking System (SMARTtm): this system characterizes the frequency usage in a given geographic area, allowing the customer to remotely monitor the spectrum to identify unauthorized users and to look for gaps in the spectrum usage. | |
• | MobSimtm/SimViewertm: this software provides for both planning movement and visualization of real-time tracking of carriers across multiple modes of transportation (e.g., air, sea, rail and truck). | |
• | Virtual Oceantm: this software provides visualization of ship motions based on analytically correct representation of the seaway. | |
• | Countermeasures®: we provide vulnerability/risk assessment web-based software used to analyze and quantify physical or electronic security. | |
• | Magnetics Effects Sensor (MEStm): a sensor that can detect plastics and nonconductive ceramics from their permeability (magnetic polarizability); such materials are undetectable with conventional induction sensors. | |
• | Precision Variable Resistor (PVRtm): an adjustable resistor, able to hold a precise resistance against minute changes in drift for long periods of time. | |
• | SmartMovestm: a web-based tool used for enterprise decision making in investment planning, supply chain analysis, fleet readiness management and infrastructure interdependencies. | |
• | Real Time Location System (RTLStm): this product is designed to enable customers to track thousands of users in a defined area, such as a seaport, a football stadium or an office building, using low cost antennas and badges. | |
• | Isis- 3Dtm: we provide fire code software with specific models for weapon thermal hazard response, including aerosol and radiation models. | |
• | PRISM®: we provide software used for system level failure rate modeling with the ability to model both operating and non-operating failure rates. The system considers non-component failure causes through process assessment. |
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• | Measure of Total Integrated System Survivability (MOTISStm): this software tool permits design and placement of critical systems in ships and buildings to enhance survivability and improve recovery time if damaged. | |
• | Alion Risk Management On-Line Register (ARMORtm): this web-based software application permits collection of risk issues and management analysis of risk mitigation steps to improve acquisition program success. | |
• | Receive While Transmit Sonar: this software tool significantly improves the performance of shipboard SONAR systems in detecting and properly classifying submarine targets. | |
• | Pocket MultiMedia encoder/decoder (PMM Codectm): this software tool permits real time low-latency compression, transmission and display of video with wireless systems. |
For the Six Months Ended March 31, | ||||||||||||||||
Contract Type | 2010 | 2009 | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Cost- reimbursement | $ | 297,478 | 72.6 | % | $ | 270,217 | 70.4 | % | ||||||||
Fixed-price | 50,565 | 12.4 | % | 40,523 | 10.5 | % | ||||||||||
Time-and-material | 61,241 | 15.0 | % | 73,485 | 19.1 | % | ||||||||||
Total | $ | 409,284 | 100.0 | % | $ | 384,225 | 100.0 | % | ||||||||
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For the Years Ended September 30, | ||||||||||||||||||||||||
Contract Type | 2009 | 2008 | 2007 | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Cost- reimbursement | $ | 567,294 | 70.7 | % | $ | 517,692 | 70.0 | % | $ | 512,587 | 69.5 | % | ||||||||||||
Fixed-price | 91,885 | 11.5 | % | 70,146 | 9.5 | % | 70,946 | 9.6 | % | |||||||||||||||
Time-and-material | 143,046 | 17.8 | % | 151,644 | 20.5 | % | 154,054 | 20.9 | % | |||||||||||||||
Total | $ | 802,225 | 100.0 | % | $ | 739,482 | 100.0 | % | $ | 737,587 | 100.0 | % | ||||||||||||
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Percentage of Total | ||||||||||||
Contract | End Date | FY2009 Revenue | ||||||||||
1. | SeaPort Multiple Award Contracts (MAC) — Naval Sea Systems Command (NAVSEA) | 2019 | 23.0 | %* | ||||||||
2. | Secretary of Air Force — Technical and Analytical Support | 2015 | 9.5 | % | ||||||||
3. | NAVSEA MAC (former JJMA MAC) | 2016 | 7.0 | %* | ||||||||
4. | Modeling and Simulation Information Analysis Center (MSIAC) — DMSO | 2010 | 6.8 | %* | ||||||||
5. | Weapons System Technology Information Analysis Center (WSTIAC) — DISA | 2010 | 5.5 | %* |
* | Multiple task orders |
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March 31, | September 30, | |||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Backlog: | ||||||||||||||||||||
Funded | $ | 380.0 | $ | 411.0 | $ | 376.5 | $ | 340.5 | $ | 360.0 | ||||||||||
Unfunded | 6,236.0 | 5,392.0 | 6,008.4 | 4,475.8 | 4,669.0 | |||||||||||||||
Total | $ | 6,616 | $ | 5,803.0 | $ | 6,384.9 | $ | 4,816.3 | $ | 5,029.0 | ||||||||||
September 30, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In millions) | ||||||||||||
In-process | $ | 361.0 | $ | 529.0 | $ | 250.0 | ||||||
Submitted | 1,491.0 | 1,057.0 | 834.0 | |||||||||
Total | $ | 1,852.0 | $ | 1,586.0 | $ | 1,084.0 | ||||||
(1) | Identified for fiscal year 2011 — fiscal year 2012. | |
(2) | Qualified for fiscal year 2010. |
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For the Six Months Ended | ||||||||||||||||||||||||||||||||||||||||
March 31, | For the Fiscal Years Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
U.S. Department of Defense | $ | 376,861 | 92.1 | % | $ | 351,542 | 91.9 | % | $ | 736,625 | 91.9 | % | $ | 660,270 | 89.3 | % | $ | 659,601 | 89.4 | % | ||||||||||||||||||||
Other Federal Civilian Agencies | 21,036 | 5.1 | % | 18,378 | 4.4 | % | 37,197 | 4.6 | % | 34,107 | 4.6 | % | 29,503 | 4.0 | % | |||||||||||||||||||||||||
Commercial and International | 11,387 | 2.8 | % | 14,305 | 3.7 | % | 28,403 | 3.5 | % | 45,105 | 6.1 | % | 48,483 | 6.6 | % | |||||||||||||||||||||||||
Total | $ | 409,284 | 100.0 | % | $ | 384,225 | 100.0 | % | $ | 802,225 | 100.0 | % | $ | 739,482 | 100.0 | % | $ | 737,587 | 100.0 | % | ||||||||||||||||||||
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• | We will not enter into any transactions with any of our officers or directors without approval from our board of directors or compensation committee; | |
• | We will obtain the ESOP Trust’s consent before effecting our first public offering of common stock to be listed on any securities exchange; | |
• | We will not take actions that would prevent the ESOP Trust from acquiring any additional shares of our common stock under the control share acquisition provisions of the Delaware General Corporation Law; | |
• | We will repurchase any shares of common stock distributed to participants in the ESOP component of the KSOP, to the extent required by the ESOP, any ESOP-related documents and applicable laws; | |
• | We will maintain the KSOP and the ESOP Trust so that they will remain in compliance with the qualification and tax exemption requirements under the Code; and | |
• | We will use our best efforts to ensure that the ESOP Trust fully enjoys its right to elect a majority of our board of directors and to otherwise control us. |
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Position | Term | Director | ||||||||||||||
Name | Age | Position | Since | Expires | Since | |||||||||||
Bahman Atefi | 57 | President, Chief Executive Officer and Chairman of the Board(1) | December 2001 | 2011 | 2001 | |||||||||||
Stacy Mendler | 47 | Chief Operating Officer and Executive Vice President(1) | September 2006 | |||||||||||||
Michael Alber | 53 | Chief Financial Officer, Senior Vice President and Treasurer(1) | November 2008 | |||||||||||||
Scott Fry | 60 | Sector Senior Vice President — Engineering and Integration Solutions Sector(1) | October 2005 | |||||||||||||
Walter “Buck” Buchanan | 59 | Sector Senior Vice President — Engineering and Information Technology Sector | June 2007 | |||||||||||||
David Ohle | 65 | Senior Vice President — Defense Operations Integration Sector | November 2008 | |||||||||||||
Thomas E. McCabe | 55 | General Counsel | March 2010 | |||||||||||||
Edward C. “Pete” Aldridge | 71 | Director | 2012 | 2003 | ||||||||||||
Leslie Armitage | 41 | Director | 2010 | 2002 | ||||||||||||
Lewis Collens | 72 | Director | 2010 | 2002 | ||||||||||||
Admiral (Ret.) Harold W. Gehman, Jr. | 67 | Director | 2010 | 2002 | ||||||||||||
General (Ret.) George A. Joulwan | 70 | Director | 2011 | 2002 | ||||||||||||
General (Ret.) Michael E. Ryan | 68 | Director | 2011 | 2002 | ||||||||||||
David J. Vitale | 64 | Director | 2012 | 2009 |
(1) | Member of the ESOP Committee |
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Fiscal 2009 | ||||
Named Executive Officer | Base Salary | |||
Bahman Atefi | $ | 650,000 | ||
Stacy Mendler | $ | 375,000 | ||
Michael Alber | $ | 300,000 | ||
Rob Goff* | $ | 320,000 | ||
Scott Fry | $ | 340,000 | ||
James Fontana | $ | 280,000 |
* | Mr. Goff resigned as Sector Senior Vice President in October 2008. |
• | 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 |
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• | provide certain employees an incentive for excellence in achieving certain Company and business unit or departmental goals; | |
• | facilitate key employee retention and recruitment; | |
• | provide award opportunities that are at-risk and 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 given 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. |
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Minimum/Maximum | ||||||||
Form of Award Agreement | Date of Grant | Performance Cycles | Award Amount | Vesting Date | ||||
Category A | November 1, 2008 | November 1, 2008 until performance goals achieved | N/A | Date performance goals achieved | ||||
Category B | November 1, 2008 | November 1, 2008-October 31, 2009 | 80%/120% | November 15, 2009 | ||||
Category C | November 1, 2008 | November 1, 2008- October 31, 2009 | 50%/150% | November 15, 2010 | ||||
November 1, 2009- October 31, 2010 | ||||||||
Category D | November 1, 2008 | November 1, 2008- October 31, 2009 | 50%/150% | November 15, 2011 | ||||
November 1, 2009- October 31, 2010 | ||||||||
November 1, 2010- October 31, 2011 | ||||||||
Ongoing Category E | November 1, 2008 | November 1, 2008- October 31, 2009 | 50%/150% | November 15, 2011 | ||||
November 1, 2009- October 31, 2010 | ||||||||
November 1, 2010- October 31, 2011 | ||||||||
Ongoing Category F | November 1, 2009 | November 1, 2009- October 31, 2012 | 50%/150% | November 15, 2011 |
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Name | Category A | Category B | Category C | Category D | Category E | Category F | ||||||||||||||||||
Bahman Atefi | $ | 998,223 | $ | 934,910 | $ | 1,738,830 | $ | 800,000 | $ | 1,000,000 | ||||||||||||||
Stacy Mendler | $ | 479,559 | $ | 411,360 | $ | 725,782 | $ | 300,000 | $ | 350,000 | ||||||||||||||
Scott Fry | $ | 233,125 | $ | 191,511 | $ | 250,000 | $ | 250,000 | ||||||||||||||||
Michael Alber | $ | 94,646 | $ | 150,000 | $ | 200,000 | ||||||||||||||||||
James Fontana | $ | 112,189 | $ | 86,180 | $ | 100,000 |
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Long-Term | Non-Equity | |||||||||||||||||||||||||||||||
Phantom | Incentive | Incentive | ||||||||||||||||||||||||||||||
Name and | Stock | Plan | Plan | All Other | ||||||||||||||||||||||||||||
Principal Position | Year | Salary | Bonus(1) | Grants(2) | Awards(3) | Compensation(4) | Compensation(5) | Total | ||||||||||||||||||||||||
Bahman Atefi | 2009 | $ | 644,187 | — | — | 1,000,000 | 650,000 | $ | 103,866 | $ | 2,398,053 | |||||||||||||||||||||
Chief Executive Officer and President | ||||||||||||||||||||||||||||||||
Stacy Mendler | 2009 | $ | 367,307 | — | — | 350,000 | 250,000 | $ | 84,838 | $ | 1,052,145 | |||||||||||||||||||||
Chief Operating Officer and Executive Vice President | ||||||||||||||||||||||||||||||||
Michael Alber | 2009 | $ | 303,000 | — | — | 200,000 | 200,000 | $ | 44,277 | $ | 747,277 | |||||||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||
Scott Fry | 2009 | $ | 339,824 | $ | 256,444 | — | 250,000 | 250,000 | $ | 66,409 | $ | 1,162,677 | ||||||||||||||||||||
Engineering and Integration Solutions Sector Senior Vice President | ||||||||||||||||||||||||||||||||
James Fontana(6) | 2009 | $ | 288,803 | $ | 637,176 | — | — | 90,000 | $ | 74,987 | $ | 1,090,966 | ||||||||||||||||||||
Senior Vice President, General Counsel and Secretary | ||||||||||||||||||||||||||||||||
Rob Goff(6) | 2009 | $ | 351,645 | — | — | — | — | $ | 1,563,155 | $ | 1,914,800 | |||||||||||||||||||||
Defense Operations Integration Sector, Senior Vice President |
(1) | This column includes non-incentive based cash bonuses, such as special performance bonuses, paid to Named Executive Officers. | |
(2) | There were no phantom stock grants in fiscal year 2009. In fiscal year 2009, Named Executive Officers forfeited previously vested phantom stock awards. We recognized the following credits to stock-based compensation expense for forfeitures: Dr. Atefi $2,466,756; Ms. Mendler $1,137,091; Mr. Alber $26,600; Mr. Fry $465,300; and Mr. Fontana $748,222. | |
(3) | This column reflects the grant date value of Long Term Incentive Plan grants issued this year for future performance. | |
(4) | This column includes cash bonuses awarded to our Named Executive Officers under the Non-Equity Incentive Plan for fiscal 2009 service. | |
(5) | This column (and table below) includes the following amounts for our Named Executive Officers: |
• | 401(k) matching and profit sharing contributions under Alion’s KSOP; | |
• | Company contributions for long and short term disability; | |
• | Amounts paid for life insurance premiums; | |
• | Amounts paid or reimbursed with respect to health and welfare; | |
• | Amounts paid or reimbursed with respect to social club membership; |
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• | Amounts paid or reimbursed with respect to leased cars; and | |
• | Termination related payments for vested Phantom Stock exercised. |
(6) | Mr. Fontana resigned as Senior Vice President and Secretary on December 8, 2009 and as General Counsel on February 1, 2010. Mr. Goff resigned as Sector Senior Vice President and Sector Manager of the Defense Operations Integration Sector on October 23, 2008. He received $1,500,000 in payments for vested Phantom Stock. |
Company | ||||||||||||||||||||||||||||||||
Matching | Long and Short | Term Life | ||||||||||||||||||||||||||||||
Contributions | Health and | Term Disability | Club | Insurance | Termination | |||||||||||||||||||||||||||
Name and | Under | Welfare | Paid by | Membership | Paid by | Leased | Related | |||||||||||||||||||||||||
Principal Position | Alion’s KSOP | Benefits | the Company | Fees | the Company | Cars | Payment(1) | Total | ||||||||||||||||||||||||
Bahman Atefi | $ | 14,950 | $ | 52,228 | $ | 5,234 | $ | 5,410 | $ | 810 | $ | 25,234 | $ | — | $ | 103,866 | ||||||||||||||||
Stacy Mendler | $ | 14,950 | $ | 37,572 | $ | 3,574 | $ | 1,647 | $ | 598 | $ | 26,497 | $ | — | $ | 84,838 | ||||||||||||||||
Michael Alber | $ | 5,750 | $ | 15,074 | $ | 3,119 | $ | 1,029 | $ | 475 | $ | 18,830 | $ | — | $ | 44,277 | ||||||||||||||||
Scott Fry | $ | 14,242 | $ | 19,107 | $ | 3,385 | $ | — | $ | 548 | $ | 29,127 | $ | — | $ | 66,409 | ||||||||||||||||
James Fontana | $ | 15,391 | $ | 33,918 | $ | 3,031 | $ | 500 | $ | 451 | $ | 21,696 | $ | — | $ | 74,987 | ||||||||||||||||
Rob Goff | $ | 13,965 | $ | 28,793 | $ | 252 | $ | — | $ | 40 | $ | 20,105 | $ | 1,500,000 | $ | 1,563,155 |
(1) | Mr. Goff received $1,500,000 in payments for vested Phantom Stock. |
Non-Equity | ||||||||||||||||||||||||||||||||
Phantom | Incentive | |||||||||||||||||||||||||||||||
Name and | Stock | SAR | Plan | All Other | ||||||||||||||||||||||||||||
Principal Position | Year | Salary | Bonus(1) | Awards(2) | Awards(2) | Compensation(3) | Compensation(4) | Total | ||||||||||||||||||||||||
Bahman Atefi | 2008 | $ | 604,749 | — | $ | 1,630,296 | — | $ | 500,000 | $ | 146,488 | $ | 2,881,533 | |||||||||||||||||||
Chief Executive Officer and President | ||||||||||||||||||||||||||||||||
Stacy Mendler | 2008 | $ | 333,185 | — | $ | 759,346 | — | $ | 200,000 | $ | 100,071 | $ | 1,392,602 | |||||||||||||||||||
Chief Operating Officer and Executive Vice President | ||||||||||||||||||||||||||||||||
Michael Alber | 2008 | $ | 220,000 | $ | 95,000 | $ | 15,836 | $ | 3,000 | $ | 150,000 | $ | 29,910 | $ | 513,746 | |||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||
Rob Goff | 2008 | $ | 318,090 | — | $ | 662,625 | — | — | $ | 54,577 | $ | 1,035,292 | ||||||||||||||||||||
Defense Operations Integration Sector Senior Vice President | ||||||||||||||||||||||||||||||||
Scott Fry | 2008 | $ | 316,171 | — | $ | 183,937 | — | $ | 225,000 | $ | 51,263 | $ | 776,371 | |||||||||||||||||||
Engineering and Integration Solutions Sector Senior Vice President |
(1) | This column includes non-incentive based cash bonuses, such as sign-on bonuses, paid to Named Executive Officers. | |
(2) | These columns reflect the fiscal year 2008 expense we recognized under SFAS 123(R) for phantom stock and SAR awards to Named Executive Officers issued in fiscal year 2008 and in prior years. | |
(3) | This column includes cash bonuses awarded to our Named Executive Officers under the non-equity incentive plan for their service in fiscal year 2008. | |
(4) | This column includes the following amounts paid by us: |
• | 401(k) matching and profit sharing contributions under Alion’s KSOP; | |
• | Company contributions for long and short term disability insurance; |
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• | Alion’s portion of life insurance premiums; | |
• | Amounts paid or reimbursed with respect to health and welfare; | |
• | Amounts paid or reimbursed for social club membership; and | |
• | Amounts paid or reimbursed for car leases and automotive expenses. |
Company | ||||||||||||||||||||||||||||
Matching | Long and Short | Term Life | ||||||||||||||||||||||||||
Contributions | Health and | Term Disability | Club | Insurance | ||||||||||||||||||||||||
Name and | Under | Welfare | Paid by | Membership | Paid by | Leased | ||||||||||||||||||||||
Principal Position | Alion’s KSOP | Benefits | the Company | Fees | the Company | Cars | Total | |||||||||||||||||||||
Bahman Atefi | $ | 14,625 | $ | 94,337 | $ | 4,840 | $ | 5,120 | $ | 735 | $ | 26,831 | $ | 146,488 | ||||||||||||||
Stacy Mendler | $ | 14,625 | $ | 55,208 | $ | 3,210 | — | $ | 531 | $ | 26,497 | $ | 100,071 | |||||||||||||||
Michael Alber | — | $ | 12,530 | $ | 2,421 | — | $ | 356 | $ | 14,603 | $ | 29,910 | ||||||||||||||||
Rob Goff | $ | 14,625 | $ | 12,812 | $ | 3,120 | — | $ | 512 | $ | 23,508 | $ | 54,577 | |||||||||||||||
Scott Fry | $ | 10,228 | $ | 13,748 | $ | 3,108 | — | $ | 512 | $ | 23,667 | $ | 51,263 |
Phantom | Non-Equity | |||||||||||||||||||||||||||
Name and | Stock | Incentive Plan | All Other | |||||||||||||||||||||||||
Principal Position | Year | Salary | Bonus(1) | Awards(2) | Compensation(3) | Compensation(4) | Total | |||||||||||||||||||||
Bahman Atefi | 2007 | $ | 532,997 | — | $ | 976,353 | $ | 490,000 | $ | 87,119 | $ | 2,086,469 | ||||||||||||||||
Chief Executive Officer and President | ||||||||||||||||||||||||||||
Stacy Mendler | 2007 | $ | 321,206 | — | $ | 429,595 | $ | 180,000 | $ | 65,618 | $ | 996,419 | ||||||||||||||||
Chief Operating Officer and Executive Vice President | ||||||||||||||||||||||||||||
Rob Goff | 2007 | $ | 308,562 | — | $ | 146,453 | �� | $ | 160,000 | $ | 45,119 | $ | 660,134 | |||||||||||||||
Defense Operations Integration Sector Senior Vice President | ||||||||||||||||||||||||||||
Scott Fry | 2007 | $ | 295,431 | — | $ | 195,271 | $ | 160,000 | $ | 38,121 | $ | 688,823 | ||||||||||||||||
Engineering and Integration Solutions Sector Senior Vice President |
(1) | This column includes non-incentive based cash bonuses awarded to our Named Executive Officers, such as sign-on bonuses. None of our Named Executive Officers received any non-incentive bonuses in fiscal year 2007. See the column entitled “Non-equity Incentive Plan Compensation” for other bonuses awarded for their service in fiscal year 2007. | |
(2) | These columns reflect the dollar amounts that were recognized in fiscal 2007 for financial statement reporting purposes under SFAS 123(R) with respect to phantom stock and SAR awards granted to our Named Executive Officers in fiscal year 2007. | |
(3) | This column includes cash bonuses awarded to our Named Executive Officers under the Non-Equity Incentive Plan for their service in fiscal year 2007. | |
(4) | This column includes the following amounts with respect to our Named Executive Officers: |
• | 401(k) matching and profit sharing contributions under Alion’s KSOP; | |
• | Company contributions for long and short term disability; |
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• | Amounts paid for life insurance premiums; | |
• | Amounts paid or reimbursed with respect to health and welfare; | |
• | Amounts paid or reimbursed with respect to social club membership; and | |
• | Amounts paid or reimbursed with respect to leased cars. |
Company | ||||||||||||||||||||||||||||
Matching | Long and Short | Term Life | ||||||||||||||||||||||||||
Contributions | Health and | Term Disability | Club | Insurance | ||||||||||||||||||||||||
Name and | Under | Welfare | Paid by | Membership | Paid by | Leased | ||||||||||||||||||||||
Principal Position | Alion’s KSOP | Benefits | the Company | Fees | the Company | Cars | Total | |||||||||||||||||||||
Bahman Atefi | $ | 14,869 | $ | 43,758 | $ | 3,921 | $ | 4,920 | $ | 486 | $ | 19,165 | $ | 87,119 | ||||||||||||||
Stacy Mendler | $ | 14,300 | $ | 29,262 | $ | 2,644 | — | $ | 486 | $ | 18,926 | $ | 65,618 | |||||||||||||||
Rob Goff | $ | 14,300 | $ | 15,168 | $ | 2,565 | — | $ | 486 | $ | 12,600 | $ | 45,119 | |||||||||||||||
Scott Fry | $ | 10,341 | $ | 13,075 | $ | 2,491 | — | $ | 481 | $ | 11,733 | $ | 38,121 |
Vested Amount | ||||||||
for Grant in | ||||||||
February | November | |||||||
Anniversary from Grant Date | 2003 | 2003 | ||||||
1st | — | 20 | % | |||||
2nd | — | 20 | % | |||||
3rd | 50 | % | 20 | % | ||||
4th | 25 | % | 20 | % | ||||
5th | 25 | % | 20 | % |
• | the numerator of which is the number of months from the date of grant of the phantom stock through the end of the month of such termination; and | |
• | the denominator of which is 60. |
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98
• | Date of grant; | |
• | Number of shares of the phantom stock awarded; and | |
• | Provisions governing vesting of the phantom stock awarded. |
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Cumulative Shares | ||||||||||||
Shares Issued | Cumulative Shares | Authorized under | ||||||||||
Date of Issuance | by Plan | Issued by Plan | All Plans | |||||||||
February 2003 | 171,000 | (1) | 171,000 | (1) | 173,000 | (1) | ||||||
November 2003 | 52,685 | (1) | 223,685 | (1) | 225,000 | (1) | ||||||
February 2005 | 316,629 | (2) | 316,629 | (2) | 2,000,000 | (2) | ||||||
August 2005 | 2,960 | (2) | 319,589 | (2) | 2,000,000 | (2) | ||||||
November 2005 | 122,318 | (2) | 441,907 | (2) | 2,000,000 | (2) | ||||||
November 2006 | 65,456 | (2) | 507,363 | (2) | 2,000,000 | (2) | ||||||
November 2007 | 42,447 | (2) | 549,810 | 2,000,000 | (2) | |||||||
January 2008 | 2,497 | (2) | 552,307 | 2,000,000 | (2) | |||||||
May 2008 | 1,120 | (2) | 553,427 | 2,000,000 | (2) | |||||||
November 2005 | 7,808 | (3) | 7,808 | (3) | 2,000,000 | (3) | ||||||
November 2006 | 5,978 | (3) | 13,786 | (3) | 2,000,000 | (3) | ||||||
November 2007 | 6,993 | (3) | 20,779 | 2,000,000 | (3) |
(1) | Number of shares authorized under the Initial Phantom Stock Plan as periodically amended and approved by the Compensation Committee of Alion’s Board of Directors. | |
(2) | Number of shares authorized under the Second Phantom Stock Plan as periodically amended and approved by the Compensation Committee of Alion’s Board of Directors. | |
(e) | Number of shares authorized under the Director Phantom Stock Plan as periodically amended and approved by the Compensation Committee of Alion’s Board of Directors. |
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Number of | ||||||||||||
Name | Shares | Grant Date | Grant Type | Full Vesting Period | Period(s) Until Payout | |||||||
Bahman Atefi | 65,500 | (1) | February 2003 | Retention | February 2008(2) | February 2006, 2007, 2008(3) | ||||||
18,695 | (1) | November 2003 | Retention | November 2008(2) | November 2006, 2007, 2008(3) | |||||||
43,951 | February 2005 | Retention | February 2008(4) | February 2008(4) | ||||||||
67,888 | (5) | February 2005 | Performance | February 2008(4) | February 2008(4) | |||||||
22,290 | November 2005 | Retention | November 2008(4) | November 2008(4)(6) | ||||||||
27,863 | November 2005 | Retention | November 2010(4) | November 2010(4)(6) | ||||||||
24,378 | November 2006 | Retention | November 2009(4) | November 2009(4)(6) | ||||||||
17,478 | November 2007 | Retention | November 2010(4) | November 2010(4)(6) | ||||||||
Michael Alber | 1,248 | January 2008 | Retention | January 2011(4) | January 2011(4)(6) | |||||||
1,219 | May 2008 | Retention | May 2011(4) | May 2011(4)(6) | ||||||||
Stacy Mendler | 28,500 | (1) | February 2003 | Retention | February 2008(2) | February 2006, 2007, 2008(3) | ||||||
6,798 | (1) | November 2003 | Retention | November 2008(2) | November 2006, 2007, 2008(3) | |||||||
24,151 | February 2005 | Retention | February 2008(4) | February 2008(4) | ||||||||
37,305 | (5) | February 2005 | Performance | February 2008(4) | February 2008(4) | |||||||
11,145 | November 2005 | Retention | November 2008(4) | November 2008(4)(6) | ||||||||
13,931 | November 2005 | Retention | November 2010(4) | November 2010(4)(6) | ||||||||
10,726 | November 2006 | Retention | November 2009(4) | November 2009(4)(6) | ||||||||
4,994 | November 2007 | Retention | November 2010(4) | November 2010(4)(6) | ||||||||
Robert Goff | 3,399 | (1) | November 2003 | Retention | November 2008(2) | November 2008(3) | ||||||
25,821 | (5) | February 2005 | Performance | February 2008(4) | November 2010(4) | |||||||
8,080 | November 2005 | Retention | November 2008(4) | November 2008(4) | ||||||||
3,657 | November 2006 | Retention | November 2009(4) | November 2009(4) | ||||||||
4,994 | November 2007 | Retention | November 2010(4) | November 2010(4) | ||||||||
Scott Fry | 2,507 | February 2005 | Retention | February 2009(4) | February 2010(4)(6) | |||||||
4,179 | November 2005 | Retention | November 2008(4) | November 2008(4)(6) | ||||||||
4,876 | November 2006 | Retention | November 2009(4) | November 2009(4)(6) | ||||||||
4,994 | November 2007 | Retention | November 2010(4) | November 2010(4)(6) | ||||||||
James Fontana | 10,328 | February 2005 | Retention | February 2008(4) | February 2010(4)(6) | |||||||
5,573 | November 2005 | Retention | November 2008(4) | November 2008(4)(6) | ||||||||
3,657 | November 2006 | Retention | November 2009(4) | November 2009(4)(6) | ||||||||
2,497 | November 2007 | Retention | November 2010(4) | November 2010(4)(6) |
(1) | The initial set of awards made in February 2003 was made solely to Alion’s executive management team. The awards made in November 2003 were made to executives and Alion senior management. | |
(2) | Pursuant to the Initial Phantom Stock Plan, recipients became fully vested on the fifth year from the grant date, approximately February 2008 and November 2008. | |
(3) | Pursuant to the Initial Phantom Stock Plan, recipients were to be paid commencing on the fifth year from the date of grant. In November 2005, the Initial 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) | Pursuant to the Second Phantom Stock Plan, recipients could be awarded performance-based or retention-based phantom stock. Performance-based phantom stock fully vested three years from the date of grant; retention-based phantom stock fully vested as specified in individual agreements. Recipients of performance-based and retention-based phantom stock were paid as specified in individual agreements for vested shares not forfeited. |
101
(5) | Pursuant to the Second Phantom Stock Plan, performance awards were subject to change at the vesting date. February 2005 performance-based grants were fixed based on the September 30, 2008 share price. | |
(6) | 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. |
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SAR Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | SAR | SAR | |||||||||||||
Unexercised SARs | Unexercised SARs | Exercise | Expiration | |||||||||||||
Name | (#) Exercisable | (#) Unexercisable | Price ($) | Date | ||||||||||||
Scott Fry(1) | 1,000 | 3,000 | $ | 19.94 | 12/01/10 | |||||||||||
Michael Alber(2) | 1,250 | 3,750 | $ | 40.05 | 12/13/13 |
(1) | In February 2005, Mr. Fry was awarded 4,000 SARs at the exercise price of $19.94 per share, all of which were outstanding as of September 30, 2009. | |
(2) | In December 2007, Mr. Alber was awarded 5,000 SARs at the exercise price of $40.05 per share, all of which were outstanding as of September 30, 2009. |
SAR Awards | ||||||||
Number of | Value | |||||||
Shares Acquired on | Realized on | |||||||
Name | Exercise (#) | Exercise ($) | ||||||
Rob Goff(1) | 500 | $ | 11,820 | |||||
James Fontana(2) | 2,000 | $ | 47,280 |
(1) | Mr. Goff exercised 500 SARs at $38.35 with an exercise price of $14.71 per share. | |
(2) | Mr. Fontana exercised 2,000 SARs at $38.35 with an exercise share price of $14.71 per share. |
Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||||||||||||
Contributions in | Contributions in | Earnings in | Withdrawals/ | Balance at | ||||||||||||||||
Name | Last FY | Last FY | Last FY | Distributions | Last FYE | |||||||||||||||
($) | ($) | ($) | ($) | ($) | ||||||||||||||||
James Fontana | — | — | $ | (15,508 | ) | — | $ | 210,167 | ||||||||||||
Scott Fry | — | — | $ | (52,820 | ) | — | $ | 321,215 |
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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
Severance | Early Vesting of | |||||||||||||||
Name | Amount | LTIP Awards | Other | Total | ||||||||||||
(a) | (b) | (c) | (d) | |||||||||||||
Bahman Atefi | $ | 2,700,000 | $ | 2,737,053 | $ | 25,000 | $ | 5,462,053 | ||||||||
Stacy Mendler | $ | 975,000 | $ | 1,205,341 | $ | 25,000 | $ | 2,205,341 | ||||||||
Michael Alber | $ | 525,000 | $ | 94,646 | $ | 25,000 | $ | 644,646 | ||||||||
Scott Fry | $ | 600,000 | $ | 210,662 | $ | 25,000 | $ | 835,662 | ||||||||
James Fontana | $ | 360,000 | $ | 86,180 | $ | 25,000 | $ | 471,180 |
(a) | Represents payment of a percentage of the executive’s annual salary and a percentage of the bonus the executive would have earned as of such date based upon the actual bonus paid for fiscal 2009 performance. |
Name | Other | Total | ||||||
Bahman Atefi | 200 | % | 200 | % | ||||
Stacy Mendler | 150 | % | 150 | % | ||||
Michael Alber | 100 | % | 100 | % | ||||
Scott Fry | 100 | % | 100 | % | ||||
James Fontana | 100 | % | 100 | % |
(b) | Represents the value of the vested LTIP awards not yet payable and unvested LTIP awards held by the executive as of September 30, 2009. This amount does not include any amounts for unvested Category E and F LTIP awards as no Named Executive Officer has as yet completed 18 months of post-award service. Amounts in this column would be paid to the executive if termination were to occur within one year following execution of a definitive change in control agreement where such transaction is subsequently consummated. |
104
(c) | Represents outplacement services in an amount not to exceed $25,000 with a firm selected by the Company and at the reasonable expense of the Company; provided, however, that under no circumstances shall such outplacement services be provided beyond the December 31 of the second calendar year following the calendar year in which the executive’s separation from service occurred. | |
In addition, the Company is obligated to pay the executive, if he or she is eligible for and elects to receive, medicaland/or dental benefits pursuant to the provisions of COBRA for himselfand/or any qualifying beneficiaries. The Company shall pay on the executive’s behalf the amount of the applicable COBRA that exceeds the amount of premium payable by the executive for the same level of coverage immediately prior to the effective date of termination. | ||
(d) | Represents the maximum amount that the executive can receive, including payment for accelerated LTIP award vesting in the event of a termination occurring within one year following the execution of a definitive agreement for a change in control, which transaction is subsequently consummated. |
Fees Earned | ||||||||||||
or Paid | All Other | |||||||||||
in Cash | Compensation | |||||||||||
Name | ($)(1) | ($)(2) | Total | |||||||||
Edward C. Pete Aldridge, Jr. | $ | 51,500 | $ | 3,963 | $ | 55,463 | ||||||
Leslie Armitage | $ | 45,000 | — | $ | 45,000 | |||||||
Lewis Collens | $ | 42,500 | $ | 2,471 | $ | 44,971 | ||||||
Admiral (Ret.) Harold W. Gehman, Jr. | $ | 53,000 | $ | 804 | $ | 53,804 | ||||||
General (Ret.) George A. Joulwan | $ | 50,000 | — | $ | 50,000 | |||||||
General (Ret.) Michael E. Ryan | $ | 52,000 | $ | 3,108 | $ | 55,108 | ||||||
David Vitale | $ | 11,000 | $ | 1,022 | $ | 12,022 |
(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, 2009, the Company’s non-employee directors received an annual retainer of $30,000, 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 chairmen 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. |
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Committee | Chairperson | Members | ||
Audit and Finance Committee | Leslie Armitage | Harold Gehman, Michael Ryan, Lewis Collens | ||
Compensation Committee | Harold Gehman | Pete Aldridge, Leslie Armitage, Lewis Collens, George Joulwan | ||
Governance and Compliance Committee | Michael Ryan | Bahman Atefi, George Joulwan, Harold Gehman | ||
Special Projects Committee | Pete Aldridge | Michael Ryan, George Joulwan |
106
STOCKHOLDERS MATTERS
Amount | ||||||||||||
and Nature | ||||||||||||
of Beneficial | Percentage | |||||||||||
Name of Beneficial Owner | Title of Class | Ownership | of Class(1) | |||||||||
Directors(2) and Executive Officers: | ||||||||||||
Bahman Atefi | Common stock | 57,241(3 | ) | 1.0 | ||||||||
Stacy Mendler | Common stock | 74,762(3 | ) | 1.4 | ||||||||
Michael Alber | Common stock | 155(3 | ) | * | ||||||||
Scott Fry | Common stock | 5,509(3 | ) | * | ||||||||
James Fontana | Common stock | 4,697(3 | ) | * | ||||||||
Rob Goff | Common stock | 10,403(3 | ) | * | ||||||||
All Directors and Executive Officers as a Group (6 Persons ) | Common stock | 152,092(3 | ) | 2.8 |
* | less than 1% | |
(1) | Percentages are based on 5,469,272, shares outstanding on May 14, 2010. The table is based upon information in our possession and believed to be accurate. Unless indicated in the footnotes to this table and subject to community property laws where applicable, we believe each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. | |
(2) | We do not believe any director other than Dr. Atefi beneficially owns any of our common stock. | |
(3) | Includes beneficial ownership of our common stock held by our KSOP. |
107
• | commits to us credit for up to $25,000,000 in outstanding borrowings at any time; | |
• | includes a $15,000,000 letter of credit subfacility; | |
• | matures approximately four and one half years from the closing date; | |
• | at our election, bears cash interest at a rate of either (i) an adjusted LIBOR plus a specified margin or (ii) a base rate plus a specified margin; | |
• | is available for working capital and general corporate purposes; and | |
• | includes an uncommitted incremental term and revolving credit facility in an amount of up to $10,000,000. |
108
• | Indebtedness incurred pursuant to the previously existing Term B Senior Credit Agreement and certain other contracts up to $360 million less principal repayments made under that indebtedness; | |
• | Permitted intercompany Indebtedness; | |
• | Our unsecured notes; | |
• | Indebtedness pre-existing the issuance of our unsecured notes; | |
• | Permitted Indebtedness of acquired subsidiaries; | |
• | Permitted refinancing Indebtedness; | |
• | Indebtedness under hedging agreements; | |
• | Performance, bid, appeal and surety bonds and completion guarantees; | |
• | Ordinary course insufficient funds coverage; | |
• | Guarantees in connection with permitted refinancing indebtedness; | |
• | Indebtedness ofnon-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 the greater of $25 million and 2.5% of the Company’s Total Assets as defined in the unsecured notes 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 acquirednon-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 our balance sheet; | |
• | Certain deferred compensation agreements; and | |
• | Certain other Indebtedness not exceeding $35 million. |
109
• | 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 our 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 our equity securities; | |
• | The required premium payable on the unsecured notes in connection with a change of control of the Company; | |
• | Certain permitted inter-company subordinated obligations; | |
• | Certain repurchases and redemptions of subordination obligations of us or a Subsidiary Guarantor from Net Available Cash (as defined in the unsecured notes indenture); | |
• | Repurchases of subordinated obligations in connection with an asset sale to the extent required by the unsecured notes 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 us; | |
• | Certain permitted transactions with the ESOP not exceeding $25 million in the aggregate; and | |
• | Certain other payments not exceeding $30 million in the aggregate. |
• | payment default; | |
• | uncured covenant breaches; | |
• | default under an acceleration of certain other debt exceeding $30 million; | |
• | certain bankruptcy and insolvency events; | |
• | a judgment for payment in excess of $30 million entered against us or any material subsidiary that remains outstanding for a period of 60 days and is not discharged, waived or stayed; and | |
• | failure of any guarantee of the unsecured notes to be in effect or the denial or disaffirmation by any subsidiary guarantor of its guaranty obligations. |
• | subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power or voting stock of ours; | |
• | individuals who constituted our board of directors on the date the unsecured notes were issued, cease for any reason to constitute a majority of our board of directors; |
110
• | the adoption of a plan relating to our liquidation or dissolution; and | |
• | subject to certain exceptions, the merger or consolidation of us with or into another person or the merger of another person with or into us, or the sale of all or substantially all the assets of ours to another person. |
Period | Redemption Price | |||
2011 | 105.125 | % | ||
2012 | 102.563 | % | ||
2013 and thereafter | 100.000 | % |
6-Fiscal Years | ||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Bank revolving credit facility(1) | ||||||||||||||||||||||||
— Interest | $ | 233 | $ | 444 | $ | 445 | $ | 444 | $ | 396 | $ | — | ||||||||||||
Secured Notes(2) | ||||||||||||||||||||||||
— Interest | 3,358 | 31,223 | 31,850 | 32,490 | 33,144 | 16,821 | ||||||||||||||||||
— Principal and PIK Interest | — | — | — | — | — | 339,788 | ||||||||||||||||||
Unsecured Notes(3) | ||||||||||||||||||||||||
— Interest | 12,813 | 25,625 | 25,625 | 25,625 | 25,625 | 12,813 | ||||||||||||||||||
— Principal | — | — | — | — | — | 250,000 | ||||||||||||||||||
Total cash — pay interest | 16,404 | 57,292 | 57,920 | 58,559 | 59,165 | 29,634 | ||||||||||||||||||
Total cash — pay principal and PIK Interest | — | — | — | — | — | 589,788 | ||||||||||||||||||
Total | $ | 16,404 | $ | 57,292 | $ | 57,920 | $ | 58,559 | $ | 59,165 | $ | 619,422 | ||||||||||||
(1) | We expect to occasionally utilize our $25.0 million revolving credit facility to meet working capital needs through 2014. We expect the average utilized revolver balance will be immaterial and that interest expense will consist of commitment fees for unused balances. The current facility expires August 22, 2014. | |
(2) | The secured notes bear interest at 10% in cash and 2% in PIK. Outstanding principal will increase over time for the 2% compounding PIK interest added to the initial $310 million in principal. The secured notes including $29.8 million in PIK interest mature November 1, 2014. | |
(3) | The senior unsecured notes bear interest at 10.25% and mature February 1, 2015. |
111
• | file with the SEC by June 22, 2010 a registration statement under the Securities Act with respect to the exchange notes, and | |
• | use our reasonable best efforts to cause the registration statement to become effective under the Securities Act on or before November 17, 2010. |
• | any exchange notes that you receive will be acquired in the ordinary course of your business; | |
• | you are not participating, and you have no arrangement or understanding with any person to participate, in the distribution of the exchange notes, | |
• | you are neither our “affiliate,” as defined in Rule 405 of the Securities Act, or if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, nor a broker-dealer tendering outstanding notes acquired directly from us for your own account; | |
• | if you are not a broker-dealer, you will also be representing that you are not engaged in and do not intend to engage in a distribution of the exchange notes, and that you have no arrangement or understanding with any person to distribute the exchange notes; and | |
• | if you are a broker, that you will receive the exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities and that you will be required to acknowledge that you will deliver a prospectus in connection with any resale of such exchange notes. |
112
• | notify the exchange agent of any extension by oral or written notice; and | |
• | issue a press release or other public announcement that will include disclosure of the approximate number of outstanding notes deposited; such press release or announcement would be issued prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. |
• | to delay our acceptance of outstanding notes for exchange; | |
• | to terminate the exchange offer if any of the conditions set forth under “The Exchange Offer — Conditions of the Exchange Offer” have not been satisfied or waived by us; | |
• | to waive any condition to the exchange offer; | |
• | to amend any of the terms of the exchange offer; and | |
• | to extend the expiration date and retain all outstanding notes tendered in the exchange offer, subject to your right to withdraw your tendered outstanding notes as described under “The Exchange Offer — Withdrawal of Tenders.” |
113
• | you cannot rely on those interpretations by the SEC staff, and | |
• | you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, ofRegulation S-K of the Securities Act. |
• | delay acceptance for exchange of outstanding notes tendered under the exchange offer, subject toRule 14e-1 under the Exchange Act, which requires that an offeror pay the consideration offered or return the securities deposited by or on behalf of the holders promptly after the termination or withdrawal of a tender offer; and |
114
• | terminate the exchange offer and not accept for exchange any outstanding notes not theretofore accepted for exchange, if any of the conditions set forth below under “The Exchange Offer — Conditions of the Exchange Offer” have not been satisfied or waived by us or in order to comply in whole or in part with any applicable law. In all cases, exchange notes will be issued only after timely receipt by the exchange agent of (i) certificates representing outstanding notes, or confirmation of book-entry transfer, (ii) a properly completed and duly executed letter of transmittal, or a manually signed facsimile thereof with any required signature guarantees, or, in the case of a book-entry transfer, an agent’s message, and (iii) any other required documents. For purposes of the exchange offer, we will be deemed to have accepted for exchange validly tendered outstanding notes, or defectively tendered outstanding notes with respect to which we have waived such defect, if, as and when we give oral, confirmed in writing, or written notice to the exchange agent. Promptly after the expiration date, we will deposit the exchange notes with the exchange agent, who will act as agent for the tendering holders for the purpose of receiving the exchange notes and transmitting them to the holders. The exchange agent will deliver the exchange notes to holders of outstanding notes accepted for exchange after the exchange agent receives the exchange notes. |
115
• | the exchange agent must receive at its address set forth in this prospectus a properly completed and validly executed letter of transmittal, or a manually signed facsimile thereof, together with any signature guarantees and any other documents required by the instructions to the letter of transmittal, and | |
• | the exchange agent must receive certificates for tendered outstanding notes at such address, or such outstanding notes must be transferred pursuant to the procedures for book-entry transfer described above. A confirmation of such book-entry transfer must be received by the exchange agent prior to the expiration date of the exchange offer. A holder who desires to tender outstanding notes and who cannot comply with the procedures set forth herein for tender on a timely basis or whose outstanding notes are not immediately available must comply with the procedures for guaranteed delivery set forth below. |
• | the letter of transmittal is signed by the registered holder of the outstanding notes tendered therewith, or by a participant in one of the book-entry transfer facilities whose name appears on a security position listing it as the owner of those outstanding notes, or if any outstanding notes for principal amounts not tendered are to be issued directly to the holder, or, if tendered by a participant in one of the book-entry transfer facilities, any outstanding notes for principal amounts not tendered or not accepted for exchange are to be credited to the participant’s account at the book-entry transfer facility, and neither the Special Issuance Instructions nor the Special Delivery Instructions box on the letter of transmittal has been completed, or | |
• | the outstanding notes are tendered for the account of an eligible institution. |
116
• | your tender is made by or through an eligible institution; and | |
• | on or prior to the expiration date of the exchange offer, the exchange agent has received from the eligible institution a properly completed and validly executed notice of guaranteed delivery, by manually signed facsimile transmission, mail or hand delivery, or via an electronically transmitted agent’s message, in substantially the form provided with this prospectus. The notice of guaranteed delivery must: |
• | certificates for (or a timely book-entry confirmation with respect to) your outstanding notes, | |
• | a properly completed and duly executed letter of transmittal or facsimile thereof with any required signature guarantees, or, in the case of a book-entry transfer, an agent’s message, and | |
• | any other documents required by the letter of transmittal. |
117
• | the exchange agent must receive a written notice of withdrawal at the address set forth below under “The Exchange Offer — Exchange Agent,” or | |
• | you must comply with the appropriate procedures of DTC’s automated tender offer program system. |
• | specify the name of the person who tendered the outstanding notes to be withdrawn, and | |
• | identify the outstanding notes to be withdrawn, including the principal amount of the outstanding notes. |
• | as set forth in the legend printed on the outstanding notes as a consequence of the issuance of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and |
118
• | otherwise set forth in the offering circular distributed in connection with the private offering of the outstanding notes. |
Rodney Square North
1100 North Market Street
Wilmington, DE19890-1626
Attn: Corporate Trust Reorg
Tel:302-686-6181
Fax:302-636-4139
119
• | are senior secured obligations of the Company; | |
• | rank pari passu in right of payment with all existing and future senior Indebtedness of the Company including the Unsecured Notes and Indebtedness which may be borrowed pursuant to the Revolving Credit Facility; | |
• | are secured, with our obligations under our new revolving credit facility, by the Collateral, subject to certain liens permitted under the Indenture; | |
• | are the subject of an Intercreditor Agreement, which provides first-out rights to the Revolving Credit Facility lenders in the event of our liquidation or certain insolvency events; | |
• | are guaranteed on a senior secured basis by the Subsidiary Guarantors; | |
• | are structurally subordinated to all liabilities of our Subsidiaries that are not Subsidiary Guarantors and to claims of holders, if any, of Preferred Stock of our Subsidiaries that are not Subsidiary Guarantors; | |
• | are effectively subordinated to Indebtedness of the Company permitted to be Incurred which is secured by Permitted Collateral Liens or Priority Liens; | |
• | are subject to registration with the SEC pursuant to the Registration Rights Agreement. |
• | is a senior secured obligation of such Subsidiary Guarantor; |
120
• | ranks pari passu in right of payment with all existing and future senior Indebtedness of such Subsidiary Guarantor; | |
• | is structurally subordinated to all existing and future liabilities of such Subsidiary Guarantor and claims of holders of Preferred Stock of Subsidiaries, if any, that do not guarantee the Secured Notes; | |
• | is effectively subordinated to Indebtedness of such Subsidiary Guarantor permitted to be Incurred which is secured by Permitted Collateral Liens or Priority Liens; and | |
• | is subject to registration with the SEC pursuant to the Registration Rights Agreement. |
121
122
• | irrevocably appointed the Collateral Agent to act as its agent under the Security Documents; and | |
• | irrevocably authorized the Collateral Agent to (i) perform the duties and exercise the rights, powers and discretions that are specifically given to it under the Security Documents or other documents to which it is a party, together with any other incidental rights, power and discretions and (ii) execute each document expressed to be executed by the Collateral Agent on its behalf. |
123
124
• | selling or otherwise disposing of, in any transaction or series of related transactions, any property subject to the Lien of the Security Documents that has become worn out, defective, obsolete or not used or useful in the business; | |
• | abandoning, terminating, canceling, releasing or making alterations in or substitutions of any leases or contracts including, but not limited to, any customer contract subject to the Lien of the Indenture or any of the Security Documents; | |
• | surrendering or modifying any franchise, license or permit subject to the Lien of the Security Documents that it may own or under which it may be operating; | |
• | altering, repairing, replacing, changing the location or position of and adding to its structures, machinery, systems, equipment, fixtures and appurtenances; | |
• | granting a license of any intellectual property; | |
• | selling, transferring or otherwise disposing of inventory in the ordinary course of business; | |
• | collecting accounts receivable in the ordinary course of business as permitted by the Indenture; | |
• | making cash payments (including for the repayment of Indebtedness or interest) from cash that is at any time part of the Collateral in the ordinary course of business that are not otherwise prohibited by the Indenture and the Security Documents; and | |
• | abandoning any intellectual property that is no longer used or useful in the Company’s business. |
125
Redemption | ||||
Period | Price | |||
April 1, 2013 to September 30, 2013 | 105 | % | ||
October 1, 2013 to March 31, 2014 | 103 | % | ||
Thereafter | 100 | % |
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
• | an individual citizen or resident of the United States, | |
• | a corporation or other entity treated as a corporation created or organized in or under the laws of the United States, any State of the United States or the District of Columbia, | |
• | an estate the income of which is subject to U.S. federal income tax regardless of its source, and | |
• | a trust, if either (A) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust was in existence on August 20, 1996, was treated as a U.S. person on that date and elected to be treated as a U.S. person at all times thereafter. |
172
173
174
• | the amount realized (less an amount attributable to any accrued and unpaid interest, which will be taxable as ordinary interest income as discussed above to the extent not previously included in income by the U.S. Holder) and | |
• | the U.S. Holder’s adjusted tax basis in the exchange note (other than tax basis which is attributable to accrued but unpaid interest). |
175
• | is signed by you under penalties of perjury; | |
• | certifies that you are the beneficial owner of the exchange note and are not a U.S. Holder; and | |
• | provides your name and address. |
176
• | such gain is effectively connected with your conduct of a trade or business within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment you maintain) which, in the case of a corporatenon-U.S. Holder, may also give rise to a branch profits tax; | |
• | you are an individual, you hold your exchange notes as capital assets, you are present in the United States for 183 days or more in the taxable year of disposition and you meet certain other conditions, and you are not eligible for relief under an applicable income tax treaty; or | |
• | the gain represents accrued interest or OID, in which case the rules for interest would apply. |
• | fails to furnish his social security or other taxpayer identification number within a reasonable time after the request therefor; | |
• | furnishes an incorrect taxpayer identification number; | |
• | fails to report properly interest or dividends; | |
• | fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is its correct number and that it is not subject toback-up withholding; or | |
• | in the case of anon-United States beneficial owner, fails to meet certain certification requirements or exemptions. |
177
178
Condensed Consolidated Financial Statements of Alion Science and Technology Corporation | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
Consolidated Financial Statements of Alion Science and Technology Corporation | ||||
F-38 | ||||
F-39 | ||||
F-40 | ||||
F-41 | ||||
F-42 | ||||
F-43 |
F-1
March 31, | September 30, | |||||||
2010 | 2009 | |||||||
(In thousands, except share and per share information) | ||||||||
(Unaudited) | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 28,300 | $ | 11,185 | ||||
Accounts receivable, net | 187,847 | 180,157 | ||||||
Prepaid expenses and other current assets | 5,432 | 3,795 | ||||||
Total current assets | 221,579 | 195,137 | ||||||
Property, plant and equipment, net | 12,952 | 14,474 | ||||||
Intangible assets, net | 23,048 | 28,680 | ||||||
Goodwill | 398,921 | 398,921 | ||||||
Other assets | 10,661 | 10,286 | ||||||
Total assets | $ | 667,161 | $ | 647,498 | ||||
Current liabilities: | ||||||||
Interest payable | $ | 5,095 | $ | 9,039 | ||||
Current portion, senior term loan payable | — | 2,389 | ||||||
Current portion, subordinated note payable | — | 3,000 | ||||||
Current portion, acquisition obligations | — | 50 | ||||||
Trade accounts payable | 71,127 | 60,707 | ||||||
Accrued liabilities | 54,698 | 45,425 | ||||||
Accrued payroll and related liabilities | 36,435 | 43,033 | ||||||
Billings in excess of revenue earned | 3,783 | 3,661 | ||||||
Total current liabilities | 171,138 | 167,304 | ||||||
Senior term loan payable, excluding current portion | — | 229,221 | ||||||
Senior secured notes | 268,400 | — | ||||||
Senior unsecured notes | 245,684 | 245,241 | ||||||
Subordinated note payable | — | 46,932 | ||||||
Accrued compensation, excluding current portion | 5,275 | 5,740 | ||||||
Accrued postretirement benefit obligations | 740 | 717 | ||||||
Non-current portion of lease obligations | 7,921 | 7,286 | ||||||
Deferred income taxes | 33,818 | — | ||||||
Commitments and contingencies | — | — | ||||||
Redeemable common stock warrants | — | 32,717 | ||||||
Redeemable common stock, $0.01 par value, 8,000,000 shares authorized, 5,469,272 and 5,424,274 shares issued and outstanding at March 31, 2010 and September 30, 2009 | 153,140 | 187,137 | ||||||
Common stock warrants | 20,785 | — | ||||||
Accumulated other comprehensive loss | (238 | ) | (238 | ) | ||||
Accumulated deficit | (239,502 | ) | (274,559 | ) | ||||
Total liabilities, redeemable common stock and accumulated deficit | $ | 667,161 | $ | 647,498 | ||||
F-2
Three Months Ended | Six Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands, except share and per share information) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Contract revenue | $ | 203,546 | $ | 195,429 | $ | 409,284 | $ | 384,225 | ||||||||
Direct contract expense | 156,049 | 149,135 | 315,045 | 294,457 | ||||||||||||
Gross profit | 47,497 | 46,294 | 94,239 | 89,768 | ||||||||||||
Operating expenses: | ||||||||||||||||
Indirect contract expense | 9,982 | 9,332 | 19,268 | 18,456 | ||||||||||||
Research and development | 309 | 78 | 570 | 147 | ||||||||||||
General and administrative | 18,466 | 13,426 | 34,473 | 23,599 | ||||||||||||
Rental and occupancy expense | 8,298 | 8,468 | 16,284 | 16,206 | ||||||||||||
Depreciation and amortization | 4,212 | 4,700 | 8,443 | 9,506 | ||||||||||||
Total operating expenses | 41,267 | 36,004 | 79,038 | 67,914 | ||||||||||||
Operating income | 6,230 | 10,290 | 15,201 | 21,854 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 12 | 25 | 57 | 48 | ||||||||||||
Interest expense | (14,097 | ) | (10,244 | ) | (30,983 | ) | (24,332 | ) | ||||||||
Other | 87 | (87 | ) | (24 | ) | (122 | ) | |||||||||
Gain on extinguishment of debt | 50,749 | — | 50,749 | — | ||||||||||||
Total other income (expense) | 36,751 | (10,306 | ) | 19,799 | (24,406 | ) | ||||||||||
Pre-tax income (loss) | 42,981 | (16 | ) | 35,000 | (2,552 | ) | ||||||||||
Income tax (expense) benefit | (33,816 | ) | 55 | (33,776 | ) | 51 | ||||||||||
Net income (loss) | $ | 9,165 | $ | 39 | $ | 1,224 | $ | (2,501 | ) | |||||||
Basic and diluted earnings (loss) per share | 1.69 | 0.01 | 0.23 | (0.48 | ) | |||||||||||
Basic and weighted average common shares outstanding | 5,411,342 | 5,227,835 | 5,417,756 | 5,228,787 | ||||||||||||
F-3
Six Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | 1,224 | $ | (2,501 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 8,443 | 9,506 | ||||||
Bad debt expense | — | 512 | ||||||
Accretion of debt to face value | — | 1,180 | ||||||
Amortization of debt issuance costs | 2,223 | 1,364 | ||||||
Secured Note paid in kind interest | 155 | — | ||||||
Change in fair value of redeemable common stock warrants | (160 | ) | (6,899 | ) | ||||
Stock-based compensation | (865 | ) | (5,764 | ) | ||||
Incentive compensation | 1,168 | 1,848 | ||||||
Gain on extinguishment of debt | (50,749 | ) | — | |||||
Deferred income taxes | 33,818 | — | ||||||
Other gains and losses | (1 | ) | 18 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (7,690 | ) | (15,824 | ) | ||||
Other assets | (754 | ) | (578 | ) | ||||
Trade accounts payable | 10,540 | 2,100 | ||||||
Accrued liabilities | 5,675 | (347 | ) | |||||
Interest payable | (3,944 | ) | 2,478 | |||||
Other liabilities | 840 | 4,022 | ||||||
Net cash used in operating activities | (77 | ) | (8,885 | ) | ||||
Cash flows from investing activities: | ||||||||
Cash paid for acquisitions-related obligations | (50 | ) | (166 | ) | ||||
Capital expenditures | (1,271 | ) | (1,076 | ) | ||||
Proceeds from sale of assets | 5 | — | ||||||
Net cash used in investing activities | (1,316 | ) | (1,242 | ) | ||||
Cash flows from financing activities: | ||||||||
Change in book overdraft | — | 100 | ||||||
Cash paid for interest rate swap | — | (4,647 | ) | |||||
Sale of Secured Notes | 281,465 | — | ||||||
Sale of Common Stock Warrants | 20,785 | |||||||
Payment of debt issue costs | (16,710 | ) | — | |||||
Payment of Term B Loan | (236,596 | ) | (1,216 | ) | ||||
Repurchase of Subordinated Note and related warrants | (25,000 | ) | — | |||||
Payment of Subordinated Note principal | — | (3,000 | ) | |||||
Revolver borrowings | 84,200 | 227,500 | ||||||
Revolver repayments | (84,200 | ) | (222,780 | ) | ||||
Loan to ESOP Trust | (5,323 | ) | (5,936 | ) | ||||
ESOP loan repayment | 5,323 | 5,936 | ||||||
Redeemable common stock purchased from ESOP Trust | (7,561 | ) | (7,232 | ) | ||||
Redeemable common stock sold to ESOP Trust | 2,128 | 5,115 | ||||||
Net cash provided by (used in) financing activities | 18,511 | (6,160 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 17,115 | (16,287 | ) | |||||
Cash and cash equivalents at beginning of period | 11,185 | 16,287 | ||||||
Cash and cash equivalents at end of period | $ | 28,300 | $ | — | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 32,759 | $ | 23,397 | ||||
Cash received for taxes | (42 | ) | (51 | ) | ||||
Non-cash financing activities: | ||||||||
Common stock issued to ESOP Trust in satisfaction of employer contribution liability | $ | 5,268 | $ | 5,252 |
F-4
(1) | Description and Formation of the Business |
(2) | Summary of Significant Accounting Policies |
F-5
F-6
F-7
F-8
Purchased contracts | 1-13 years | |||
Internal use software and engineering designs | 2-3 years | |||
Non-compete agreements | 3-6 years |
F-9
F-10
(3) | Employee Stock Ownership Plan (ESOP) and ESOP Trust |
(4) | Earnings (Loss) Per Share |
(5) | Redeemable Common Stock Owned by ESOP Trust |
F-11
(6) | Accounts Receivable |
March 31, | September 30, | |||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Billed receivables | $ | 103,166 | $ | 108,566 | ||||
Unbilled receivables: | ||||||||
Amounts currently billable | 37,392 | 22,954 | ||||||
Revenues recorded in excess of milestone billings on fixed price contracts | 3,726 | 3,757 | ||||||
Revenues recorded in excess of estimated contract value or funding | 33,543 | 36,327 | ||||||
Retainages and other amounts billable upon contract completion | 13,877 | 12,972 | ||||||
Allowance for doubtful accounts | (3,857 | ) | (4,419 | ) | ||||
Total Accounts Receivable | $ | 187,847 | $ | 180,157 | ||||
F-12
(7) | Property, Plant and Equipment |
March 31, | September 30, | |||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Leasehold improvements | $ | 10,980 | $ | 10,214 | ||||
Equipment and software | 33,100 | 32,807 | ||||||
Total cost | 44,080 | 43,021 | ||||||
Less: accumulated depreciation and amortization | (31,128 | ) | (28,547 | ) | ||||
Net Property, Plant and Equipment | $ | 12,952 | $ | 14,474 | ||||
(8) | Goodwill and Intangible Assets |
March 31, 2010 | September 30, 2009 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Gross | Amortization | Net | Gross | Amortization | Net | |||||||||||||||||||
Purchased contracts | $ | 111,635 | $ | (88,987 | ) | $ | 22,648 | $ | 111,635 | $ | (83,563 | ) | $ | 28,072 | ||||||||||
Internal use software and engineering designs | 2,155 | (1,763 | ) | 392 | 2,155 | (1,568 | ) | 587 | ||||||||||||||||
Non-compete agreements | 725 | (717 | ) | 8 | 725 | (704 | ) | 21 | ||||||||||||||||
Total | $ | 114,515 | $ | (91,467 | ) | $ | 23,048 | $ | 114,515 | $ | (85,835 | ) | $ | 28,680 | ||||||||||
F-13
(In thousands) | ||||
For the remaining six months: | ||||
2010 | $ | 5,353 | ||
For the year ending September 30: | ||||
2011 | 6,843 | |||
2012 | 5,766 | |||
2013 | 3,246 | |||
2014 | 879 | |||
2015 | 737 | |||
Thereafter | 224 | |||
$ | 23,048 | |||
(9) | Long-Term Debt |
F-14
Period | Minimum Consolidated EBITDA | |||
June 30, 2010 through March 31, 2011 | $ | 52,500,000 | ||
April 1, 2011 through September 30, 2011 | $ | 55,000,000 | ||
October 1, 2011 through September 30, 2012 | $ | 60,000,000 | ||
October 1, 2012 through September 30, 2013 | $ | 62,500,000 | ||
Thereafter | $ | 65,000,000 |
F-15
F-16
March 31, | September 30, | |||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Unsecured Notes | $ | 4,271 | $ | 4,271 | ||||
Secured Notes | 824 | — | ||||||
Senior Term Loan | — | 3,975 | ||||||
Subordinated Note Payable | — | 793 | ||||||
Total | $ | 5,095 | $ | 9,039 | ||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Total | ||||||||||||||||||||||
Secured Notes and PIK Interest(1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 339,788 | $ | 339,788 | ||||||||||||||
Unsecured Notes(2) | — | — | — | — | — | 250,000 | 250,000 | |||||||||||||||||||||
Total 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 March 31, 2010, the $276.9 million carrying value on the face of the balance sheet included $310 million in principal, $0.9 million in accrued interest and is net of $34 million in unamortized debt issue costs. Initial debt issue costs consist of $7.7 million in original issue discount, $5.8 million in third-party costs and $20.8 million for the initial fair value of the new Secured Note warrants. | |
(2) | The Unsecured Notes on the face of the balance sheet include $250 million in principal and $4.3 million in unamortized debt issue costs as of March 31, 2010 (initially $7.1 million). |
(10) | Fair Value Measurement |
F-17
F-18
Level 1 | Level 2 | Level 3 | ||||||||||
Liabilities: as of September 30, 2009 | ||||||||||||
Redeemable common stock warrants | — | — | (32,717 | ) | ||||||||
Liabilities: as of September 30, 2009 | $ | — | $ | — | $ | (32,717 | ) | |||||
As of March 31, | ||||||||
2010 | 2009 | |||||||
Redeemable Common Stock Warrants | ||||||||
Balance, beginning of period | $ | (32,557 | ) | $ | (39,996 | ) | ||
Total realized and unrealized gains and (losses) | 14,724 | — | ||||||
Included in interest expense | (160 | ) | 1,454 | |||||
Issuances and settlements | 17,993 | — | ||||||
Balance, end of period | $ | — | $ | (38,542 | ) | |||
(11) | Interest Rate Swap |
(12) | Redeemable Common Stock Warrants |
F-19
(13) | Secured Note Common Stock Warrants |
(14) | Leases |
F-20
Lease Payments for Fiscal Years Ending | ||||
(In thousands) | ||||
2010 (for the remainder of fiscal year) | $ | 14,099 | ||
2011 | 26,296 | |||
2012 | 22,336 | |||
2013 | 20,842 | |||
2014 | 14,408 | |||
2015 | 14,366 | |||
And thereafter | 24,180 | |||
Gross lease payments | $ | 136,527 | ||
Less: non-cancelable subtenant receipts | (3,104 | ) | ||
Net lease payments | $ | 133,423 | ||
March 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Minimum rentals | $ | 11,649 | $ | 12,821 | ||||
Less: Sublease rental income | (958 | ) | (1,484 | ) | ||||
Total rent expense, net | $ | 10,691 | $ | 11,337 | ||||
(15) | Long Term Incentive Compensation Plan |
(16) | Stock Appreciation Rights |
F-21
Stock Appreciation Rights
As of March 31, 2010
Shares | ||||||||||||
Granted to | Exercise | Outstanding | ||||||||||
Date of Grant | Employees | Price | at 9/30/09 | |||||||||
February 2005 | 165,000 | $ | 19.94 | 71,150 | ||||||||
March 2005 | 2,000 | $ | 19.94 | 2,000 | ||||||||
April 2005 | 33,000 | $ | 29.81 | 18,000 | ||||||||
June 2005 | 2,000 | $ | 29.81 | 2,000 | ||||||||
December 2005 | 276,675 | $ | 35.89 | 175,284 | ||||||||
February 2006 | 13,000 | $ | 35.89 | 7,750 | ||||||||
February 2006 | 7,500 | $ | 35.89 | 2,500 | ||||||||
May 2006 | 7,000 | $ | 37.06 | 6,000 | ||||||||
July 2006 | 15,000 | $ | 37.06 | 10,000 | ||||||||
October 2006 | 2,500 | $ | 41.02 | 2,500 | ||||||||
December 2006 | 238,350 | $ | 41.02 | 171,500 | ||||||||
February 2007 | 33,450 | $ | 41.02 | 21,700 | ||||||||
May 2007 | 2,000 | $ | 43.37 | 2,000 | ||||||||
September 2007 | 2,000 | $ | 43.37 | 2,000 | ||||||||
December 2007 | 232,385 | $ | 40.05 | 187,740 | ||||||||
April 2008 | 2,000 | $ | 41.00 | 2,000 | ||||||||
September 2008 | 2,000 | $ | 41.00 | 2,000 | ||||||||
December 2008 | 203,250 | $ | 38.35 | 189,875 | ||||||||
April 2009 | 1,000 | $ | 34.30 | 1,000 | ||||||||
Total | 1,240,110 | 876,999 | ||||||||||
Weighted Average Exercise Price | $ | 35.95 | $ | 37.07 |
F-22
Stock Appreciation Rights
As of March 31, 2010
Outstanding | Vested at | Exercisable | ||||||||||||||||||||||
Date of Grant | at 03/31/10 | Forfeited | Exercised | Expired | 03/31/10 | at 03/31/10 | ||||||||||||||||||
February 2005 | 71,150 | — | — | — | 71,150 | — | ||||||||||||||||||
March 2005 | 2,000 | — | — | — | 2,000 | — | ||||||||||||||||||
April 2005 | 18,000 | — | — | — | 18,000 | — | ||||||||||||||||||
June 2005 | 2,000 | — | — | — | 2,000 | — | ||||||||||||||||||
December 2005 | 167,034 | 412 | 7,838 | — | 167,034 | — | ||||||||||||||||||
February 2006 | 7,750 | — | — | — | 7,750 | — | ||||||||||||||||||
February 2006 | 1,250 | — | 1,250 | — | 1,250 | — | ||||||||||||||||||
May 2006 | 6,000 | — | — | — | 4,500 | — | ||||||||||||||||||
July 2006 | 10,000 | — | — | — | 7,500 | — | ||||||||||||||||||
October 2006 | 2,500 | — | — | — | 1,875 | — | ||||||||||||||||||
December 2006 | 161,930 | 2,830 | 6,740 | — | 121,448 | — | ||||||||||||||||||
February 2007 | 21,200 | 250 | 250 | — | 15,900 | — | ||||||||||||||||||
May 2007 | 2,000 | — | — | — | 1,000 | — | ||||||||||||||||||
September 2007 | 2,000 | — | — | — | 1,000 | — | ||||||||||||||||||
December 2007 | 178,040 | 5,313 | 4,387 | — | 89,020 | — | ||||||||||||||||||
April 2008 | 2,000 | — | — | — | 500 | — | ||||||||||||||||||
September 2008 | 2,000 | — | — | — | 500 | — | ||||||||||||||||||
December 2008 | 178,475 | 9,275 | 2,125 | — | 44,619 | — | ||||||||||||||||||
April 2009 | 1,000 | — | — | — | — | — | ||||||||||||||||||
Total | 836,329 | 18,080 | 22,590 | — | 557,046 | — | ||||||||||||||||||
Weighted Average Exercise Price | $ | 36.98 | $ | 39.25 | $ | 38.52 | $ | — | $ | 35.78 | — |
F-23
Stock Appreciation Rights
As of March 31, 2010
Remaining | ||||||||||||||||
Risk Free | Expected | Life | ||||||||||||||
Date of Grant | Interest Rate | Volatility | Life | (months) | ||||||||||||
February 2005 | 3.10% - 3.60% | 45 | % | 4 yrs | — | |||||||||||
March 2005 | 3.10% - 3.60% | 45 | % | 4 yrs | — | |||||||||||
April 2005 | 4.10% - 4.20% | 45 | % | 4 yrs | — | |||||||||||
June 2005 | 4.10% - 4.20% | 45 | % | 4 yrs | — | |||||||||||
December 2005 | 4.20% - 4.20% | 40 | % | 4 yrs | — | |||||||||||
February 2006 | 4.20% - 4.20% | 40 | % | 4 yrs | — | |||||||||||
February 2006 | 4.20% - 4.20% | 40 | % | 4 yrs | — | |||||||||||
May 2006 | 4.82% - 4.83% | 35 | % | 4 yrs | 1.6 | |||||||||||
July 2006 | 4.82% - 4.83% | 35 | % | 4 yrs | 3.0 | |||||||||||
October 2006 | 4.82% - 4.83% | 35 | % | 4 yrs | 6.8 | |||||||||||
December 2006 | 4.54% - 4.58% | 35 | % | 4 yrs | 8.7 | |||||||||||
February 2007 | 4.54% - 4.58% | 35 | % | 4 yrs | 10.8 | |||||||||||
May 2007 | 4.54% - 4.58% | 35 | % | 4 yrs | 13.6 | |||||||||||
September 2007 | 4.54% - 4.54% | 35 | % | 4 yrs | 17.1 | |||||||||||
December 2007 | 4.23% - 4.23% | 35 | % | 4 yrs | 20.8 | |||||||||||
April 2008 | 4.23% - 4.23% | 35 | % | 4 yrs | 24.9 | |||||||||||
September 2008 | 4.23% - 4.23% | 35 | % | 4 yrs | 29.5 | |||||||||||
December 2008 | 4.23% - 4.23% | 35 | % | 4 yrs | 32.8 | |||||||||||
April 2009 | 4.23% - 4.23% | 35 | % | 4 yrs | 36.4 | |||||||||||
Weighted Average Remaining Life (months) | 13.7 |
(17) | Phantom Stock Plans |
F-24
Director Phantom Stock Plan
as of March 31, 2010
Shares | Total Shares | Grant Date | Outstanding | |||||||||||||
Date of Grant | Granted | Granted | Share Price | at 9/30/09 | ||||||||||||
November 2006 | 5,978 | 5,978 | 41.02 | 4,839 | ||||||||||||
November 2007 | 6,993 | 6,993 | 40.05 | 5,994 | ||||||||||||
Total | 12,971 | 12,971 | 10,833 | |||||||||||||
Weighted Average Grant Date Fair Value Price Per Share | $ | 40.50 | $ | 40.50 | $ | 40.48 |
Director Phantom Stock Plan
as of March 31, 2010
Outstanding at | Vested at | Exercisable at | ||||||||||||||||||||||
Date of Grant | 03/31/10 | Forfeited | Exercised | Expired | 3/31/10 | 03/31/10 | ||||||||||||||||||
November 2006 | 4,839 | — | — | — | 4,839 | 4,839 | ||||||||||||||||||
November 2007 | 5,994 | — | — | — | 3,663 | 3,663 | ||||||||||||||||||
Total | 10,833 | — | — | — | 8,502 | 8,502 | ||||||||||||||||||
Weighted Average Grant Date | $ | 40.48 | $ | — | $ | — | $ | — | $ | 40.60 | $ | 40.60 |
F-25
Director Phantom Stock Plan
as of March 31, 2010
Risk Free | Expected | Remaining Life | ||||||||||||
Date of Grant | Interest Rate | Volatility | Life | (months) | ||||||||||
November 2006 | 4.54% - 4.58% | 35 | % | 3 yrs | — | |||||||||
November 2007 | 4.23% - 4.23% | 35 | % | 3 yrs | 7.4 | |||||||||
Weighted Average Remaining Life | 4.1 |
(18) | Segment Information and Customer Concentration |
(19) | Income Taxes |
F-26
March 31, 2010 | ||||
Current: | ||||
Federal | $ | — | ||
State | (2 | ) | ||
Foreign | (40 | ) | ||
Total current provision | (42 | ) | ||
Deferred: | ||||
Federal | 27,833 | |||
State | 5,985 | |||
Foreign | — | |||
Total deferred provision/(benefit) | 33,818 | |||
Total provision for income taxes | $ | 33,776 | ||
F-27
March 31, 2010 | March 31, 2010 | |||||||
Expected fed income tax (benefit) | 35.0 | % | $ | 12,250 | ||||
State taxes (net of federal benefit) | 11.1 | % | 3,891 | |||||
Nondeductible expenses | 0.4 | % | 150 | |||||
Provision to returntrue-ups (permanent items) | 0.0 | % | (2 | ) | ||||
Tax credits | (0.1 | )% | (40 | ) | ||||
Deferred tax assets at conversion | 101.0 | % | 35,359 | |||||
Valuation allowance | (101.0 | )% | (35,359 | ) | ||||
Deferred tax liabilities at conversion | 96.6 | % | 33,818 | |||||
Debt extinguishment and tax status change | (46.5 | )% | (16,291 | ) | ||||
Income tax expense (benefit) | 96.5 | % | $ | 33,776 | ||||
March 31, 2010 | ||||
Deferred tax assets: | ||||
Accrued expenses and reserves | $ | 9,511 | ||
Intangible amortization | 12,657 | |||
Deferred rent | 2,556 | |||
Deferred wages | 4,857 | |||
Depreciation and leases | 2,784 | |||
Carryforwards and tax credits | 2,968 | |||
Other | 25 | |||
Gross deferred tax assets | $ | 35,359 | ||
Less Valuation | 35,359 | |||
Net Deferred Tax Assets | $ | — | ||
Deferred tax liabilities: | ||||
Goodwill | (33,818 | ) | ||
Net deferred tax asset/(liability) | $ | (33,818 | ) | |
(20) | Debt Extinguishment |
F-28
(21) | Commitments and Contingencies |
(22) | Guarantor/Non-guarantor Condensed Consolidated Financial Information |
F-29
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 28,541 | $ | (241 | ) | $ | — | $ | — | $ | 28,300 | |||||||||
Accounts receivable, net | 181,494 | 6,241 | 112 | — | 187,847 | |||||||||||||||
Prepaid expenses and other current assets | 5,300 | 132 | — | — | 5,432 | |||||||||||||||
Total current assets | 215,335 | 6,132 | 112 | — | 221,579 | |||||||||||||||
Property, plant and equipment, net | 12,834 | 118 | — | — | 12,952 | |||||||||||||||
Intangible assets, net | 23,048 | — | — | — | 23,048 | |||||||||||||||
Goodwill | 398,921 | — | — | — | 398,921 | |||||||||||||||
Investment in subsidiaries | 20,172 | — | — | (20,172 | ) | — | ||||||||||||||
Intercompany receivables | 896 | 18,592 | — | (19,488 | ) | — | ||||||||||||||
Other assets | 10,645 | 13 | 3 | — | 10,661 | |||||||||||||||
Total assets | $ | 681,851 | $ | 24,855 | $ | 115 | $ | (39,660 | ) | $ | 667,161 | |||||||||
Current liabilities: | ||||||||||||||||||||
Book cash overdraft | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Interest payable | 5,095 | — | — | — | 5,095 | |||||||||||||||
Current portion, senior term loan payable | — | — | — | — | — | |||||||||||||||
Current portion of subordinated note payable | — | — | — | — | — | |||||||||||||||
Current portion, acquisition obligations | — | — | — | — | — | |||||||||||||||
Trade accounts payable | 70,081 | 1,046 | — | — | 71,127 | |||||||||||||||
Accrued liabilities | 53,050 | 1,648 | — | — | 54,698 | |||||||||||||||
Accrued payroll and related liabilities | 35,284 | 1,129 | 22 | — | 36,435 | |||||||||||||||
Billings in excess of revenue earned | 3,783 | — | — | — | 3,783 | |||||||||||||||
Total current liabilities | 167,293 | 3,823 | 22 | — | 171,138 | |||||||||||||||
Intercompany payables | 18,593 | — | 895 | (19,488 | ) | — | ||||||||||||||
Senior term loan payable, excluding current portion | — | — | — | — | — | |||||||||||||||
Senior secured notes | 268,400 | — | — | — | 268,400 | |||||||||||||||
Senior unsecured notes | 245,684 | — | — | — | 245,684 | |||||||||||||||
Subordinated note payable | — | — | — | — | — | |||||||||||||||
Accrued compensation, excluding current portion | 5,275 | — | — | — | 5,275 | |||||||||||||||
Accrued postretirement benefit obligations | 740 | — | — | 740 | ||||||||||||||||
Non-current portion of lease obligations | 7,863 | 58 | — | — | 7,921 | |||||||||||||||
Deferred income taxes | 33,818 | — | — | — | 33,818 | |||||||||||||||
Commitments and contingencies | — | — | — | — | — | |||||||||||||||
Redeemable common stock warrants | — | — | — | — | — | |||||||||||||||
Redeemable common stock | 153,140 | — | — | — | 153,140 | |||||||||||||||
Common stock warrants | 20,785 | — | — | — | 20,785 | |||||||||||||||
Common stock of subsidiaries | — | 2,800 | — | (2,800 | ) | — | ||||||||||||||
Accumulated other comprehensive loss | (238 | ) | — | — | — | (238 | ) | |||||||||||||
Accumulated deficit | (239,502 | ) | 18,174 | (802 | ) | (17,372 | ) | (239,502 | ) | |||||||||||
Total liabilities, redeemable common stock and accumulated deficit | $ | 681,851 | $ | 24,855 | $ | 115 | $ | (39,660 | ) | $ | 667,161 | |||||||||
F-30
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 11,404 | $ | (215 | ) | $ | (4 | ) | $ | — | $ | 11,185 | ||||||||
Accounts receivable, net | 174,458 | 5,661 | 38 | — | 180,157 | |||||||||||||||
Prepaid expenses and other current assets | 3,659 | 133 | 3 | — | 3,795 | |||||||||||||||
Total current assets | 189,521 | 5,579 | 37 | — | 195,137 | |||||||||||||||
Property, plant and equipment, net | 14,346 | 128 | — | — | 14,474 | |||||||||||||||
Intangible assets, net | 28,680 | — | — | — | 28,680 | |||||||||||||||
Goodwill | 398,921 | — | — | — | 398,921 | |||||||||||||||
Investment in subsidiaries | 17,132 | — | — | (17,132 | ) | — | ||||||||||||||
Intercompany receivables | 702 | 15,939 | — | (16,641 | ) | — | ||||||||||||||
Other assets | 10,270 | 13 | 3 | — | 10,286 | |||||||||||||||
Total assets | $ | 659,572 | $ | 21,659 | $ | 40 | $ | (33,773 | ) | $ | 647,498 | |||||||||
Interest payable | $ | 9,039 | $ | — | $ | — | $ | — | $ | 9,039 | ||||||||||
Current portion, senior term loan payable | 2,389 | — | — | — | 2,389 | |||||||||||||||
Current portion of subordinated note payable | 3,000 | — | — | — | 3,000 | |||||||||||||||
Current portion, acquisition obligations | 50 | — | — | — | 50 | |||||||||||||||
Trade accounts payable | 59,742 | 963 | 2 | — | 60,707 | |||||||||||||||
Accrued liabilities | 43,985 | 1,440 | — | — | 45,425 | |||||||||||||||
Accrued payroll and related liabilities | 41,643 | 1,381 | 9 | — | 43,033 | |||||||||||||||
Billings in excess of revenue earned | 3,661 | — | — | — | 3,661 | |||||||||||||||
Total current liabilities | 163,509 | 3,784 | 11 | — | 167,304 | |||||||||||||||
Intercompany payables | 15,939 | — | 702 | (16,641 | ) | — | ||||||||||||||
Senior term loan payable, excluding current portion | 229,221 | — | — | — | 229,221 | |||||||||||||||
Senior unsecured notes | 245,241 | — | — | — | 245,241 | |||||||||||||||
Subordinated note payable | 46,932 | — | — | — | 46,932 | |||||||||||||||
Accrued compensation, excluding current portion | 5,740 | — | — | — | 5,740 | |||||||||||||||
Accrued postretirement benefit obligations | 717 | — | — | 717 | ||||||||||||||||
Non-current portion of lease obligations | 7,216 | 70 | — | — | 7,286 | |||||||||||||||
Redeemable common stock warrants | 32,717 | — | — | — | 32,717 | |||||||||||||||
Redeemable common stock | 187,137 | — | — | — | 187,137 | |||||||||||||||
Common stock of subsidiaries | — | 2,800 | — | (2,800 | ) | — | ||||||||||||||
Accumulated other comprehensive loss | (238 | ) | — | — | — | (238 | ) | |||||||||||||
Accumulated deficit | (274,559 | ) | 15,005 | (673 | ) | (14,332 | ) | (274,559 | ) | |||||||||||
Total liabilities, redeemable common stock and accumulated deficit | $ | 659,572 | $ | 21,659 | $ | 40 | $ | (33,773 | ) | $ | 647,498 | |||||||||
F-31
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 195,192 | $ | 8,322 | $ | 32 | $ | — | $ | 203,546 | ||||||||||
Direct contract expense | 150,349 | 5,680 | 20 | — | 156,049 | |||||||||||||||
Gross profit | 44,843 | 2,642 | 12 | — | 47,497 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Indirect contract expense | 9,023 | 949 | 10 | — | 9,982 | |||||||||||||||
Research and development | 309 | — | — | — | 309 | |||||||||||||||
General and administrative | 18,172 | 204 | 90 | — | 18,466 | |||||||||||||||
Rental and occupancy expense | 8,138 | 149 | 11 | — | 8,298 | |||||||||||||||
Depreciation and amortization | 4,199 | 13 | — | — | 4,212 | |||||||||||||||
Total operating expenses | 39,841 | 1,315 | 111 | — | 41,267 | |||||||||||||||
Operating income | 5,002 | 1,327 | (99 | ) | — | 6,230 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 12 | — | — | — | 12 | |||||||||||||||
Interest expense | (14,097 | ) | — | — | — | (14,097 | ) | |||||||||||||
Other | 8 | 79 | — | — | 87 | |||||||||||||||
Gain on extinguishment of debt | 50,749 | — | — | — | 50,749 | |||||||||||||||
Equity in net income of subsidiaries | 1,309 | — | — | (1,309 | ) | — | ||||||||||||||
Total other expenses | 37,981 | 79 | — | (1,309 | ) | 36,751 | ||||||||||||||
Pre-tax income (loss) | 42,983 | 1,406 | (99 | ) | (1,309 | ) | 42,981 | |||||||||||||
Income tax (expense) benefit | (33,818 | ) | 2 | — | — | (33,816 | ) | |||||||||||||
Net income (loss) | $ | 9,165 | $ | 1,408 | $ | (99 | ) | $ | (1,309 | ) | $ | 9,165 | ||||||||
F-32
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 186,153 | 9,274 | 2 | — | $ | 195,429 | |||||||||||||
Direct contract expense | 142,650 | 6,485 | — | — | 149,135 | |||||||||||||||
Gross profit | 43,503 | 2,789 | 2 | — | 46,294 | |||||||||||||||
Indirect contract expense | 8,478 | 805 | 49 | — | 9,332 | |||||||||||||||
Research and development | 78 | — | — | — | 78 | |||||||||||||||
General and administrative | 13,163 | 261 | 2 | — | 13,426 | |||||||||||||||
Rental and occupancy expense | 8,311 | 156 | 1 | — | 8,468 | |||||||||||||||
Depreciation and amortization | 4,687 | 13 | — | — | 4,700 | |||||||||||||||
Total operating expenses | 34,717 | 1,235 | 52 | — | 36,004 | |||||||||||||||
Operating income | 8,786 | 1,554 | (50 | ) | — | 10,290 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 9 | 16 | — | — | 25 | |||||||||||||||
Interest expense | (10,244 | ) | — | — | — | (10,244 | ) | |||||||||||||
Other | (173 | ) | 86 | — | — | (87 | ) | |||||||||||||
Equity in net income of subsidiaries | 1,606 | (1,606 | ) | — | ||||||||||||||||
Total other expenses | (8,802 | ) | 102 | — | (1,606 | ) | (10,306 | ) | ||||||||||||
Pre-tax income (loss) | (16 | ) | 1,656 | (50 | ) | (1,606 | ) | (16 | ) | |||||||||||
Income tax (expense) benefit | 55 | — | — | — | 55 | |||||||||||||||
Net income (loss) | $ | 39 | 1,656 | (50 | ) | (1,606 | ) | $ | 39 | |||||||||||
F-33
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 392,466 | $ | 16,748 | $ | 70 | $ | — | $ | 409,284 | ||||||||||
Direct contract expense | 303,814 | 11,186 | 45 | — | 315,045 | |||||||||||||||
Gross profit | 88,652 | 5,562 | 25 | — | 94,239 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Indirect contract expense | 17,394 | 1,856 | 18 | — | 19,268 | |||||||||||||||
Research and development | 570 | — | — | — | 570 | |||||||||||||||
General and administrative | 33,949 | 369 | 155 | — | 34,473 | |||||||||||||||
Rental and occupancy expense | 15,968 | 295 | 21 | — | 16,284 | |||||||||||||||
Depreciation and amortization | 8,418 | 25 | — | — | 8,443 | |||||||||||||||
Total operating expenses | 76,299 | 2,545 | 194 | — | 79,038 | |||||||||||||||
Operating income | 12,353 | 3,017 | (169 | ) | — | 15,201 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 57 | — | — | — | 57 | |||||||||||||||
Interest expense | (30,983 | ) | — | — | — | (30,983 | ) | |||||||||||||
Other | (174 | ) | 150 | — | — | (24 | ) | |||||||||||||
Gain on extinguishment of debt | 50,749 | — | — | 50,749 | ||||||||||||||||
Equity in net income of subsidiaries | 3,040 | — | — | (3,040 | ) | — | ||||||||||||||
Total other expenses | 22,689 | 150 | — | (3,040 | ) | 19,799 | ||||||||||||||
Pre-tax income (loss) | 35,042 | 3,167 | (169 | ) | (3,040 | ) | 35,000 | |||||||||||||
Income tax (expense) benefit | (33,818 | ) | 2 | 40 | — | (33,776 | ) | |||||||||||||
Net income (loss) | $ | 1,224 | $ | 3,169 | $ | (129 | ) | $ | (3,040 | ) | $ | 1,224 | ||||||||
F-34
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 366,117 | $ | 18,106 | $ | 2 | $ | — | $ | 384,225 | ||||||||||
Direct contract expense | 281,369 | 13,086 | 2 | — | 294,457 | |||||||||||||||
Gross profit | 84,748 | 5,020 | — | — | 89,768 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Indirect contract expense | 16,634 | 1,773 | 49 | — | 18,456 | |||||||||||||||
Research and development | 147 | — | — | — | 147 | |||||||||||||||
General and administrative | 23,225 | 372 | 2 | — | 23,599 | |||||||||||||||
Rental and occupancy expense | 15,924 | 281 | 1 | — | 16,206 | |||||||||||||||
Depreciation and amortization | 9,481 | 25 | — | — | 9,506 | |||||||||||||||
Total operating expenses | 65,411 | 2,451 | 52 | — | 67,914 | |||||||||||||||
Operating income | 19,337 | 2,569 | (52 | ) | — | 21,854 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 32 | 16 | — | — | 48 | |||||||||||||||
Interest expense | (24,332 | ) | — | — | — | (24,332 | ) | |||||||||||||
Other | (267 | ) | 145 | — | — | (122 | ) | |||||||||||||
Equity in net income of subsidiaries | 2,678 | — | — | (2,678 | ) | — | ||||||||||||||
Total other expenses | (21,889 | ) | 161 | — | (2,678 | ) | (24,406 | ) | ||||||||||||
Pre-tax income (loss) | (2,552 | ) | 2,730 | (52 | ) | (2,678 | ) | (2,552 | ) | |||||||||||
Income tax (expense) benefit | 51 | — | — | — | 51 | |||||||||||||||
Net income (loss) | $ | (2,501 | ) | $ | 2,730 | $ | (52 | ) | $ | (2,678 | ) | $ | (2,501 | ) | ||||||
F-35
Non- | ||||||||||||||||
Guarantor | Guarantor | |||||||||||||||
Parent | Companies | Companies | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
Net cash used in operating activities | $ | (72 | ) | $ | (10 | ) | $ | 3 | $ | (79 | ) | |||||
Cash flows from investing activities: | ||||||||||||||||
Cash paid for acquisitions-related obligations | (50 | ) | — | — | (50 | ) | ||||||||||
Capital expenditures | (1,255 | ) | (16 | ) | — | (1,271 | ) | |||||||||
Proceeds from sale of assets | 5 | — | — | 5 | ||||||||||||
Net cash used in investing activities | (1,300 | ) | (16 | ) | — | (1,316 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Change in book overdraft | — | — | — | — | ||||||||||||
Cash (paid for) received from interest rate swap | — | — | — | — | ||||||||||||
Sale of Secured Notes | 281,465 | — | — | 281,465 | ||||||||||||
Sale of Common Stock Warrants | 20,785 | — | — | 20,785 | ||||||||||||
Payment of debt issue costs | (16,710 | ) | — | — | (16,710 | ) | ||||||||||
Payment of Term B Loan | (236,596 | ) | — | — | (236,596 | ) | ||||||||||
Repurchase of Subordinated Note and related warrants | (25,000 | ) | — | — | (25,000 | ) | ||||||||||
Payment of Subordinated Note | — | — | — | — | ||||||||||||
Revolver borrowings | 84,200 | — | — | 84,200 | ||||||||||||
Revolver payments | (84,200 | ) | — | — | (84,200 | ) | ||||||||||
Loan to ESOP Trust | (5,323 | ) | — | — | (5,323 | ) | ||||||||||
ESOP loan repayment | 5,323 | — | — | 5,323 | ||||||||||||
Redeemable common stock purchased from ESOP Trust | (7,581 | ) | — | — | (7,581 | ) | ||||||||||
Redeemable common stock sold to ESOP Trust | 2,148 | — | — | 2,148 | ||||||||||||
Net cash (used in) provided by financing activities | 18,511 | — | — | 18,511 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 17,137 | (25 | ) | 3 | 17,115 | |||||||||||
Cash and cash equivalents at beginning of period | 11,404 | (215 | ) | (4 | ) | 11,185 | ||||||||||
Cash and cash equivalents at end of period | $ | 28,541 | $ | (240 | ) | $ | (1 | ) | $ | 28,300 | ||||||
F-36
Non- | ||||||||||||||||
Guarantor | Guarantor | |||||||||||||||
Parent | Companies | Companies | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
Net cash used in operating activities | $ | (8,982 | ) | $ | 97 | $ | — | $ | (8,885 | ) | ||||||
Cash paid for acquisitions-related obligations | (166 | ) | — | — | (166 | ) | ||||||||||
Capital expenditures | (1,076 | ) | — | — | (1,076 | ) | ||||||||||
Net cash used in investing activities | (1,242 | ) | — | — | (1,242 | ) | ||||||||||
Change in book overdraft | 100 | — | — | 100 | ||||||||||||
Cash (paid for) received from interest rate swap | (4,647 | ) | — | — | (4,647 | ) | ||||||||||
Payment of senior term loan principal | (1,216 | ) | — | — | (1,216 | ) | ||||||||||
Payment of subordinated note principal | (3,000 | ) | — | — | (3,000 | ) | ||||||||||
Revolver borrowings | 227,500 | — | — | 227,500 | ||||||||||||
Revolver payments | (222,780 | ) | — | — | (222,780 | ) | ||||||||||
Loan to ESOP Trust | (5,936 | ) | — | — | (5,936 | ) | ||||||||||
ESOP loan repayment | 5,936 | — | — | 5,936 | ||||||||||||
Redeemable common stock purchased from ESOP Trust | (7,232 | ) | — | — | (7,232 | ) | ||||||||||
Redeemable common stock sold to ESOP Trust | 5,115 | — | — | 5,115 | ||||||||||||
Net cash (used in) provided by financing activities | (6,160 | ) | — | — | (6,160 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | (16,384 | ) | 97 | — | (16,287 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 16,392 | (104 | ) | (1 | ) | 16,287 | ||||||||||
Cash and cash equivalents at end of period | $ | 8 | $ | (7 | ) | $ | (1 | ) | $ | — | ||||||
F-37
F-38
September 30, | ||||||||
2008 | ||||||||
(As Restated | ||||||||
2009 | See Note 11) | |||||||
(In thousands, except share and per share information) | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 11,185 | $ | 16,287 | ||||
Accounts receivable, net | 180,157 | 168,451 | ||||||
Stock subscriptions receivable | — | 2,669 | ||||||
Prepaid expenses and other current assets | 3,795 | 3,135 | ||||||
Total current assets | 195,137 | 190,542 | ||||||
Property, plant and equipment, net | 14,474 | 18,601 | ||||||
Intangible assets, net | 28,680 | 41,248 | ||||||
Goodwill | 398,921 | 398,871 | ||||||
Other assets | 10,286 | 6,684 | ||||||
Total assets | $ | 647,498 | $ | 655,946 | ||||
Current liabilities: | ||||||||
Interest payable | $ | 9,039 | $ | 6,543 | ||||
Current portion, senior term loan payable | 2,389 | 232,220 | ||||||
Interest rate swap liability | — | 4,629 | ||||||
Current portion of subordinated note payable | 3,000 | 3,000 | ||||||
Current portion, acquisition obligations | 50 | 50 | ||||||
Trade accounts payable | 60,707 | 57,164 | ||||||
Accrued liabilities | 45,425 | 39,227 | ||||||
Accrued payroll and related liabilities | 43,033 | 41,557 | ||||||
Billings in excess of revenue earned | 3,661 | 2,708 | ||||||
Total current liabilities | 167,304 | 387,098 | ||||||
Senior term loan payable, excluding current portion | 229,221 | — | ||||||
Senior unsecured notes | 245,241 | 244,355 | ||||||
Subordinated note payable | 46,932 | 42,656 | ||||||
Accrued compensation, excluding current portion | 5,740 | 11,305 | ||||||
Accrued postretirement benefit obligations | 717 | 627 | ||||||
Non-current portion of lease obligations | 7,286 | 6,260 | ||||||
Redeemable common stock warrants | 32,717 | 39,996 | ||||||
Commitments and contingencies | — | — | ||||||
Redeemable common stock, $0.01 par value, 8,000,000 shares authorized, 5,424,274 and 5,229,756 shares issued and outstanding at September 30, 2009 and September 30, 2008 | 187,137 | 200,561 | ||||||
Accumulated other comprehensive loss | (238 | ) | (36 | ) | ||||
Accumulated deficit | (274,559 | ) | (276,876 | ) | ||||
Total liabilities, redeemable common stock and accumulated deficit | $ | 647,498 | $ | 655,946 | ||||
F-39
Year Ended September 30, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands, except share and | ||||||||||||
per share information) | ||||||||||||
Contract revenue | $ | 802,225 | $ | 739,482 | $ | 737,587 | ||||||
Direct contract expense | 615,700 | 566,408 | 562,139 | |||||||||
Gross profit | 186,525 | 173,074 | 175,448 | |||||||||
Operating expenses: | ||||||||||||
Indirect contract expense | 35,473 | 40,050 | 43,972 | |||||||||
Research and development | 677 | 988 | 2,379 | |||||||||
General and administrative | 60,867 | 59,484 | 60,698 | |||||||||
Rental and occupancy expense | 32,984 | 30,880 | 32,410 | |||||||||
Depreciation and amortization | 18,959 | 20,715 | 21,824 | |||||||||
Total operating expenses | 148,960 | 152,117 | 161,283 | |||||||||
Operating income | 37,565 | 20,957 | 14,165 | |||||||||
Other income (expense): | ||||||||||||
Interest income | 91 | 423 | 319 | |||||||||
Interest expense | (55,154 | ) | (47,382 | ) | (51,226 | ) | ||||||
Loss on debt extinguishment | — | — | (6,170 | ) | ||||||||
Other | 305 | 655 | 132 | |||||||||
Total other expenses | (54,758 | ) | (46,304 | ) | (56,945 | ) | ||||||
Loss before income taxes | (17,193 | ) | (25,347 | ) | (42,780 | ) | ||||||
Income tax benefit | 152 | 13 | 10 | |||||||||
Net loss | $ | (17,041 | ) | $ | (25,334 | ) | $ | (42,770 | ) | |||
Basic and diluted loss per share | $ | (3.25 | ) | $ | (5.01 | ) | $ | (8.35 | ) | |||
Basic and diluted weighted average common shares outstanding | 5,246,227 | 5,057,337 | 5,121,033 | |||||||||
F-40
Redeemable | ||||||||||||||||
Common Stock | Comprehensive | Accumulated | ||||||||||||||
Shares | Amount | Income | Deficit | |||||||||||||
(In thousands, except share and per share information) | ||||||||||||||||
Balances at October 1, 2006 | 5,210,126 | $ | 213,719 | $ | — | $ | (221,009 | ) | ||||||||
Issuance of redeemable common stock | 493,740 | 20,265 | — | — | ||||||||||||
Retirement of redeemable common stock | (690,932 | ) | (29,584 | ) | — | — | ||||||||||
Reduction in common stock redemption value | — | (3,632 | ) | — | 3,632 | |||||||||||
Net loss for year ended September 30, 2007 | — | — | (42,770 | ) | (42,770 | ) | ||||||||||
Balances at September 30, 2007 | 5,012,934 | $ | 200,768 | $ | — | $ | (260,147 | ) | ||||||||
Issuance of redeemable common stock | 316,117 | $ | 12,449 | — | — | |||||||||||
Retirement of redeemable common stock | (99,295 | ) | (4,051 | ) | — | — | ||||||||||
Reduction in common stock redemption value | — | (8,605 | ) | — | 8,605 | |||||||||||
Postretirement 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 | ) | ||||||||||
Issuance of redeemable common stock | 439,637 | $ | 15,109 | $ | — | $ | ||||||||||
Retirement of redeemable common stock | (245,119 | ) | (9,175 | ) | — | |||||||||||
Reduction in common stock redemption value | — | (19,358 | ) | — | 19,358 | |||||||||||
Postretirement 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 | ) | ||||||||||
F-41
Year Ended September 30, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (17,041 | ) | $ | (25,334 | ) | $ | (42,770 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation and amortization | 18,959 | 20,715 | 21,824 | |||||||||
Bad debt expense (recovery) | 1,014 | (578 | ) | 1,812 | ||||||||
Loss (gain) on sale of non-operating assets | 19 | (750 | ) | — | ||||||||
Accretion of debt to face value | 2,359 | 1,146 | 969 | |||||||||
Amortization of debt issuance costs | 2,708 | 1,766 | 2,768 | |||||||||
Change in fair value of redeemable common stock warrants | (7,279 | ) | (3,895 | ) | (1,624 | ) | ||||||
Loss on extinguishment of debt | — | — | 6,170 | |||||||||
Postretirement benefits curtailment gain | — | — | (3,320 | ) | ||||||||
Stock-based compensation | (5,215 | ) | 500 | 8,340 | ||||||||
Long term incentive compensation | 3,696 | — | — | |||||||||
Other | (407 | ) | 33 | (28 | ) | |||||||
Loss on interest rate hedging agreements | 18 | 295 | 413 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (12,718 | ) | 18,941 | (37,583 | ) | |||||||
Other assets | (4,283 | ) | 771 | (773 | ) | |||||||
Trade accounts payable | 3,544 | 11,059 | 10,229 | |||||||||
Accrued liabilities | 14,340 | 6,119 | 10,734 | |||||||||
Interest payable | 2,496 | (5,568 | ) | 11,871 | ||||||||
Other liabilities | 6,785 | 4,100 | 5,960 | |||||||||
Net cash provided by (used in) operating activities | 8,995 | 29,320 | (5,008 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||
Cash paid for acquisitions-related obligations | (166 | ) | (7,946 | ) | (14,751 | ) | ||||||
Capital expenditures | (2,186 | ) | (4,986 | ) | (10,687 | ) | ||||||
Proceeds from sale of non-operating assets | 5 | 780 | — | |||||||||
Net cash used in investing activities | (2,347 | ) | (12,152 | ) | (25,438 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from Term B Senior Credit Agreement note payable | — | — | 40,000 | |||||||||
Proceeds from Senior Unsecured Notes | — | — | 250,000 | |||||||||
Cash (paid for) received from interest rate swap | (4,647 | ) | 4,333 | — | ||||||||
Payment of senior term loan principal | (2,433 | ) | (6,474 | ) | (53,513 | ) | ||||||
Payment of subordinated note principal | (3,000 | ) | — | (170,000 | ) | |||||||
Payment of debt issuance cost | — | (500 | ) | (10,796 | ) | |||||||
Revolver borrowings | 504,900 | 450,505 | 465,245 | |||||||||
Revolver payments | (504,900 | ) | (459,755 | ) | (468,295 | ) | ||||||
Proceeds from interest cap agreement | — | — | 360 | |||||||||
Loan to ESOP Trust | (5,936 | ) | (3,369 | ) | — | |||||||
ESOP loan repayment | 5,936 | 3,369 | — | |||||||||
Redeemable common stock purchased from ESOP Trust | (9,175 | ) | (4,051 | ) | (29,584 | ) | ||||||
Redeemable common stock sold to ESOP Trust | 7,505 | 3,377 | 15,958 | |||||||||
Net cash (used in) provided by financing activities | (11,750 | ) | (12,565 | ) | 39,375 | |||||||
Net (decrease) increase in cash and cash equivalents | (5,102 | ) | 4,603 | 8,929 | ||||||||
Cash and cash equivalents at beginning of period | 16,287 | 11,684 | 2,755 | |||||||||
Cash and cash equivalents at end of period | $ | 11,185 | $ | 16,287 | $ | 11,684 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid for interest | $ | 49,953 | $ | 49,909 | $ | 33,695 | ||||||
Cash paid (received) for taxes | (152 | ) | 28 | 68 | ||||||||
Non-cash financing activities: | ||||||||||||
Common stock issued to ESOP Trust in satisfaction of employer contribution liability | 10,273 | 9,781 | 9,920 |
F-42
(1) | Description and Formation of the Business |
(2) | Summary of Significant Accounting Policies |
• | Human Factors Application, Inc. (HFA) — acquired November 1998 | |
• | 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 |
F-43
F-44
F-45
Purchased contracts | 1-13 years | |
Internal use software and engineering designs | 2-3 years | |
Non-compete agreements | 3-6 years |
F-46
F-47
F-48
(3) | Business Combinations |
F-49
(4) | Employee Stock Ownership Plan (ESOP) and Stock Ownership Trust |
(5) | Postretirement Benefits |
F-50
2009 | 2008 | |||||||
Accumulated postretirement benefit obligation as of September 30: | ||||||||
Retirees | $ | 717 | $ | 627 | ||||
Total active plan participants | $ | 717 | $ | 627 | ||||
2009 | 2008 | |||||||
Reconciliation of beginning and ending benefit obligation: | ||||||||
Benefit obligation at beginning of year | $ | 627 | $ | 1,175 | ||||
Interest cost | 38 | 52 | ||||||
Actuarial loss | 202 | 36 | ||||||
Benefits paid | (150 | ) | (636 | ) | ||||
Benefit obligation at end of year | $ | 717 | $ | 627 | ||||
2009 | 2008 | |||||||
Funded status of the plan: | ||||||||
Obligation at September 30 | $ | (717 | ) | $ | (627 | ) | ||
Accrued postretirement benefits included in the consolidated balance sheet | $ | (717 | ) | $ | (627 | ) | ||
2009 | 2008 | |||||||
Amounts recognized in the statement of financial position consist of: | ||||||||
Noncurrent liabilities | $ | 717 | $ | 627 | ||||
$ | 717 | $ | 627 | |||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Components of net periodic postretirement benefit cost: | ||||||||
Interest cost | $ | 38 | $ | 52 | ||||
Net periodic postretirement benefit cost | $ | 38 | $ | 52 | ||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Accumulated Other Comprehensive Income | $ | 238 | $ | 36 | ||||
$ | 238 | $ | 36 | |||||
F-51
2009 | 2008 | |||||||
Accumulated post retirement benefit obligation at September 30 | 5.12 | % | 7.00 | % | ||||
Service and interest cost portions of net periodic postretirement benefit cost | 7.00 | % | 6.15 | % |
2009 | 2008 | |||||||
Health care cost trend rate assumed for next year | 10.0 | % | 10.0 | % | ||||
Rate to which the cost trend rate is assumed to decline (ultimate trend rates) | 6.0 | % | 6.0 | % | ||||
Year the rate reaches the ultimate trend rate | 2018 | 2017 |
One-Percentage- | One-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
(In thousands) | ||||||||
Effect on total service and interest cost | $ | 2 | $ | 2 | ||||
Effect on accumulated postretirement benefit obligation | $ | 65 | $ | 57 |
(In thousands) | ||||
2010 | $ | 60 | ||
2011 | 64 | |||
2012 | 68 | |||
2013 | 70 | |||
2014 | 71 | |||
2015-2019 | $ | 290 |
(6) | Loss Per Share |
F-52
(7) | Redeemable common stock owned by ESOP Trust |
(8) | Accounts Receivable |
September 30, | ||||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Billed receivables | $ | 108,566 | $ | 99,794 | ||||
Unbilled receivables: | ||||||||
Amounts currently billable | 22,954 | 37,883 | ||||||
Revenues recorded in excess of milestone billings on fixed price contracts | 3,757 | 2,651 | ||||||
Revenues recorded in excess of estimated contract value or funding | 36,327 | 18,925 | ||||||
Retainages and other amounts billable upon contract completion | 12,972 | 13,160 | ||||||
Allowance for doubtful accounts | (4,419 | ) | (3,962 | ) | ||||
Total Accounts Receivable | $ | 180,157 | $ | 168,451 | ||||
F-53
(9) | Property, Plant and Equipment |
September 30, | ||||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Leasehold improvements | $ | 10,214 | $ | 9,451 | ||||
Equipment and software | 32,807 | 31,393 | ||||||
Total cost | 43,021 | 40,844 | ||||||
Less: accumulated depreciation and amortization | (28,547 | ) | (22,243 | ) | ||||
Net property, plant and equipment | $ | 14,474 | $ | 18,601 | ||||
(10) | Goodwill and Intangible Assets |
Total | ||||
(In thousands) | ||||
Balance as of September 30, 2007 | $ | 395,926 | ||
Adjustment to initial allocation (includes earn out obligations) | 2,945 | |||
Balance as of September 30, 2008 | $ | 398,871 | ||
Adjustment to initial allocation (includes earn out obligations) | 50 | |||
Balance as of September 30, 2009 | $ | 398,921 | ||
September 30, 2009 | September 30, 2008 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Gross | Amortization | Net | Gross | Amortization | Net | |||||||||||||||||||
Purchased contracts | $ | 111,635 | $ | (83,563 | ) | $ | 28,072 | $ | 111,635 | $ | (71,410 | ) | $ | 40,225 | ||||||||||
Internal use software and engineering designs | 2,155 | (1,568 | ) | 587 | 2,155 | (1,178 | ) | 977 | ||||||||||||||||
Non-compete agreements | 725 | (704 | ) | 21 | 725 | (679 | ) | 46 | ||||||||||||||||
Total | $ | 114,515 | $ | (85,835 | ) | $ | 28,680 | $ | 114,515 | $ | (73,267 | ) | $ | 41,248 | ||||||||||
F-54
(In thousands) | ||||
2010 | $ | 10,985 | ||
2011 | 6,843 | |||
2012 | 5,766 | |||
2013 | 3,246 | |||
2014 | 879 | |||
Thereafter | 961 | |||
$ | 28,680 | |||
(11) | Long-Term Debt |
• | In April 2005, the first amendment made certain changes and added $72.0 million in senior term loans to the total Term B Senior Credit Agreement debt. | |
• | In March 2006, the second amendment made certain changes, increased the senior term loan commitment by $68.0 million (drawn in full) and increased the revolving credit commitment from $30.0 million to $50.0 million. | |
• | In June 2006, the third amendment made certain changes and added $50.0 million in senior term loans to the total Term B Senior Credit Agreement debt. | |
• | In January 2007, the fourth increment added $15.0 million in senior term loans to the total Term B Senior Credit Agreement debt. | |
• | In February 2007, the fourth amendment made certain changes, extended the senior term loan maturity date to February 6, 2013, adjusted the principal repayment schedule to require a balloon principal payment at maturity, and added an incurrence test as an additional condition precedent to Alion’s ability to borrow additional funds. | |
• | In July 2007, the fifth increment added $25.0 million in senior term loans to the Term B Senior Credit Agreement. | |
• | On September 30, 2008, the fifth amendment made certain changes. |
• | It increased the interest rate by 350 basis points to a minimum Eurodollar interest rate of 3.50% plus 600 basis points, and a minimum alternate base rate of 4.50% plus 500 basis points. | |
• | If the Company refinances, replaces or extends the maturity of its existing revolving line of credit with an interest rate spread which is more than 50 basis points higher than the then-current interest |
F-55
rate spread applicable to the Company’s senior term loan, Alion’s interest rate spread would increase by the difference between the higher revolving credit facility interest rate spread and 50 basis points. |
• | Alion is required to use all (formerly half) of excess annual cash flow to prepay outstanding senior term loans. | |
• | It amended financial covenants to provide Alion flexibility through September 30, 2009. | |
• | It restricts the Company’s ability to pay the CEO or COO for previously awarded shares of phantom stock. | |
• | It permits Alion to incur additional second lien debt, subject to certain conditions. |
• | In July 2009, the sixth amendment extended the revolving credit facility maturity date to September 25, 2009 (which by later amendment was extended to September 30, 2010) and reduced the aggregate amount of the revolving credit commitments from $50 million to $40 million (which by later amendment was reduced to $25 million). | |
• | In September 2009, the seventh amendment extended the revolving credit facility maturity date to October 9, 2009. | |
• | In October 2009, the ninth amendment extended the revolving credit maturity date to September 30, 2010, added a liquidity condition requiring Alion to pay in kind an additional 100 basis points in interest if Alion does not secure an additional $10 million in revolving credit commitments by February 1, 2010, added a leverage reduction condition requiring Alion to pay in kind an additional 100 basis points in interest if Alion’s Senior Secured Leverage Ratio is more than 2.75 to 1.00 as of June 30, 2010 and the additional interest increases by 50 basis points each quarter thereafter if the leverage ratio is not met, afforded the senior lenders the opportunity to appoint a designee to Alion’s board of directors if Alion’s Senior Secured Leverage Ratio is more than 2.75 to 1.00 as of June 30, 2010, added a $25 million uncommitted incremental revolving credit facility, removed a requirement that Alion maintain its S-corporation status, limited Alion’s ability to make capital expenditures from June 30, 2009 to September 30, 2010 to $8 million and made other modifications to Alion’s negative covenants. |
• | a senior term loan in the approximate amount of $236.6 million; | |
• | a $25.0 million senior revolving credit facility only $182 thousand of which was allocated to letters of credit and deemed borrowed, but none of which was actually drawn as of September 30, 2009; and | |
• | a $110.0 million uncommitted incremental term loan “accordion” facility for which loans may be permitted subject to satisfying the leverage based incurrence test. |
F-56
F-57
F-58
F-59
September 30, | ||||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Senior Unsecured Notes | $ | 4,271 | $ | 4,271 | ||||
Term B Senior Credit Agreement Note Payable | 3,975 | 2,272 | ||||||
Subordinated Note Payable | 793 | — | ||||||
Total | $ | 9,039 | $ | 6,543 | ||||
F-60
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Senior Secured Term B Loan(1) | $ | 2,433 | $ | 2,433 | $ | 2,433 | $ | 229,297 | $ | — | $ | $ | 236,596 | |||||||||||||||
Senior Unsecured Notes(2) | — | — | — | — | — | 250,000 | 250,000 | |||||||||||||||||||||
Subordinated Seller Note(3) | 3,000 | 3,000 | 2,000 | 70,312 | — | 78,312 | ||||||||||||||||||||||
Total Principal Payments | $ | 5,433 | $ | 5,433 | $ | 4,433 | $ | 299,609 | $ | — | $ | 250,000 | $ | 564,908 | ||||||||||||||
(1) | The table does not include any Term B Senior Credit Agreement principal pre-payments. The timing and amount of such payments is uncertain. The total on the face of the balance sheet for the Term B Senior Term Loan includes approximately $236.6 million in principal and $5.0 million in unamortized debt issue costs as of September 30, 2009. Debt issue costs for the original loan and subsequent modifications totaled $12.5 million through September 2009. The Company estimates it will need to refinance the Term B Senior Credit Agreement before it matures. | |
(2) | The Senior Unsecured Notes on the face of the balance sheet include $250 million in principal and $4.8 million in unamortized debt issue costs as of September 30, 2009 (originally $7.1 million). | |
(3) | The Subordinated Note on the face of the balance sheet includes approximately $10.2 million of unamortized original issue discount for the fair value of the detachable warrants Alion issued in December 2002 and the warrants Alion issued for the September 2008 amendment. The first set of Subordinated Note |
F-61
warrants had an initial fair value of approximately $7.1 million The amendment to the first set of warrants had an initial fair value of $1.3 million and the additional warrants had an initial fair value of approximately $9.0 million. The Company recognized original issue discount for the fair value of the warrants. | ||
The amounts presented do not reflect the anticipated effect of the Company’s agreement with IIT to retire the Subordinated Note and related Warrants for $25 million prior to April 2010. |
(12) | Fair Value Measurement |
F-62
Level 1 | Level 2 | Level 3 | ||||||||||
Liabilities: | ||||||||||||
Redeemable common stock warrants | $ | — | $ | — | $ | (32,717 | ) | |||||
Fiscal Year Ended | ||||||||
September 30, 2009 | September 30, 2008 | |||||||
Redeemable Common Stock Warrants | ||||||||
Balance, beginning of period | $ | (39,996 | ) | $ | (33,610 | ) | ||
Total realized and unrealized gains and (losses) Included in interest expense | (7,279 | ) | (3,895 | ) | ||||
Issuances and settlements | — | 10,281 | ||||||
Balance, end of period | $ | (32,717 | ) | $ | (39,996 | ) | ||
(13) | Interest Rate Swap |
(14) | Redeemable Common Stock Warrants |
F-63
(15) | Leases |
Lease Payments for Fiscal Years Ending | ||||
(In thousands) | ||||
2010 | $ | 27,350 | ||
2011 | 25,700 | |||
2012 | 21,731 | |||
2013 | 20,403 | |||
2014 | 13,979 | |||
And thereafter | 38,947 | |||
Gross lease payments | $ | 148,110 | ||
Less: non-cancelable subtenant receipts | (2,982 | ) | ||
Net lease payments | $ | 145,128 | ||
F-64
September 30, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Minimum rentals | $ | 25,742 | $ | 24,794 | $ | 25,574 | ||||||
Less: Sublease rental income | (2,655 | ) | (3,559 | ) | (2,687 | ) | ||||||
Total rent expense, net | $ | 23,087 | $ | 21,235 | $ | 22,887 | ||||||
(16) | Stock Appreciation Rights |
F-65
Stock Appreciation Rights
As of September 30, 2009
Shares Granted to | Exercise | Outstanding at | ||||||||||
Date of Grant | Employees | Price | 9/30/2008 | |||||||||
November 2003 | 129,550 | $ | 14.71 | 68,335 | ||||||||
February 2004 | 2,000 | $ | 14.71 | 2,000 | ||||||||
February 2005 | 165,000 | $ | 19.94 | 89,162 | ||||||||
March 2005 | 2,000 | $ | 19.94 | 2,000 | ||||||||
April 2005 | 33,000 | $ | 29.81 | 20,250 | ||||||||
June 2005 | 2,000 | $ | 29.81 | 2,000 | ||||||||
December 2005 | 276,675 | $ | 35.89 | 203,774 | ||||||||
February 2006 | 13,000 | $ | 35.89 | 7,750 | ||||||||
February 2006 | 7,500 | $ | 35.89 | 3,750 | ||||||||
May 2006 | 7,000 | $ | 37.06 | 6,000 | ||||||||
July 2006 | 15,000 | $ | 37.06 | 10,500 | ||||||||
October 2006 | 2,500 | $ | 41.02 | 2,500 | ||||||||
December 2006 | 238,350 | $ | 41.02 | 201,083 | ||||||||
February 2007 | 33,450 | $ | 41.02 | 24,700 | ||||||||
May 2007 | 2,000 | $ | 43.37 | 2,000 | ||||||||
September 2007 | 2,000 | $ | 43.37 | 2,000 | ||||||||
December 2007 | 232,385 | $ | 40.05 | 210,310 | ||||||||
April 2008 | 2,000 | $ | 41.00 | 2,000 | ||||||||
September 2008 | 2,000 | $ | 41.00 | 2,000 | ||||||||
December 2008 | 203,250 | $ | 38.35 | — | ||||||||
April 2009 | 1,000 | $ | 34.30 | — | ||||||||
Total | 1,371,660 | 862,114 | ||||||||||
Weighted Average Exercise Price | $ | 33.91 |
F-66
Stock Appreciation Rights
As of September 30, 2009
Outstanding at | Vested at | Exercisable | ||||||||||||||||||||||
Date of Grant | 9/30/09 | Forfeited | Exercised | Expired | 9/30/09 | at 9/30/09 | ||||||||||||||||||
November 2003 | — | 565 | 67,770 | — | — | — | ||||||||||||||||||
February 2004 | — | — | 2,000 | — | — | — | ||||||||||||||||||
February 2005 | 71,150 | 2,412 | 15,600 | — | 71,150 | — | ||||||||||||||||||
March 2005 | 2,000 | — | — | — | 2,000 | — | ||||||||||||||||||
April 2005 | 18,000 | — | 2,250 | — | 18,000 | — | ||||||||||||||||||
June 2005 | 2,000 | — | — | — | 2,000 | — | ||||||||||||||||||
December 2005 | 175,284 | 9,607 | 18,883 | — | 131,505 | — | ||||||||||||||||||
February 2006 | 7,750 | — | — | — | 5,813 | — | ||||||||||||||||||
February 2006 | 2,500 | 625 | 625 | — | 1,875 | — | ||||||||||||||||||
May 2006 | 6,000 | — | — | — | 4,500 | — | ||||||||||||||||||
July 2006 | 10,000 | — | 500 | — | 7,500 | — | ||||||||||||||||||
October 2006 | 2,500 | — | — | — | 1,250 | — | ||||||||||||||||||
December 2006 | 171,500 | 17,648 | 11,935 | — | 85,750 | — | ||||||||||||||||||
February 2007 | 21,700 | 1,500 | 1,500 | — | 10,850 | — | ||||||||||||||||||
May 2007 | 2,000 | — | — | — | 1,000 | — | ||||||||||||||||||
September 2007 | 2,000 | — | — | — | 1,000 | — | ||||||||||||||||||
December 2007 | 187,740 | 18,659 | 3,911 | — | 46,935 | — | ||||||||||||||||||
April 2008 | 2,000 | — | — | — | 500 | — | ||||||||||||||||||
September 2008 | 2,000 | — | — | — | 500 | — | ||||||||||||||||||
December 2008 | 189,875 | 13,375 | — | — | — | — | ||||||||||||||||||
April 2009 | 1,000 | — | ||||||||||||||||||||||
Total | 876,999 | 64,391 | 124,974 | — | 392,128 | — | ||||||||||||||||||
Weighted Average Exercise Price | $ | 37.07 | $ | 38.35 | $ | 22.65 | $ | — | $ | 34.47 | $ | — |
F-67
Stock Appreciation Rights
As of September 30, 2009
Risk Free | Expected | Remaining Life | ||||||||||||||
Date of Grant | Interest Rate | Volatility | Life | (Months) | ||||||||||||
November 2003 | 4.06% - 4.49% | 60 | % | 5 yrs | — | |||||||||||
February 2004 | 4.06% - 4.49% | 60 | % | 5 yrs | — | |||||||||||
February 2005 | 3.10% - 3.60% | 45 | % | 4 yrs | — | |||||||||||
March 2005 | 3.10% - 3.60% | 45 | % | 4 yrs | — | |||||||||||
April 2005 | 4.10% - 4.20% | 45 | % | 4 yrs | — | |||||||||||
June 2005 | 4.10% - 4.20% | 45 | % | 4 yrs | — | |||||||||||
December 2005 | 4.20% - 4.20% | 40 | % | 4 yrs | 2.7 | |||||||||||
February 2006 | 4.20% - 4.20% | 40 | % | 4 yrs | 4.4 | |||||||||||
February 2006 | 4.20% - 4.20% | 40 | % | 4 yrs | 4.8 | |||||||||||
May 2006 | 4.82% - 4.83% | 35 | % | 4 yrs | 7.6 | |||||||||||
July 2006 | 4.82% - 4.83% | 35 | % | 4 yrs | 9.0 | |||||||||||
October 2006 | 4.82% - 4.83% | 35 | % | 4 yrs | 12.8 | |||||||||||
December 2006 | 4.54% - 4.58% | 35 | % | 4 yrs | 14.7 | |||||||||||
February 2007 | 4.54% - 4.58% | 35 | % | 4 yrs | 16.8 | |||||||||||
May 2007 | 4.54% - 4.58% | 35 | % | 4 yrs | 19.6 | |||||||||||
September 2007 | 4.54% - 4.54% | 35 | % | 4 yrs | 23.1 | |||||||||||
December 2007 | 4.23% - 4.23% | 35 | % | 4 yrs | 26.8 | |||||||||||
April 2008 | 4.23% - 4.23% | 35 | % | 4 yrs | 30.9 | |||||||||||
September 2008 | 4.23% - 4.23% | 35 | % | 4 yrs | 35.5 | |||||||||||
December 2008 | 4.23% - 4.23% | 35 | % | 4 yrs | 38.8 | |||||||||||
April 2009 | 4.23% - 4.23% | 35 | % | 4 yrs | 42.4 | |||||||||||
Weighted Average Remaining Life (months) | 18.5 |
(17) | Phantom Stock Plans |
F-68
F-69
Phantom Stock
as of September 30, 2009
Shares Granted to | Shares Granted | Total Shares | Grant Date | Outstanding at | ||||||||||||||||
Date of Grant | Employees | to Directors | Granted | Share Price | 9/30/08 | |||||||||||||||
November 2003 | 52,685 | — | 52,685 | $ | 14.71 | 11,897 | ||||||||||||||
February 2005 | 213,215 | — | 213,215 | $ | 19.94 | 66,436 | ||||||||||||||
February 2005 | 98,399 | — | 98,399 | $ | 19.94 | 16,696 | ||||||||||||||
February 2005 | 5,015 | — | 5,015 | $ | 19.94 | 5,015 | ||||||||||||||
August 2005 | 2,960 | — | 2,960 | $ | 33.78 | 2,960 | ||||||||||||||
November 2005 | 66,592 | — | 66,592 | $ | 35.89 | 51,268 | ||||||||||||||
November 2005 | — | 7,808 | 7,808 | $ | 35.89 | 5,531 | ||||||||||||||
November 2005 | 55,726 | — | 55,726 | $ | 35.89 | 41,795 | ||||||||||||||
November 2006 | — | 5,978 | 5,978 | $ | 41.02 | 5,409 | ||||||||||||||
November 2006 | 65,456 | — | 65,456 | $ | 41.02 | 50,341 | ||||||||||||||
November 2007 | — | 6,993 | 6,993 | $ | 40.05 | 6,993 | ||||||||||||||
November 2007 | 42,447 | — | 42,447 | $ | 40.05 | 39,950 | ||||||||||||||
January 2008 | 2,497 | — | 2,497 | $ | 40.05 | 2,497 | ||||||||||||||
May 2008 | 1,220 | — | 1,220 | $ | 41.00 | 1,220 | ||||||||||||||
Total | 606,212 | 20,779 | 626,991 | 308,008 | ||||||||||||||||
Weighted Average Grant Date Fair Value Price Per Share | $ | 26.58 | $ | 38.77 | $ | 26.98 | $ | 32.10 |
F-70
Phantom Stock
as of September 30, 2009
Outstanding at | Vested at | Exercisable at | ||||||||||||||||||||||
Date of Grant | 9/30/09 | Forfeited | Exercised | Expired | 9/30/09 | 9/30/09 | ||||||||||||||||||
November 2003 | — | — | 11,897 | — | — | — | ||||||||||||||||||
February 2005 | — | 10,328 | 56,108 | — | — | — | ||||||||||||||||||
February 2005 | — | — | 16,696 | — | — | — | ||||||||||||||||||
February 2005 | — | 2,558 | 2,457 | — | — | — | ||||||||||||||||||
August 2005 | — | 2,960 | — | — | — | — | ||||||||||||||||||
November 2005 | — | 43,188 | 8,080 | — | — | — | ||||||||||||||||||
November 2005 | — | — | 5,531 | — | — | — | ||||||||||||||||||
November 2005 | — | 41,795 | — | — | — | — | ||||||||||||||||||
November 2006 | 4,839 | — | 569 | — | 2,847 | 2,847 | ||||||||||||||||||
November 2006 | — | 46,684 | 3,657 | — | — | — | ||||||||||||||||||
November 2007 | 5,994 | — | 999 | — | 1,332 | 1,332 | ||||||||||||||||||
November 2007 | — | 34,956 | 4,994 | — | — | — | ||||||||||||||||||
January 2008 | — | 2,497 | — | — | — | — | ||||||||||||||||||
May 2008 | — | 1,220 | — | — | — | — | ||||||||||||||||||
�� | ||||||||||||||||||||||||
Total | 10,833 | 186,186 | 110,988 | — | 4,179 | 4,179 | ||||||||||||||||||
Weighted Average Grant Date Fair Value Price Per Share | $ | 40.48 | $ | 36.91 | $ | 23.22 | $ | — | $ | 40.71 | $ | 40.71 |
Phantom Stock
as of September 30, 2009
Expected | Remaining Life | |||||||||||||||
Date of Grant | Risk Free Interest Rate | Volatility | Life | (Months) | ||||||||||||
November 2003 | 4.06% - 4.49% | 60 | % | 5 yrs | — | |||||||||||
February 2005 | 3.10% - 3.60% | 45 | % | 3 yrs | — | |||||||||||
February 2005 | 3.10% - 3.60% | 45 | % | 3 yrs | — | |||||||||||
February 2005 | 3.10% - 3.60% | 45 | % | 4 yrs | — | |||||||||||
August 2005 | 3.72% - 3.77% | 45 | % | 3 yrs | — | |||||||||||
November 2005 | 4.20% - 4.20% | 40 | % | 3 yrs | — | |||||||||||
November 2005 | 4.20% - 4.20% | 40 | % | 3 yrs | — | |||||||||||
November 2005 | 4.20% - 4.20% | 40 | % | 5 yrs | — | |||||||||||
November 2006 | 4.54% - 4.58% | 35 | % | 3 yrs | 1.4 | |||||||||||
November 2006 | 4.54% - 4.58% | 35 | % | 3 yrs | — | |||||||||||
November 2007 | 4.23% - 4.23% | 35 | % | 3 yrs | 13.4 | |||||||||||
November 2007 | 4.23% - 4.23% | 35 | % | 3 yrs | — | |||||||||||
January 2008 | 4.23% - 4.23% | 35 | % | 3 yrs | — | |||||||||||
May 2008 | 4.23% - 4.23% | 35 | % | 3 yrs | — | |||||||||||
Weighted Average Remaining Life | 8.0 |
F-71
(18) | Long Term Incentive Plan |
(19) | Segment Information and Customer Concentration |
For the Years Ended September 30, | ||||||||||||||
Government Agency | Contract | 2009 | 2008 | 2007 | ||||||||||
DoD — Navy | SeaPort Multiple Award Contract — NAVSEA | 14.3 | % | 16.8 | % | 14.2 | % | |||||||
DoD — Air Force | Secretary of the Air Force | 9.5 | % | 9.0 | % | 8.7 | % | |||||||
DoD — Navy | Seaport-e Multiple Award Contract | 7.0 | % | 8.6 | % | 6.7 | % |
(20) | Guarantor/Non-guarantor Condensed Consolidated Financial Information |
F-72
(in thousands)
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 11,404 | $ | (215 | ) | $ | (4 | ) | $ | — | $ | 11,185 | ||||||||
Accounts receivable | 174,456 | 5,663 | 38 | — | 180,157 | |||||||||||||||
Prepaid expenses and other current assets | 3,659 | 133 | 3 | — | 3,795 | |||||||||||||||
Total current assets | 189,519 | 5,581 | 37 | — | 195,137 | |||||||||||||||
Property, plant and equipment, net | 14,346 | 128 | — | — | 14,474 | |||||||||||||||
Intangible assets, net | 28,680 | — | — | — | 28,680 | |||||||||||||||
Goodwill | 398,921 | — | — | — | 398,921 | |||||||||||||||
Investment in subsidiaries | 17,132 | — | — | (17,132 | ) | — | ||||||||||||||
Intercompany receivables | 702 | 15,939 | — | (16,641 | ) | — | ||||||||||||||
Other assets | 10,270 | 13 | 3 | — | 10,286 | |||||||||||||||
Total assets | $ | 659,570 | $ | 21,661 | $ | 40 | $ | (33,773 | ) | $ | 647,498 | |||||||||
Current liabilities: | ||||||||||||||||||||
Interest payable | $ | 9,039 | $ | — | $ | — | $ | — | $ | 9,039 | ||||||||||
Current portion, Senior Term Loan payable | 2,389 | — | — | — | 2,389 | |||||||||||||||
Current portion, subordinated note payable | 3,000 | — | — | — | 3,000 | |||||||||||||||
Current portion, acquisition obligations | 50 | — | — | — | 50 | |||||||||||||||
Trade accounts payable | 59,742 | 963 | 2 | — | 60,707 | |||||||||||||||
Accrued liabilities | 43,984 | 1,441 | — | — | 45,425 | |||||||||||||||
Accrued payroll and related liabilities | 41,642 | 1,381 | 10 | — | 43,033 | |||||||||||||||
Billings in excess of costs revenue earned | 3,661 | — | — | — | 3,661 | |||||||||||||||
Total current liabilities | 163,507 | 3,785 | 12 | — | 167,304 | |||||||||||||||
Intercompany payables | 15,939 | — | 702 | (16,641 | ) | — | ||||||||||||||
Senior Term Loan payable, excluding current portion | 229,221 | — | — | — | 229,221 | |||||||||||||||
Senior Unsecured Notes | 245,241 | — | — | — | 245,241 | |||||||||||||||
Subordinated note payable | 46,932 | �� | — | — | — | 46,932 | ||||||||||||||
Accrued compensation, excluding current portion | 5,740 | — | — | — | 5,740 | |||||||||||||||
Accrued postretirement benefit obligations | 717 | — | — | — | 717 | |||||||||||||||
Non-current portion of lease obligations | 7,216 | 70 | — | — | 7,286 | |||||||||||||||
Redeemable common stock warrants | 32,717 | — | — | — | 32,717 | |||||||||||||||
Common stock of subsidiaries | — | 2,800 | — | (2,800 | ) | — | ||||||||||||||
Redeemable common stock | 187,137 | — | — | — | 187,137 | |||||||||||||||
Accumulated 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 | |||||||||
F-73
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 16,392 | $ | (103 | ) | $ | (2 | ) | $ | — | $ | 16,287 | ||||||||
Accounts receivable | 161,519 | 6,932 | — | — | 168,451 | |||||||||||||||
Stock subscriptions receivable | 2,669 | — | — | — | 2,669 | |||||||||||||||
Prepaid expenses and other current assets | 3,024 | 64 | 47 | — | 3,135 | |||||||||||||||
Total current assets | 183,604 | 6,893 | 45 | — | 190,542 | |||||||||||||||
Property, plant and equipment, net | 18,419 | 182 | — | — | 18,601 | |||||||||||||||
Intangible assets, net | 41,248 | — | — | — | 41,248 | |||||||||||||||
Goodwill | 398,871 | — | — | — | 398,871 | |||||||||||||||
Investment in subsidiaries | 10,831 | — | — | (10,831 | ) | — | ||||||||||||||
Intercompany receivables | — | 8,110 | — | (8,110 | ) | — | ||||||||||||||
Other assets | 6,668 | 16 | — | — | 6,684 | |||||||||||||||
Total assets | $ | 659,641 | $ | 15,201 | $ | 45 | $ | (18,941 | ) | $ | 655,946 | |||||||||
Current liabilities: | ||||||||||||||||||||
Interest payable | $ | 6,543 | $ | — | $ | — | $ | — | $ | 6,543 | ||||||||||
Interest rate swap liability | 4,629 | — | — | — | 4,629 | |||||||||||||||
Current portion, Term B Senior Credit Facility note payable | 232,220 | — | — | — | 232,220 | |||||||||||||||
Current portion, subordinated note payable | 3,000 | — | — | — | 3,000 | |||||||||||||||
Current portion, acquisition obligations | 50 | — | — | — | 50 | |||||||||||||||
Trade accounts payable | 55,932 | 1,232 | — | — | 57,164 | |||||||||||||||
Accrued liabilities | 37,678 | 1,549 | — | — | 39,227 | |||||||||||||||
Accrued payroll and related liabilities | 40,569 | 983 | 5 | — | 41,557 | |||||||||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 2,708 | — | — | — | 2,708 | |||||||||||||||
Total current liabilities | 383,329 | 3,764 | 5 | — | 387,098 | |||||||||||||||
Intercompany payables | 7,543 | — | 567 | (8,110 | ) | — | ||||||||||||||
Term B Senior Credit Facility note payable, excluding current portion | — | — | — | — | — | |||||||||||||||
Senior Unsecured Notes | 244,355 | — | — | — | 244,355 | |||||||||||||||
Subordinated note payable | 42,656 | — | — | — | 42,656 | |||||||||||||||
Accrued compensation, excluding current portion | 11,305 | — | — | — | 11,305 | |||||||||||||||
Accrued postretirement benefit obligations | 627 | — | — | — | 627 | |||||||||||||||
Non-current portion of lease obligations | 6,181 | 79 | — | — | 6,260 | |||||||||||||||
Redeemable common stock warrants | 39,996 | — | — | — | 39,996 | |||||||||||||||
Common stock of subsidiaries | — | 2,800 | — | (2,800 | ) | — | ||||||||||||||
Redeemable common stock | 200,561 | — | — | — | 200,561 | |||||||||||||||
Accumulated other comprehensive loss | (36 | ) | — | — | — | (36 | ) | |||||||||||||
Accumulated surplus (deficit) | (276,876 | ) | 8,558 | (527 | ) | (8,031 | ) | (276,876 | ) | |||||||||||
Total liabilities, redeemable common stock and accumulated deficit | $ | 659,641 | $ | 15,201 | $ | 45 | $ | (18,941 | ) | $ | 655,946 | |||||||||
F-74
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 766,297 | $ | 35,884 | $ | 44 | $ | — | $ | 802,225 | ||||||||||
Direct contract expenses | 590,934 | 24,737 | 29 | — | 615,700 | |||||||||||||||
Gross profit | 175,363 | 11,147 | 15 | — | 186,525 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Indirect contract expense | 31,968 | 3,509 | (4 | ) | — | 35,473 | ||||||||||||||
Research and development | 677 | — | — | — | 677 | |||||||||||||||
General and administrative | 59,615 | 998 | 254 | — | 60,867 | |||||||||||||||
Rental and occupancy expense | 32,370 | 592 | 22 | — | 32,984 | |||||||||||||||
Depreciation and amortization | 18,907 | 52 | — | — | 18,959 | |||||||||||||||
Total operating expenses | 143,537 | 5,151 | 272 | — | 148,960 | |||||||||||||||
Operating income (loss) | 31,826 | 5,996 | (257 | ) | — | 37,565 | ||||||||||||||
Other income / (expense): | ||||||||||||||||||||
Interest income | 72 | 19 | — | — | 91 | |||||||||||||||
Interest expense | (55,154 | ) | — | — | — | (55,154 | ) | |||||||||||||
Other | (129 | ) | 434 | — | — | 305 | ||||||||||||||
Equity 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 | — | 152 | ||||||||||||||
Net income / (loss) | $ | (17,041 | ) | $ | 6,447 | $ | (147 | ) | $ | (6,300 | ) | $ | (17,041 | ) | ||||||
F-75
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 706,699 | $ | 32,593 | $ | 190 | $ | — | $ | 739,482 | ||||||||||
Direct contract expense | 542,674 | 23,608 | 126 | — | 566,408 | |||||||||||||||
Gross profit | 164,025 | 8,985 | 64 | — | 173,074 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Indirect contract expense | 34,779 | 5,118 | 153 | — | 40,050 | |||||||||||||||
Research and development | 944 | — | 44 | — | 988 | |||||||||||||||
General and administrative | 58,582 | 923 | (21 | ) | — | 59,484 | ||||||||||||||
Rental and occupancy expense | 30,869 | (13 | ) | 24 | — | 30,880 | ||||||||||||||
Depreciation and amortization | 20,572 | 143 | — | — | 20,715 | |||||||||||||||
Total operating expenses | 145,746 | 6,171 | 200 | — | 152,117 | |||||||||||||||
Operating income (loss) | 18,279 | 2,814 | (136 | ) | — | 20,957 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 412 | 11 | — | — | 423 | |||||||||||||||
Interest expense | (47,382 | ) | — | — | — | (47,382 | ) | |||||||||||||
Other | 193 | 463 | (1 | ) | — | 655 | ||||||||||||||
Equity in operations of subsidiaries | 3,151 | — | — | (3,151 | ) | — | ||||||||||||||
Total other income (expenses) | (43,626 | ) | 474 | (1 | ) | (3,151 | ) | (46,304 | ) | |||||||||||
Income (loss) before income taxes | (25,347 | ) | 3,288 | (137 | ) | (3,151 | ) | (25,347 | ) | |||||||||||
Income tax benefit | 13 | — | — | — | 13 | |||||||||||||||
Net income (loss) | $ | (25,334 | ) | $ | 3,288 | $ | (137 | ) | $ | (3,151 | ) | $ | (25,334 | ) | ||||||
F-76
Non- | ||||||||||||||||||||
Guarantor | Guarantor | |||||||||||||||||||
Parent | Companies | Companies | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contract revenue | $ | 709,980 | $ | 27,375 | $ | 232 | $ | — | $ | 737,587 | ||||||||||
Direct contract expense | 542,085 | 19,904 | 150 | — | 562,139 | |||||||||||||||
Gross profit | 167,895 | 7,471 | 82 | — | 175,448 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Indirect contract expense | 39,206 | 4,629 | 137 | — | 43,972 | |||||||||||||||
Research and development | 2,158 | 8 | 213 | — | 2,379 | |||||||||||||||
General and administrative | 59,328 | 1,496 | (126 | ) | — | 60,698 | ||||||||||||||
Rental and occupancy expense | 32,098 | 273 | 39 | — | 32,410 | |||||||||||||||
Depreciation and amortization | 21,689 | 135 | — | — | 21,824 | |||||||||||||||
Total operating expenses | 154,479 | 6,541 | 263 | — | 161,283 | |||||||||||||||
Operating income (loss) | 13,416 | 930 | (181 | ) | — | 14,165 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 319 | — | — | — | 319 | |||||||||||||||
Interest expense | (51,226 | ) | — | — | — | (51,226 | ) | |||||||||||||
Loss on extinguishment of debt | (6,170 | ) | — | — | — | (6,170 | ) | |||||||||||||
Other | 1,191 | (1,146 | ) | 87 | — | 132 | ||||||||||||||
Equity in operations of subsidiaries | (300 | ) | — | — | 300 | — | ||||||||||||||
Total other income (expenses) | (56,186 | ) | (1,146 | ) | 87 | 300 | (56,945 | ) | ||||||||||||
Income (loss) before income taxes | (42,770 | ) | (216 | ) | (94 | ) | 300 | (42,780 | ) | |||||||||||
Income tax benefit | — | 10 | — | — | 10 | |||||||||||||||
Net income (loss) | $ | (42,770 | ) | $ | (206 | ) | $ | (94 | ) | $ | 300 | $ | (42,770 | ) | ||||||
F-77
Year Ended September 30, 2009
Non- | ||||||||||||||||
Parent | Guarantors | Guarantors | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
Net cash provided by / (used in) operating activities | $ | 9,083 | $ | (90 | ) | $ | 2 | $ | 8,995 | |||||||
Cash 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 | — | — | 5 | ||||||||||||
Net cash used in investing activities | (2,321 | ) | (22 | ) | (4 | ) | (2,347 | ) | ||||||||
Cash inflows / (outflows) from financing activities: | ||||||||||||||||
Net cash received/(paid) from interest rate swap | (4,647 | ) | — | — | (4,647 | ) | ||||||||||
Repayment of CSFB senior note payable | (2,433 | ) | — | — | (2,433 | ) | ||||||||||
Repayment of subordinated note | (3,000 | ) | — | — | (3,000 | ) | ||||||||||
Revolver borrowings | 504,900 | — | — | 504,900 | ||||||||||||
Revolver payments | (504,900 | ) | — | — | (504,900 | ) | ||||||||||
Loan to ESOP trust | (5,936 | ) | — | — | (5,936 | ) | ||||||||||
ESOP loan repayment | 5,936 | — | — | 5,936 | ||||||||||||
Purchase of shares of common stock from ESOP trust | (9,175 | ) | — | — | (9,175 | ) | ||||||||||
Cash received from issuance of common stock to trust | 7,505 | — | — | 7,505 | ||||||||||||
Net cash provided by / (used in) financing activities | (11,750 | ) | — | — | (11,750 | ) | ||||||||||
Net increase / (decrease) in cash and cash equivalents | (4,988 | ) | (112 | ) | (2 | ) | (5,102 | ) | ||||||||
Cash at beginning of period | 16,392 | (103 | ) | (2 | ) | 16,287 | ||||||||||
Cash at end of period | $ | 11,404 | $ | (215 | ) | $ | (4 | ) | $ | 11,185 | ||||||
F-78
Year Ended September 30, 2008
Non- | ||||||||||||||||
Guarantor | Guarantor | |||||||||||||||
Parent | Companies | Companies | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 29,268 | $ | 53 | $ | (1 | ) | $ | 29,320 | |||||||
Cash flows from investing activities: | ||||||||||||||||
Cash paid for acquisitions, net of cash acquired | (7,946 | ) | — | — | (7,946 | ) | ||||||||||
Capital expenditures | (4,863 | ) | (123 | ) | — | (4,986 | ) | |||||||||
Proceeds from sale of non-operating assets | 780 | — | — | 780 | ||||||||||||
Net cash used in investing activities | (12,029 | ) | (123 | ) | — | (12,152 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Net cash received from interest rate swap | 4,333 | — | — | 4,333 | ||||||||||||
Payment of debt issuance costs | (500 | ) | — | — | (500 | ) | ||||||||||
Repayment of Term B Credit Facility note payable | (6,474 | ) | — | — | (6,474 | ) | ||||||||||
Revolver borrowings | 450,505 | — | — | 450,505 | ||||||||||||
Revolver payments | (459,755 | ) | — | — | (459,755 | ) | ||||||||||
Loan to ESOP Trust | (3,369 | ) | — | — | (3,369 | ) | ||||||||||
ESOP to loan repayment | 3,369 | — | — | 3,369 | ||||||||||||
Purchase of redeemable common stock from ESOP Trust | (4,051 | ) | — | — | (4,051 | ) | ||||||||||
Cash received from issuance of redeemable common stock to ESOP Trust | 3,377 | — | — | 3,377 | ||||||||||||
Net cash used in financing activities | (12,565 | ) | — | — | (12,565 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 4,674 | (70 | ) | (1 | ) | 4,603 | ||||||||||
Cash and cash equivalents at beginning of year | 11,718 | (33 | ) | (1 | ) | 11,684 | ||||||||||
Cash and cash equivalents at end of year | $ | 16,392 | $ | (103 | ) | $ | (2 | ) | $ | 16,287 | ||||||
F-79
Year Ended September 30, 2007
Non- | ||||||||||||||||
Guarantor | Guarantor | |||||||||||||||
Parent | Companies | Companies | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | (4,986 | ) | $ | 38 | $ | (60 | ) | $ | (5,008 | ) | |||||
Cash flows from investing activities: | ||||||||||||||||
Cash paid for acquisitions, net of cash acquired | (14,751 | ) | — | — | (14,751 | ) | ||||||||||
Capital expenditures | (10,648 | ) | (39 | ) | — | (10,687 | ) | |||||||||
Net cash used in investing activities | (25,399 | ) | (39 | ) | — | (25,438 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from Term B Senior Credit Facility note payable | 40,000 | — | — | 40,000 | ||||||||||||
Proceeds from Senior Unsecured Notes | 250,000 | — | — | 250,000 | ||||||||||||
Payment of Bridge Loan | (170,000 | ) | — | — | (170,000 | ) | ||||||||||
Payment of debt issuance costs | (10,796 | ) | — | — | (10,796 | ) | ||||||||||
Repayment of Term B Credit Facility note payable | (53,513 | ) | — | — | (53,513 | ) | ||||||||||
Revolver borrowings | 465,245 | — | — | 465,245 | ||||||||||||
Revolver payments | (468,295 | ) | — | — | (468,295 | ) | ||||||||||
Proceeds from interest rate cap agreement | 360 | — | — | 360 | ||||||||||||
Purchase of redeemable common stock form ESOP Trust | (29,584 | ) | — | — | (29,584 | ) | ||||||||||
Cash received from issuance of redeemable common stock to ESOP Trust | 15,958 | — | — | 15,958 | ||||||||||||
Net cash used in financing activities | 39,375 | — | — | 39,375 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 8,990 | (1 | ) | (60 | ) | 8,929 | ||||||||||
Cash and cash equivalents at beginning of year | 2,728 | (32 | ) | 59 | 2,755 | |||||||||||
Cash and cash equivalents at end of year | $ | 11,718 | $ | (33 | ) | $ | (1 | ) | $ | 11,684 | ||||||
(21) | Related Party Transactions |
(22) | Commitments and Contingencies |
F-80
F-81
(23) | Interim Period (Unaudited, in thousands except per share information) |
2009 Quarters | ||||||||||||||||
1st | 2nd | 3rd | 4th | |||||||||||||
Revenue | $ | 188,796 | $ | 195,429 | $ | 204,160 | $ | 213,840 | ||||||||
Gross profit | $ | 43,474 | $ | 46,294 | $ | 46,494 | $ | 50,263 | ||||||||
Net income (loss) | $ | (2,540 | ) | $ | 39 | $ | (9,437 | ) | $ | (5,103 | ) | |||||
Income (loss) per share | $ | (0.49 | ) | $ | 0.01 | $ | (1.79 | ) | $ | (0.97 | ) | |||||
Current assets | $ | 183,275 | $ | 188,135 | $ | 183,013 | $ | 195,137 | ||||||||
Current liabilities (restated)(1) | $ | 383,750 | $ | 389,738 | $ | 387,591 | $ | 167,304 |
2008 Quarters | ||||||||||||||||
1st | 2nd | 3rd | 4th | |||||||||||||
Revenue | $ | 183,145 | $ | 189,243 | $ | 185,876 | $ | 181,218 | ||||||||
Gross profit | $ | 42,763 | $ | 46,213 | $ | 43,014 | $ | 41,084 | ||||||||
Net income (loss) | $ | (8,706 | ) | $ | (9,805 | ) | $ | (7,893 | ) | $ | 1,070 | |||||
Income (loss) per share | $ | (1.74 | ) | $ | (1.96 | ) | $ | (1.55 | ) | $ | 0.23 | |||||
Current assets | $ | 231,610 | $ | 243,068 | $ | 211,763 | $ | 190,542 | ||||||||
Current liabilities (restated)(1) | $ | 428,749 | $ | 441,532 | $ | 412,634 | $ | 387,098 |
2009 Quarters (Previously Reported) | ||||||||||||||||
1st | 2nd | 3rd | 4th | |||||||||||||
Current liabilities | $ | 154,066 | $ | 155,482 | $ | 158,204 | $ | N/A |
2008 Quarters (Previously Reported) | ||||||||||||||||
1st | 2nd | 3rd | 4th | |||||||||||||
Current liabilities | $ | 164,237 | $ | 181,115 | $ | 164,613 | $ | 157,267 |
(1) | As a result of the Company’s failure to comply with certain Term B Senior Credit Agreement affirmative and negative covenants, all outstanding balances on the Company’s Term B Senior Credit Agreement for the first three quarters in 2009 and all periods in 2008 should have been presented as current liabilities as these amounts were callable by the lenders. See Note 11. |
(24) | Subsequent Events |
F-82