10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

COMMISSION FILE NUMBER 333–89756

Alion Science and Technology Corporation

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	54–2061691
(State or Other Jurisdiction of Incorporation of Organization)	(I.R.S. Employer Identification No.)

1750 Tysons Boulevard, Suite 1300

McLean, VA 22102

(703) 918–4480

(Address, including Zip Code and Telephone Number with Area Code, of Principal Executive Offices)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ¨  Yes    x  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	x  (Do not check if a smaller reporting company)	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of Alion Science and Technology Corporation Common Stock as of

August 8, 2013 was: Common Stock 6,831,791

ALION SCIENCE AND TECHNOLOGY CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2013

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	1
Condensed Consolidated Balance Sheets (unaudited)	1
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)	2
Condensed Consolidated Statements of Cash Flows (unaudited)	3
Notes to Condensed Consolidated Financial Statements (unaudited)	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk	49
Item 4. Controls and Procedures	50
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	51
Item 1A. Risk Factors	51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3. Defaults Upon Senior Securities	51
Item 4. Mine Saftey Disclosures	51
Item 5. Other Information	51
Item 6. Exhibits	52

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ALION SCIENCE AND TECHNOLOGY CORPORATION

Condensed Consolidated Balance Sheets (unaudited)

As of June 30, 2013 and September 30, 2012

	June 30,			September 30,
	2013			2012
	(In thousands, except share and per share information)
Current assets:
Cash and cash equivalents	$	19,976		$	27,227
Accounts receivable, net		185,197			175,293
Receivable due from ESOP Trust		—			1,129
Prepaid expenses and other current assets		6,291			5,448
Total current assets		211,464			209,097
Property, plant and equipment, net		9,640			10,605
Intangible assets, net		2,356			5,242
Goodwill		398,921			398,921
Other assets		10,484			11,431
Total assets	$	632,865		$	635,296
Current liabilities:
Interest payable	$	15,749		$	17,658
Trade accounts payable		66,599			44,793
Accrued liabilities		43,058			52,460
Accrued payroll and related liabilities		37,596			39,926
Billings in excess of revenue earned		4,251			2,666
Total current liabilities		167,253			157,503
Secured Notes		318,315			306,502
Unsecured Notes		238,597			242,923
Accrued compensation and benefits, excluding current portion		6,090			5,905
Non-current portion of lease obligations		12,946			12,364
Deferred income taxes		56,386			51,156
Commitments and contingencies
Redeemable common stock, $0.01 par value, 20,000,000 shares authorized, 6,831,791 shares issued and outstanding at June 30, 2013; 8,000,000 shares authorized and 6,731,889 shares issued and outstanding at September 30, 2012		111,017			110,740
Common stock warrants		20,785			20,785
Accumulated other comprehensive loss		(149	)		(149	)
Accumulated deficit		(298,375	)		(272,433	)
Total liabilities, redeemable common stock and accumulated deficit	$	632,865		$	635,296

See accompanying notes to unaudited condensed consolidated financial statements.

1

ALION SCIENCE AND TECHNOLOGY CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(In thousands, except share and per share information)
Contract revenue	$	220,947		$	211,514			646,557			598,517
Direct contract expense		174,314			165,042			509,911			461,817
Gross profit		46,633			46,472			136,646			136,700
Operating expenses		20,929			22,926			64,841			69,393
General and administrative		14,017			11,957			39,025			37,873
Operating income		11,687			11,589			32,780			29,434
Other income (expense):
Interest income		10			15			44			56
Interest expense		(18,982	)		(18,793	)		(56,814	)		(56,130	)
Other		(24	)		67			16			(50	)
Gain on debt extinguishment		1,966			—			1,966			—
Total other expense		(17,030	)		(18,711	)		(54,788	)		(56,124	)
Loss before taxes		(5,343	)		(7,122	)		(22,008	)		(26,690	)
Income tax expense		(1,744	)		(1,744	)		(5,231	)		(5,231	)
Net loss	$	(7,087	)	$	(8,866	)		(27,239	)		(31,921	)
Basic and diluted loss per share	$	(1.01	)	$	(1.39	)		(4.02	)		(5.23	)
Basic and weighted average common shares outstanding		6,989,107			6,373,626			6,769,854			6,108,874
Net loss	$	(7,087	)	$	(8,866	)		(27,239	)		(31,921	)
Other comprehensive income:
Postretirement actuarial gains		—			—			—			—
Comprehensive loss	$	(7,087	)	$	(8,866	)		(27,239	)		(31,921	)

See accompanying notes to unaudited condensed consolidated financial statements.

2

ALION SCIENCE AND TECHNOLOGY CORPORATION

Condensed Consolidated Statements of Cash Flows (unaudited)

	Nine Months Ended
	June 30,
	2013			2012
	(In thousands)
Cash flows from operating activities:
Net loss	$	(27,239	)	$	(31,921	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,937			8,620
Bad debt expense		367			302
Paid-in-kind interest		4,902			4,806
Amortization of debt issuance costs		7,920			7,808
Incentive and stock-based compensation		1,556			628
Gain on debt extinguishment		(1,966	)		—
Deferred income taxes		5,231			5,231
Other gains		(153	)		(95	)
Changes in assets and liabilities:
Accounts receivable		(10,270	)		(15,772	)
Other assets		(849	)		1,954
Trade accounts payable		21,806			7,367
Accrued liabilities		(5,877	)		6,515
Interest payable		(1,909	)		(1,538	)
Other liabilities		1,744			(1,084	)
Net cash used in operating activities		1,200			(7,179	)
Cash flows from investing activities:
Capital expenditures		(952	)		(2,339	)
Net cash used in investing activities		(952	)		(2,339	)
Cash flows from financing activities:
Repurchase Unsecured Notes		(3,005	)		—
Revolver borrowings		3,201			26,000
Revolver repayments		(3,201	)		(26,000	)
Loan to ESOP Trust		(1,907	)		(477	)
ESOP loan repayment		1,907			477
Redeemable common stock purchased from ESOP Trust		(6,660	)		(4,836	)
Redeemable common stock sold to ESOP Trust		2,166			1,302
Net cash used in financing activities		(7,499	)		(3,534	)
Net decrease in cash and cash equivalents		(7,251	)		(13,052	)
Cash and cash equivalents at beginning of period		27,227			20,818
Cash and cash equivalents at end of period	$	19,976		$	7,766
Supplemental disclosure of cash flow information:
Cash paid for interest	$	45,845		$	44,999
Cash paid for taxes		—			—
Non-cash investing and financing activities:
Common stock issued to ESOP Trust in satisfaction of employer contribution liability	$	7,198		$	7,114
Landlord-funded tenant improvements	$	493		$	1,810
Paid-in-kind notes issued	$	6,500		$	6,373

See accompanying notes to unaudited condensed consolidated financial statements.

3

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Description and Formation of the Business

Alion Science and Technology Corporation and its subsidiaries (collectively, the Company, Alion or we) provide advanced engineering, information technology, naval architecture and operational solutions to strengthen national security and drive business results. For customers in defense, civilian government, foreign governments and commercial industries worldwide, Alion’s engineered solutions support smarter decision-making and enhanced readiness in rapidly-changing environments.

Alion was formed as a for-profit S-Corporation in October 2001, to purchase substantially all of the assets and certain liabilities of IIT Research Institute (IITRI), a not-for-profit corporation controlled by the Illinois Institute of Technology (IIT). In December 2002, Alion acquired substantially all of IITRI’s assets and liabilities except its Life Sciences Operation, for $127.3 million. Prior to that, the Company’s activities were organizational in nature. In 2010, the Company became a C corporation when it ceased to qualify as an S corporation.

(2) Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Alion Science and Technology Corporation (a Delaware corporation), and its wholly-owned subsidiaries and have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), have been omitted pursuant to those rules and regulations. However, the Company believes that the disclosures made are adequate to make the information presented not misleading. The statements are prepared on the accrual basis of accounting and include the accounts of Alion and its wholly-owned subsidiaries from their date of acquisition or formation. All inter-company accounts have been eliminated in consolidation. There have been no changes to Alion’s subsidiaries in the current fiscal year.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments and reclassifications that are necessary for fair presentation of the periods presented. The results for the three and nine months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K for the year ended September 30, 2012.

Fiscal, Quarter and Interim Periods

Alion’s fiscal year ends on September 30. The Company operates based on a three-month quarter, four-quarter fiscal year with quarters ending December 31, March 31, June 30, and September 30.

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported for assets and liabilities, disclosures of contingent assets and liabilities as of financial statement dates, and amounts reported for operating results for each period presented. Actual results are likely to differ from those estimates, but management does not believe such differences will materially affect Alion’s financial position, results of operations, or cash flows.

Reclassifications

Certain items in the unaudited condensed consolidated financial statements have been reclassified to conform to the current presentation. Alion formerly presented operating expenses in the aggregate. Beginning fiscal year 2013, the Company reports general and administrative expense separately from other operating expenses on the face of the unaudited condensed consolidated statement of comprehensive loss.

4

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

Alion derives its revenue from delivering technology services under three types of contracts. Some contracts provide for reimbursement of costs plus fees; others are fixed-price or time-and-material type contracts. We recognize revenue when a contract has been executed, the contract price is fixed or determinable, delivery of services or products has occurred, and our ability to collect the contract price is considered reasonably assured. Alion applies the percentage-of-completion method in Accounting Standards Codification (ASC) 605 – Revenue Recognition to recognize revenue.

Alion recognizes revenue on cost-reimbursement contracts as it incurs costs and includes estimated fees earned. The Company recognizes time-and-material contract revenue at negotiated, fixed, contractually billable rates as it delivers labor hours and incurs other direct expenses. We use various performance measures under the percentage-of-completion method to recognize revenue for fixed-price contracts. Estimating contract costs at completion and recognizing revenue appropriately involve significant management estimates. Actual costs may differ from estimated costs and affect estimated profitability and revenue recognition timing. From time to time, facts develop that require us to revise estimated total costs or expected revenue. We record the cumulative effect of revised estimates in the period when the facts requiring revised estimates become known. We recognize the full amount of anticipated losses on any contract in the period a loss becomes known. For each of the periods presented, the cumulative effects of revised estimates were immaterial to the Company’s financial performance.

U.S. federal government contracts are subject to periodic funding by our contracting agency customers. A customer may fund a contract at inception or incrementally throughout the period of performance as services are provided. If we determine contract funding is not probable, we defer revenue recognition until realization is probable. The federal government can audit Alion’s contract costs and adjust amounts through negotiation. The federal government considers Alion a major contractor and maintains an office on site. The Defense Contract Audit Agency (DCAA) is currently auditing our 2007 claimed indirect costs. We are negotiating our 2006 indirect rates and have settled our rates through 2005. We timely submitted our indirect cost proposals for all open fiscal years. We have recorded revenue on federal government contracts in amounts we expect to realize.

We recognize revenue on unpriced change orders as we incur expenses and only to the extent it is probable we will recover such costs. The Company recognizes revenue in excess of costs on unpriced change orders only when management can also estimate beyond a reasonable doubt the amount of excess and experience provides a sufficient basis for recognition. Alion recognizes revenue on claims as expenses are incurred and only to the extent it is probable we will recover such costs and can reliably estimate the amount we will recover.

Income Taxes

Alion accounts for income taxes by applying the provisions in currently enacted tax laws. We determine deferred income taxes based on the estimated future tax effects of differences between the financial statement and tax bases of our assets and liabilities. Deferred income tax provisions and benefits change as assets or liabilities change from year to year. In providing for deferred taxes, Alion considers the tax regulations of the jurisdictions where we operate; estimated future taxable income; and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies change, the carrying value of deferred tax assets and liabilities may require adjustment.

Alion has a history of operating losses for both tax and financial statement purposes. The Company has recorded valuation allowances equal to deferred tax assets based on the likelihood that we may not be able to realize the value of these assets. Alion recognizes the benefit of a tax position only after determining that the relevant tax authority would “more likely than not” sustain our position following an audit. For tax positions meeting the “more likely than not” threshold, we recognize the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Going Concern Assumption

Each year management assesses Alion’s financial capabilities, its forecast cash flows and its liquidity to determine whether it is appropriate for the Company to report its financial position on a going concern basis. Management believes that in the current fiscal year Alion will generate sufficient revenue and cash flow to meet debt service requirements, fund operations and comply with the minimum Consolidated EBITDA covenant in Alion’s revolving credit agreement. Management’s going concern determination is based on current forecasts for which future results could differ materially due to general economic uncertainties, sequestration’s effect on government spending levels this fiscal year, and risks associated with future federal government procurement and contracting actions.

5

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Based on management’s going concern determination, Alion’s unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability of assets or the amounts of liabilities that may result from resolving uncertainties about the Company’s ability to continue as a going concern.

Alion depends heavily on federal government prime contracts and subcontracts which account for nearly all the Company’s revenue. Interruptions in the government funding process, whether from federal budget delays, debt ceiling limitations, sequestration or Department of Defense spending cuts could materially adversely affect the Company’s revenue and cash flows for the balance of this fiscal year and beyond. This could cause Alion to be unable to fund operations, meet debt service requirements or comply with the revolving credit agreement Consolidated EBITDA covenant.

If Alion were unable to meet the revolving credit agreement Consolidated EBITDA covenant, the Company would be unable to borrow funds and could be required to immediately repay any amount then outstanding under the revolving credit agreement. The Company could seek a covenant waiver or an amendment to the revolving credit agreement in order to preserve its ability to borrow funds as and when needed. Management can provide no assurance that Alion would be able to obtain an amendment or waiver, or if one were available, that the terms would be favorable. If the Company were unable to obtain a requested waiver or amendment, it might be unable to pay its debts as they became due.

In each of the past three fiscal years, Alion generated sufficient cash flow from operations to fulfill its financial commitments. Nevertheless, management does not expect current operations to generate sufficient cash flow for Alion to be able to repay its outstanding debt when it becomes due in fiscal 2015. The Company will need to identify additional sources of cash to re-finance or retire its existing debt. Management can provide no assurance such additional financing will be available, and if available, that terms would be favorable.

Cash and Cash Equivalents

The Company considers cash in banks, and deposits with financial institutions with maturities of three months or less at time of purchase which it can liquidate without prior notice or penalty, to be cash and cash equivalents.

Accounts Receivable and Billings in Excess of Revenue Earned

Accounts receivable include billed accounts receivable and unbilled receivables. Unbilled receivables consist of costs and fees which are billable upon occurrence of a specific event, amounts billable after the balance sheet date and revenue in excess of billings on uncompleted contracts (accumulated project expenses and fees which were not billed or were not currently billable as of the date of the consolidated balance sheet). Unbilled accounts receivable include revenue recognized for customer-requested work Alion performed on new and existing contracts for which the Company had not received contracts or contract modifications. Accounts receivable are stated as estimated realized value. The allowance for doubtful accounts is Alion’s best estimate of the amount of probable losses in the Company’s existing billed and unbilled accounts receivable. The Company determines the allowance using specific identification and historical write-off experience based on receivable age. Billings in excess of revenue and advance collections from customers represent amounts received from or billed to customers in excess of project revenue recognized to date.

Property, Plant and Equipment

Leasehold improvements, software and equipment are recorded at cost. Maintenance and repairs that do not add significant value or significantly lengthen an asset’s useful life are charged to current operations. Software and equipment are depreciated on the straight-line method over their estimated useful lives (typically 3 years for software and 5 years for equipment). Leasehold improvements are amortized on the straight-line method over the shorter of the asset’s estimated useful life or the life of the lease. Upon sale or retirement of an asset, costs and related accumulated depreciation are deducted from the accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of operations.

Goodwill

Alion assigns the purchase price paid to acquire the stock or assets of a business to the net assets acquired based on the estimated fair value of assets acquired and liabilities assumed. Goodwill is the purchase price in excess of the estimated fair value of the tangible net assets and separately identified intangible assets acquired. There have been no changes to goodwill carrying value this year.

6

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for goodwill and other intangible assets in accordance with the provisions of ASC 350 – Intangibles-Goodwill and Other. Alion operates in one segment and tests goodwill at the reporting unit level. There are two reporting units. We review goodwill for impairment in the fourth quarter each year, and whenever events or circumstances indicate goodwill might be impaired. We are required to recognize an impairment loss to the extent our goodwill carrying value at the reporting unit level exceeds fair value. Evaluating goodwill involves significant management estimates. To date, our annual reviews have resulted in no goodwill impairment adjustments. See Note 8 for a detailed discussion of the Company’s goodwill impairment testing process.

Intangible Assets

Alion amortizes intangible assets as it consumes economic benefits over estimated useful lives. As of June 30, 2013, the Company had approximately $2.4 million in net intangible assets, including contracts purchased in the JJMA acquisition and internally-developed software and engineering designs. The JJMA contract is amortized over a 13 year useful life.

Redeemable Common Stock

There is no public market for Alion’s redeemable common stock and therefore no observable price for its equity, individually or in the aggregate. The Employee Stock Ownership Plan (ESOP) Trust holds all the Company’s outstanding common stock. Under certain circumstances, ESOP beneficiaries can require the ESOP Trust to distribute the value of their beneficial interests. The Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA) require the Company to offer ESOP participants who receive Alion common stock a liquidity put right. The put right requires the Company to purchase distributed shares at their then-current fair market value at any time during two put option periods. Common stock distributed by the ESOP Trust is subject to a right of first refusal. Prior to any subsequent transfer, shares must first be offered to the Company and then to the ESOP Trust. Eventual redemption of shares of Alion common stock as a result of distributions is outside the Company’s control. Therefore, Alion classifies its outstanding shares of redeemable common stock as other than permanent equity.

At each reporting date, Alion is required to increase or decrease the reported value of its outstanding common stock to reflect its estimated redemption value. Management estimates the value of Alion’s obligation to repurchase its outstanding shares of redeemable common stock by considering, in part, the most recent price at which the Company was able to sell shares to the ESOP Trust. The reported value of outstanding redeemable common stock equals the current share price multiplied by total shares issued and outstanding.

In its fiduciary capacity, the ESOP Trustee is independent of the Company and its management. Consistent with its fiduciary responsibilities, the ESOP Trustee retains an independent third party valuation firm to assist it in determining the fair market value (share price) at which the ESOP Trustee may acquire or dispose of investments in Alion common stock. The Audit and Finance Committee of Alion’s Board of Directors reviews the reasonableness of the amount management has determined Alion should recognize for the Company’s obligation to repurchase shares of its outstanding redeemable common stock. The Audit and Finance Committee considers various factors in its review, including, in part, the most recent valuation report prepared for, and the share price selected by the ESOP Trustee.

Alion records changes in the reported value of its outstanding common stock through an offsetting charge or credit to accumulated deficit. The Company recognizes changes in the fair value of its redeemable common stock on March 31 and September 30 each year. The accumulated deficit at June 30, 2013, included an $11.9 million cumulative benefit for changes in share price which reduced the Company’s aggregate share redemption obligation. Outstanding redeemable common stock had an aggregate fair value of approximately $111.0 million as of June 30, 2013.

Concentration of Credit Risk

Alion is subject to credit risk for its cash equivalents and accounts receivable. The Company believes the high credit quality of its cash equivalent investments limits its credit risk with respect to such investments. Alion believes its concentration of credit risk with respect to accounts receivable is limited as the receivables are principally due from the federal government. Approximately 14% of the Company’s receivables are due from commercial customers including other prime contractors.

7

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

Alion is required to disclose the fair value of its financial instruments but is not required to record its senior long-term debt at fair value. See Note 10 for a discussion of Alion’s long-term debt and Note 11 for the related fair value disclosures. The fair value of cash, cash equivalents, accounts payable and accounts receivable does not differ materially from carrying value because of the short maturity of those instruments.

Off-Balance Sheet Financing Arrangements

Alion accounts for operating leases entered into in the routine course of business in accordance with ASC 840 – Leases. We have no off-balance sheet financing arrangements other than operating leases and letters of credit under our revolving credit facility. Alion has no relationship with any unconsolidated or special purpose entity and has not issued any associated guarantees.

(3) Employee Stock Ownership Plan (ESOP) and ESOP Trust

In December 2001, the Company adopted the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Plan (the Plan, the KSOP) and established the ESOP Trust. The Plan, a tax qualified retirement plan, includes an ESOP and a 401(k) component. In April 2010, the Internal Revenue Service (IRS) issued a determination letter that the ESOP Trust and the Plan, as amended and restated as of October 1, 2006, including Plan amendments executed in June 2009 and May 2010 qualify under IRC Sections 401(a) and 501(a).

In August 2008, Alion amended the Trust Agreement between the Company and the ESOP Trust. In June 2011, the Company amended the Plan to eliminate the one year service requirement for employer 401(k) matching contributions; to automatically enroll new hires in the Plan’s 401(k) component; and to designate profit sharing contributions exclusively in Alion common stock. The Company believes the Plan and the ESOP Trust have been designed and are being operated in compliance with applicable IRC requirements.

(4) Loss Per Share

Basic and diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding excluding the impact of warrants. The warrants are anti-dilutive for all periods presented even after including required adjustments to the earnings per share numerator.

The Company issued warrants to purchase 602,614 shares of Alion common stock in connection with issuing its Secured Notes. The Secured Note warrants have a penny per share exercise price, are currently exercisable and expire March 15, 2017. Secured Note warrants are not redeemable or puttable; they are classified as permanent equity.

(5) Redeemable Common Stock

The ESOP Trust owns all of Alion’s issued and outstanding common stock, for the benefit of current and former employee participants in the Alion KSOP. Participants and beneficiaries are entitled to a distribution of the fair value of their vested ESOP account balance upon death, disability, retirement or termination of employment. The Plan permits distributions to be paid over a five year period commencing the year after a participant’s retirement at age 65, death or disability. Alion can delay distributions to other terminating participants for six years before commencing payment over a subsequent five year period. The Company intends to pay distribution requests in annual installments and defer initial payments as permitted.

Terminating ESOP participants can hold or immediately sell their distributed shares to the Company. If a participant elects to hold distributed shares, the IRC and ERISA require Alion to offer a put option to allow the recipient to sell stock to Alion at the estimated fair value share price based on the most recent price at which the Company was able to sell shares to the ESOP Trust ($16.25 at March 31, 2013). The put right requires Alion to purchase distributed shares during two put option periods at then-current fair market value. Consistent with its duty of independence from Alion management and its fiduciary responsibilities, the ESOP Trustee retains an independent third party valuation firm to assist it in determining the fair market value (share price) at which the Trustee may acquire or dispose of investments in Alion common stock.

Alion management determines, and the Board of Directors’ Audit and Finance Committee reviews, the reasonableness of Alion’s recorded redeemable common stock liability. The Audit and Finance Committee considers various factors in its review, including in part, the ESOP valuation report and the share price selected by the ESOP Trustee. Management considers the share price selected by the ESOP Trustee along with other factors in estimating Alion’s aggregate liability for outstanding redeemable common stock. A limited number of participants who beneficially acquired shares of Alion common stock on December 20, 2002, can sell such shares distributed from their accounts at the greater of $10.00 or the current estimated fair value share price.

8

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Although the Company and the ESOP retain the right to delay distributions consistent with the terms of the Plan, and to control the circumstances of future distributions, eventual redemption of shares of Alion common stock is deemed to be outside the Company’s control.

(6) Accounts Receivable

Accounts receivable at June 30, 2013 and September 30, 2012 consisted of the following:

	June 30,			September 30,
	2013			2012
	(In thousands)
Billed receivables and amounts billable as of the balance sheet date	$	107,006		$	94,028
Unbilled receivables:
Amounts billable after the balance sheet date		45,080			48,730
Revenues recorded in excess of milestone billings on fixed price contracts		2,836			2,666
Revenues recorded in excess of estimated contract value or funding		18,634			18,998
Retainages and other amounts billable upon contract completion		15,391			15,016
Allowance for doubtful accounts		(3,750	)		(4,145	)
Total Accounts Receivable	$	185,197		$	175,293

Billed accounts receivable include invoices issued to customers for services performed as of the balance sheet date. Unbilled accounts receivable represent revenue recognized as of the balance sheet date for which Alion has yet to issue invoices to customers. Amounts that are currently billable are expected to be invoiced to customers within the next twelve months. Fixed-price contract revenue in excess of milestone billings is not yet contractually billable. Revenue in excess of contract value or funding is billable when Alion receives contract amendments or modifications. Approximately $149.4 million (79%) and $138.9 million (77%) of contract receivables at June 30, 2013 and September 30, 2012 were from federal government prime contracts.

Alion recognized $81.9 million in revenue in excess of billings on uncompleted contracts as of June 30, 2013, including approximately $18.6 million for customer-requested work for which the Company had not received contracts or contract modifications. At September 30, 2012, Alion had recognized $85.4 million in revenue in excess of billings on uncompleted contracts including approximately $19.0 million for customer-requested work for which the Company had not received contracts or contract modifications.

Retainages and other unbilled amounts are billable upon contract completion or completion of DCAA audits. In keeping with industry practice, Alion classifies all contract-related accounts receivable as current assets based on contractual operating cycles which frequently exceed one year. Except for $15.4 million at June 30, 2013, the Company expects to invoice and collect unbilled receivables within the next twelve months.

(7) Property, Plant and Equipment

	June 30,			September 30,
	2013			2012
	(In thousands)
Leasehold improvements	$	12,897		$	12,168
Equipment and software		34,968			35,562
Total cost		47,865			47,730
Less: accumulated depreciation and amortization		(38,225	)		(37,125	)
Net Property, Plant and Equipment	$	9,640		$	10,605

Depreciation for fixed assets and leasehold amortization expense was approximately $778 thousand and $1.0 million for the quarters ended June 30, 2013 and 2012; it was $2.4 million and $2.9 million for the nine months ended June 30, 2013 and 2012.

9

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(8) Goodwill

The Company accounts for goodwill and other intangible assets according to ASC – 350 Intangibles – Goodwill and Other (ASC 350) which requires that Alion review goodwill at least annually for impairment or more frequently if events or circumstances indicate goodwill might be impaired. The Company performs this review at the end of each fiscal year. As of September 30, 2012, Alion had approximately $398.9 million in goodwill. There were no changes to the goodwill carrying amount for the years ended September 30, 2012 and 2011, nor were there any significant events this quarter that indicated a potential impairment to goodwill as of June 30, 2013.

Alion operates in one segment and tests goodwill at the reporting unit level. Each of Alion’s two reporting units delivers a similar set of professional engineering, scientific and technical services to a wide array of federal government customers, principally within the Department of Defense. Each reporting unit provides the full range of services Alion offers to customers overall.

Alion’s management has organized reporting units based on managerial responsibility and administrative structure, contract portfolios, and the availability of discrete financial information. Management evaluates reporting unit financial performance based on contract revenue and non-GAAP operating income. Alion does not maintain reporting unit balance sheets and does not track cash flows by reporting unit.

Management identifies reporting units as “sectors” which in turn include lower level business units identified as “groups” consisting of still lower level “operations.” For each business combination, management assigned the goodwill arising from acquisitions to the reporting unit or units expected to benefit from the synergies of each business combination. Coincident with its goodwill determination and purchase price allocation, management assigned assets acquired to reporting units based on the unit or units anticipated to utilize such assets. Management did not allocate to reporting units the liabilities arising from business combinations. Alion’s reporting units are the Engineering and Integration Solutions Sector (EISS) and the Technology, Engineering and Operational Solutions Sector (TEOSS). Management assigned $197.0 million in goodwill to EISS and $201.9 million in goodwill to TEOSS. Management determined that, on an enterprise value basis, Alion’s reporting units have positive carrying value.

Alion completed its most recent goodwill impairment analysis in the fourth quarter of fiscal year 2012 and concluded no goodwill impairment existed as of September 30, 2012. Management determined the totality of events and circumstances would not have supported a decision to roll forward its prior year goodwill impairment analysis and avoid performing a step one goodwill impairment analysis. Management chose to perform a step one analysis which supported a lower enterprise value for Alion as of September 2012 compared to September 2011. September 2012 estimated discounted future cash flows declined 11% compared to September 2011. The estimated fair value of Alion’s outstanding debt increased approximately seven percent from September 2011 to September 2012. As a result of changes in Alion’s estimated enterprise fair value, the estimated fair value of Alion’s outstanding redeemable common stock declined approximately 21% from September 2011 to September 2012.

As of September 30, 2012, the estimated fair value of each reporting unit exceeded its carrying value. Consistent with prior years’ disclosures, the decline in discounted cash flows for 2012 compared to 2011 did not result in a goodwill impairment. The results of Alion’s step one impairment testing make it unlikely that a reasonably probable change in assumptions would have triggered an impairment. A hypothetical 10% decrease in fair value would not have resulted in impairment to goodwill for either reporting unit or triggered the need to perform additional step two analyses for either reporting unit.

The table below sets out for each reporting unit as of September 30, 2012: the goodwill assigned to each reporting unit; reporting unit carrying value; reporting unit estimated fair value; and the excess of estimated fair value over carrying value for each reporting unit. Management used the reporting unit estimated fair values presented below in testing goodwill for impairment in the fourth quarter of fiscal year 2012.

10

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Goodwill		Carrying Value		Estimated Fair Value		Excess of Estimated Fair Value over Carrying Value
	at September 30, 2012
Sector	(In millions, except percentages)
TEOSS	$	201.9	$	197.7	$	258.4	$	60.7	31	%
EISS		197.0		193.2		227.6		34.4	18	%
Total	$	398.9	$	390.9	$	486.0	$	95.1	24	%

(9) Intangible Assets

Intangible assets consist primarily of contracts acquired through the Anteon and JJMA transactions. The table below shows intangible assets as of June 30, 2013 and September 30, 2012.

	June 30, 2013							September 30, 2012
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(In thousands)
Purchased contracts	$	111,635	$	(109,564	)	$	2,071	$	111,635	$	(106,935	)	$	4,700
Internal use software and engineering designs		3,182		(2,897	)		285		3,182		(2,640	)		542
Total	$	114,817	$	(112,461	)	$	2,356	$	114,817	$	(109,575	)	$	5,242

The weighted-average remaining amortization period of intangible assets was approximately 20 months at June 30, 2013 and September 30, 2012. Amortization expense was approximately $316 thousand and $1.6 million for the quarters ended June 30, 2013 and 2012 and approximately $2.9 million and $5.0 million for the nine months ended June 30, 2013 and 2012. Estimated aggregate amortization expense for the next five years and thereafter is as follows.

	(In thousands)
2013 (for the remainder of the fiscal year)	$	316
2014		1,079
2015		736
2016		141
2017		51
2018		33
Thereafter		—
	$	2,356

(10) Long-Term Debt

Alion’s current debt structure includes a $35 million revolving credit facility, $329.8 million in Secured Notes ($310 million in initial face value plus $19.8 million in paid in kind (PIK) interest notes issued) and $240 million of Unsecured Notes. The Company is in compliance with each of the affirmative, negative and financial covenants in its existing debt agreements as of June 30, 2013.

Credit Agreement

In March 2010, Alion entered into an agreement for a $25.0 million senior revolving credit facility that matures August 2014 (Credit Agreement). In March 2011, Alion and its lenders amended the Credit Agreement increasing the credit limit to $35 million. In August 2011, Alion and its lenders amended the Credit Agreement to revise the definition of Consolidated EBITDA and increase the Minimum Consolidated EBITDA covenant. In December 2012, Alion and its lenders amended the Credit Agreement to increase the maximum fees the Company is permitted to pay outside directors and to retroactively waive non-compliance with the former limitation in the Credit Agreement.

11

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company can use its credit facility for working capital, permitted acquisitions and general corporate purposes. This includes up to $35.0 million in letters of credit and up to $5.0 million in short-term swing line loans. As of June 30, 2013, the Company had $4.0 million in outstanding letters of credit and no balance actually drawn.

Security. The Credit Agreement is secured by a first priority security interest in all current and future tangible and intangible property of Alion and its guarantor subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation. In March 2010, Alion and the subsidiary guarantors entered into an Intercreditor Agreement with Wilmington Trust Company and Credit Suisse AG, Cayman Islands Branch to grant Credit Agreement lenders a super priority right of payment with respect to the underlying collateral compared to Secured Note holders’ rights.

Guarantees. Alion’s Credit Agreement obligations are guaranteed by its subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation. These subsidiaries also guarantee all the Company’s Secured Note and Unsecured Note obligations (described below).

Interest and Fees. Alion can choose whether the Credit Agreement loans bear interest at one of two floating rates using either a Eurodollar rate or an alternative base rate. The minimum interest rate is 8.5%. The minimum Eurodollar interest rate is 2.5% plus 600 basis points. The minimum alternate base rate is 3.5% plus 500 basis points.

Other Fees and Expenses. Each quarter, Alion pays a commitment fee of 175 basis points per year on the prior quarter’s daily unused Credit Agreement balance. The Company paid approximately $139 thousand and $130 thousand in commitment fees for the quarters ended June 30, 2013 and 2012. The Company paid approximately $411 thousand and $422 thousand in fees for the nine months ended June 30, 2013 and 2012.

Alion pays letter-of-credit issuance and administrative fees, and up to a 25 basis point fronting fee and interest in arrears each quarter on all outstanding letters of credit. The interest rate is based on the Eurodollar loan rate which was 6.0% as of June 30, 2013. The Company also pays an annual agent’s fee.

Covenants. The Credit Agreement requires Alion to achieve minimum trailing twelve month Consolidated EBITDA levels which increase over the remaining life of the agreement. The required minimum is $63.0 million through September 30, 2013 and $65.5 million through August 22, 2014.

The Credit Agreement defines Consolidated EBITDA as net income or loss in accordance with GAAP, plus employee compensation expense payments invested in Alion common stock, plus the following items, without duplication, to the extent deducted from or included in net income or loss:

• consolidated interest expense;

• provision for income taxes;

• depreciation and amortization;

• cash contributed to the ESOP in respect of Alion’s repurchase liability;

• non-cash stock-based and incentive compensation expense;

• non-cash ESOP contributions;

• any extraordinary losses; and

• nonrecurring charges and adjustments included in ESOP valuation reports as prepared by an independent third party.

To the extent included in net income or loss, the following items, without duplication, are deducted in determining Consolidated EBITDA:

• all cash payments on account of reserves, restructuring charges or other cash and non-cash charges added to net income pursuant to the list above in a previous period;

• any extraordinary gains; and

• all non-cash items of income.

12

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Credit Agreement restricts us from doing any of the following without the prior consent of syndicate lenders that have extended more than 50 percent of the aggregate amount of all Credit Agreement loans then outstanding:

• incur additional debt other than permitted additional debt;

• grant certain liens and security interests;

• enter into sale and leaseback transactions;

• make certain loans and investments including acquisitions of businesses, other than permitted acquisitions;

• consolidate, merge or sell all or substantially all our assets;

• pay dividends or distributions other than distributions required by the ESOP Plan or by certain legal requirements;

• make certain payments for subordinated indebtedness;

• enter into certain transactions with our shareholders and affiliates;

• enter into agreements which restrict our ability to incur liens or which restrict the ability of our subsidiaries to pay dividends;

• change lines of business;

• repay subordinated debt before it is due;

• redeem or repurchase certain equity;

• enter into certain transactions not permitted under ERISA;

• change the terms of our other indebtedness or our KSOP in a way materially disadvantageous to us;

• make more than $8 million in capital expenditures in any fiscal year;

• pay certain earn-outs in connection with permitted acquisitions; or

• change our fiscal year.

The Credit Agreement contains customary events of default including, without limitation:

• breach of representations and warranties;

• payment default;

• uncured covenant breaches;

• default under certain other debt exceeding an agreed amount;

• bankruptcy and certain insolvency events;

• incurrence of a civil or criminal liability in excess of $5 million of Alion or any subsidiary arising from a government investigation;

• unstayed judgments in excess of an agreed amount;

• failure of any Credit Agreement guarantee to be in effect;

• failure of the security interests to be valid, perfected, first priority security interests in the collateral;

• notice of debarment, suspension or termination under a material government contract;

• actual termination of a material contract due to alleged fraud, willful misconduct, negligence, default or any other wrongdoing;

• certain uncured defaults under our material contracts;

• certain ERISA violations;

• imposition on the ESOP Trust of certain taxes in excess of an agreed amount;

• final determination the ESOP is not a qualified plan;

• so long as any Secured Notes remain outstanding, the Intercreditor Agreement shall fail to be effective;

• a borrowing which would cause us to exceed a certain cash balance limit;

• failure to provide within 90 days of fiscal year-end, consolidated, comparative financial statements audited by an independent public accountant of recognized national standing with an opinion of such accountant that shall not include a “going concern” explanatory note or similar limitation, and

• a change of control (as defined below).

13

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Under the Credit Agreement, a change of control generally occurs when, before Alion lists its common stock to trade on a national securities exchange and obtains at least $35 million in net proceeds from an underwritten public offering, the ESOP Trust fails to own at least 51 percent of Alion’s outstanding equity interests, or, after such a qualified public offering, any person or group other than the ESOP Trust owns more than 37.5 percent of Alion’s outstanding equity interests. A change of control may also occur if a majority of the seats (other than vacant seats) on Alion’s Board of Directors shall at any time be occupied by persons who were neither nominated by the board nor were appointed by directors so nominated. A change of control may also occur if a change of control occurs under any of Alion’s material debt including the Secured and Unsecured Note Indentures.

Alion depends heavily on federal government contracts. Delays in the federal budget process; reduced federal spending, whether from budget cuts or sequestration; and fiscal and political uncertainties could adversely affect Alion’s revenue for the balance of the current fiscal year and beyond. Despite uncertainties in the government contracting professional services marketplace, particularly the effects of sequestration and/or Department of Defense programmatic and budgetary cuts, management believes Alion will be able to generate sufficient revenue and EBITDA in the coming twelve months and the Company will be able to comply with financial and non-financial covenants in the Credit Agreement.

If Alion were unable to meet a Credit Agreement covenant because of a revenue shortfall or for any other reason, the Company could seek a covenant waiver or seek to negotiate a Credit Agreement amendment. Management can provide no assurance that Alion would be able to obtain a requested covenant waiver or amend the Credit Agreement on favorable terms, if at all.

Secured Notes

In March 2010, Alion issued and sold $310 million of its private units (Units) to Credit Suisse, which informed the Company it had resold most of the Units to qualified institutional buyers. Each of the 310,000 Units consisted of $1,000 in face value of Alion’s private 12% senior secured notes (Secured Notes) and a warrant to purchase 1.9439 shares of Alion common stock. On September 2, 2010, Alion exchanged the private Secured Notes for publicly tradable Secured Notes with the same terms.

Security. The Secured Notes are secured by a first priority security interest in all current and future tangible and intangible property of Alion and its guarantor subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation. The Secured Notes are senior obligations of Alion and rank pari passu in right of payment with existing and future senior debt, including the Credit Agreement, except to the extent that the Intercreditor Agreement provides Credit Agreement lenders with a super priority right of payment with respect to the underlying collateral.

Guarantees. The Company’s obligations under the Secured Notes are guaranteed by the Company’s subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation.

Interest and Fees. The Secured Notes bear interest at 12% per year; 10% is payable in cash and 2% increases the Secured Note principal (PIK Interest). Interest is payable semi-annually in arrears on May 1 and November 1. Alion pays interest to holders of record as of the immediately preceding April 15 and October 15. The Company must pay interest on overdue principal or interest at 13% per annum to the extent lawful. The Secured Notes mature November 1, 2014.

Covenants. As of June 30, 2013, Alion was in compliance with the covenants set forth in the Indenture governing its 12% Secured Notes (Secured Note Indenture). The Secured Note Indenture does not contain any financial covenants.

A Secured Note Indenture covenant restricts our ability to incur additional debt. Defined terms in the Secured Note Indenture include: Net Available Cash, Total Assets, Restricted Subsidiaries, Indebtedness, Adjusted EBITDA and Consolidated Interest Expense. Alion and its Restricted Subsidiaries may not issue, incur, assume, guarantee, or otherwise become liable for any debt unless our Adjusted EBITDA to Consolidated Interest Expense ratio is greater than 2.0 to 1.0. Adjusted EBITDA under the Secured Note Indenture differs from Consolidated EBITDA as defined in our Credit Agreement. Adjusted EBITDA is less than Consolidated EBITDA because it does not include employee investments in Alion common stock. Our Adjusted EBITDA to Consolidated Interest Expense ratio was 0.96 to 1.0 as of June 30, 2013 ($72.3 million in Adjusted EBITDA to $75.6 million in Consolidated Interest Expense). Our ratio was 0.93 to 1.0 as of September 30, 2012 ($69.3 million in Adjusted EBITDA to $74.9 million in Consolidated Interest Expense). Even if Adjusted EBITDA is not at least two times Consolidated Interest Expense, we may incur other permitted debt including:

14

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

• debt pursuant to certain agreements up to $25 million;

• permitted inter-company debt;

• the Secured Notes and any public notes exchanged for those notes;

• debt pre-dating the Secured Notes;

• permitted debt of acquired subsidiaries;

• permitted refinancing debt;

• hedging agreement debt;

• performance, bid, appeal and surety bonds and completion guarantees;

• ordinary course insufficient funds coverage;

• permitted refinancing debt guarantees;

• working capital debt of non-U.S. subsidiaries;

• debt for capital expenditures, and capital and synthetic leases up to $25 million in the aggregate and 2.5% of Alion’s Total Assets;

• permitted subordinated debt of Alion or any Restricted Subsidiary to finance a permitted acquisition, certain permitted ESOP transactions and refinancing debt of acquired non-U.S. subsidiaries up to $35 million in the aggregate;

• letter of credit reimbursement obligations;

• certain agreements in connection with a business disposition provided liabilities incurred in connection therewith do not exceed the cash and non-cash proceeds received and are not reflected on the Company’s balance sheet;

• certain deferred compensation agreements; and

• certain other debt up to $20 million.

The Secured Note Indenture has a covenant that restricts our ability to declare and pay any cash dividend or other distribution related to any equity interest in Alion, repurchase or redeem any equity interest of Alion, repurchase or redeem the Unsecured Notes or other subordinated debt, or make certain investments. However, within certain limits, we may make such payments in limited amounts if Adjusted EBITDA is at least two times Consolidated Interest Expense. Even if Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0, we may make or pay:

• such payments out of substantially concurrent contributions of equity and substantially concurrent incurrences of permitted debt;

• certain limited and permitted dividends;

• certain repurchases of the Company’s equity securities deemed to occur upon exercise of stock options or warrants;

• 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 Secured Note premium payable on a change of control;

• certain permitted inter-company subordinated obligations;

• certain repurchases and redemptions of subordination obligations of the Company or a Subsidiary Guarantor from Net Available Cash (as defined in the Secured Note Indenture);

• repurchases of subordinated obligations in connection with an asset sale to the extent required by the Secured Note Indenture;

• certain permitted ESOP transactions;

• long-term incentive plan payments to our directors, officers and employees, subject to a $3 million annual cap that may increase annually;

• any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of the Unsecured Notes, up to an aggregate amount of $10 million; and

• certain other payments not exceeding $10 million in the aggregate.

15

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Secured Note Indenture restricts our ability to engage in other transactions including restricting our subsidiaries from making distributions and paying dividends to parents, merging or selling all or substantially all our assets, issuing certain subsidiary equity securities, engaging in certain transactions with affiliates, incurring liens, entering into sale lease-back transactions and engaging in business unrelated to our business when we issued the Secured Notes.

Events of Default. The Secured Note Indenture contains customary events of default, including:

• payment default on interest obligations when due;

• payment default on principal at maturity;

• uncured covenant breaches;

• default under an acceleration of certain other debt exceeding $30 million;

• bankruptcy and certain insolvency events;

• judgment for payment in excess of $30 million entered against the Company or any material subsidiary that remains outstanding for a period of 60 days and is not discharged, waived or stayed;

• failure of any Secured Note guarantee to be in effect or any subsidiary guarantor’s denial or disaffirmation of its guaranty obligations; and

• failure of any Secured Note security interest to constitute a valid and perfected lien with its applicable priority after a permitted cure period.

Change of Control. Upon a change in control, each Secured Note holder has the right to require Alion repurchase its notes in cash for 101% of principal plus accrued and unpaid interest. Any of the following events constitutes a change in control:

• subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power or voting stock of Alion;

• individuals who constituted Alion’s board of directors on March 22, 2010, (or individuals who were elected or nominated by them, or directors subsequently nominated or elected by them) cease for any reason to constitute a majority of the Company’s board of directors;

• the adoption of a plan relating to Alion’s liquidation or dissolution; and

• subject to certain exceptions, the merger or consolidation of the Company with or into another person or the merger of another person with or into the Company, or the sale of all or substantially all the assets of Alion to another person.

Optional Redemption. From April 1, 2013 through September 30, 2013, the Company may redeem all or a portion of the Secured Notes at 105% of principal, plus accrued and unpaid interest to the redemption date. From October 1, 2013 through March 31, 2014 the redemption price is 103% of principal, plus accrued and unpaid interest to the redemption date. After March 31, 2014, the Company is not required to pay a redemption premium.

Unsecured Notes

In February 2007, Alion issued and sold $250.0 million of its private 10.25% senior unsecured notes due February 1, 2015 (Unsecured Notes) to Credit Suisse, which informed the Company it had resold most of the notes to qualified institutional buyers. In June 2007, Alion exchanged the private Unsecured Notes for publicly tradable Unsecured Notes with the same terms. IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation guarantee the Unsecured Notes. From time to time, Alion has repurchased some of its outstanding Unsecured Notes in open market transactions. As of June 30, 2013, the Company had repurchased $10 million worth of Unsecured Notes: $2 million in November 2010; $3 million in June 2011 and $5 million in June 2013. In July 2013, the Company repurchased an additional $5 million worth of Unsecured Notes. (See Note 21 – Subsequent Event).

Interest and Fees. The Unsecured Notes bear interest at 10.25% per year, payable semi-annually in arrears on February 1 and August 1. Alion pays interest to holders of record as of the immediately preceding January 15 and July 15. The Company must pay interest on overdue principal or interest at 11.25% per annum to the extent lawful.

Covenants. There are no financial covenants in the Unsecured Note Indenture. As of June 30, 2013, we were in compliance with the Unsecured Note Indenture non-financial covenants.

A covenant in the Unsecured Note Indenture restricts our ability to incur additional debt. Defined terms in the Unsecured Note Indenture include: Net Available Cash, Total Assets, Restricted Subsidiaries, Indebtedness, Adjusted EBITDA and Consolidated Interest Expense. Alion and its Restricted Subsidiaries may not issue, incur, assume, guarantee, or otherwise become liable for any indebtedness unless our Adjusted EBITDA to Consolidated Interest Expense ratio is greater than 2.0 to 1.0. Adjusted EBITDA under the Unsecured Note Indenture differs from Consolidated EBITDA as defined in our Credit Agreement. Adjusted EBITDA is less than Consolidated EBITDA because it does not include employee investments in Alion common stock. Our Adjusted EBITDA to Consolidated Interest Expense ratio was 0.96 to 1.0 as of June 30, 2013 ($72.3 million in Adjusted EBITDA to $75.6 million in Consolidated Interest Expense). Our ratio was 0.93 to 1.0 as of September 30, 2012 ($69.3 million in Adjusted EBITDA to $74.9 million in Consolidated Interest Expense). Even if Adjusted EBITDA is not at least two times Consolidated Interest Expense, we may incur other permitted debt including:

16

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

• debt pursuant to our now terminated Term B Credit Facility and certain other contracts up to $360 million less principal repayments made under that indebtedness;

• permitted inter-company debt;

• the Unsecured Notes and any public notes exchanged for those notes;

• debt pre-dating the Unsecured Notes;

• permitted debt of acquired subsidiaries;

• permitted refinancing debt;

• hedging agreement debt;

• performance, bid, appeal and surety bonds and completion guarantees;

• ordinary course insufficient funds coverage;

• permitted refinancing debt guarantees;

• working capital debt of non-U.S. subsidiaries;

• debt for capital expenditures, capital and synthetic leases up to $25 million in the aggregate and 2.5% of Alion’s Total Assets;

• permitted subordinated debt of Alion or any Restricted Subsidiary to finance a permitted acquisition, certain permitted ESOP transactions and refinancing debt of acquired non-U.S. subsidiaries up to $35 million in the aggregate;

• letters of credit reimbursement obligations;

• certain agreements in connection with the disposition of a business provided liabilities incurred in connection therewith do not exceed the cash and non-cash proceeds received and are not reflected on the Company’s balance sheet;

• certain deferred compensation agreements; and

• certain other debt up to $35 million.

The Unsecured Note Indenture has a covenant that restricts our ability to declare and pay any cash dividend or other distribution with regard to any equity interest in the Company, make any repurchase or redemption of any equity interest in Alion, repurchase or redeem subordinated debt, and make certain investments. However, within certain limits we may make such payments in limited amounts if Adjusted EBITDA is at least two times Consolidated Interest Expense. Even if Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0, we may make or pay:

• such payments out of substantially concurrent contributions of equity and substantially concurrent incurrences of permitted debt;

• certain limited and permitted dividends;

• certain repurchases of the Company’s equity securities deemed to occur upon exercise of stock options or warrants;

• cash payments in lieu of the issuance of fractional shares for the exercise of warrants, options or other securities convertible into or exchangeable for our equity securities;

• the required Unsecured Note premium payable on a change of control;

• certain permitted inter-company subordinated obligations;

• certain repurchases and redemptions of subordination obligations of the Company or a Subsidiary Guarantor from Net Available Cash;

• repurchases of subordinated obligations in connection with an asset sale to the extent required by the Indenture;

• repurchase of common stock from former Alion Joint Spectrum Center employees;

• certain permitted transactions with the ESOP not exceeding $25 million in the aggregate; and

• certain other payments not exceeding $30 million in the aggregate.

The Unsecured Note Indenture restricts the Company’s ability to engage in other transactions including restricting our subsidiaries from making distributions and paying dividends to parents, merging or selling all or substantially all our assets, issuing certain subsidiary equity securities, engaging in certain transactions with affiliates, incurring liens, entering into sale lease-back transactions and engaging in business unrelated to our business when we issued the Unsecured Notes.

17

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Events of Default. The Unsecured Note Indenture contains customary events of default, including:

• payment default on interest obligations when due;

• payment default on principal at maturity;

• uncured covenant breaches;

• default under an acceleration of certain other debt exceeding $30 million;

• certain bankruptcy and insolvency events;

• judgment for payment in excess of $30 million entered against the Company or any material subsidiary that remains outstanding for a period of 60 days and is not discharged, waived or stayed; and

• failure of any Unsecured Note guarantee or any subsidiary guarantor’s denial or disaffirmation of its guaranty obligations.

Change of Control. Upon a change in control, each Unsecured Note holder has the right to require Alion repurchase its notes in cash for 101% of principal plus accrued and unpaid interest. Any of the following events constitutes a change in control:

• subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power or voting stock of Alion;

• individuals who constituted Alion’s board of directors on February 8, 2007, (or individuals who were elected or nominated by them, or individuals who were elected or nominated by them) cease for any reason to constitute a majority of the Company’s board of directors;

• adoption of a plan relating to Alion’s liquidation or dissolution; and

• subject to certain exceptions, Alion’s merger or consolidation with or into another person or the merger of another person with or into Alion, or the sale of all or substantially all our assets to another person.

Optional Redemption. Beginning February 1, 2013, we may redeem all or a portion of the Unsecured Notes at par plus accrued and unpaid interest to the redemption date.

Alion will need to refinance some if not all its senior debt prior to maturity in November 2014 and February 2015 when the Company will have to payout more than $600 million over a three-month period. We are uncertain if Alion will be able to refinance these obligations or if refinancing terms will be favorable. The Company has retained Goldman Sachs and Wells Fargo to assist it in its refinancing efforts.

Interest Payable

As of June 30, 2013, and September 30, 2012 interest payable consisted of the following amounts.

	June 30		September 30,
	2013		2012
	(In thousands)
Unsecured Notes	$	10,252	$	4,188
Secured Notes		5,497		13,470
Total	$	15,749	$	17,658

As of June 30, 2013, Alion must make the following principal repayments (at face amount before debt discount) for its outstanding debt.

Fiscal Year:	2013		2014		2015		Total
Secured Notes and PIK Interest(1)	$	—	$	—	$	339,788	$	339,788
Unsecured Notes(2)		—		—		240,000		240,000
Total Principal Payments	$	—	$	—	$	579,788	$	579,788

1. The Secured Notes due November 2014 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 June 30, 2013, the $318.3 million carrying value on the face of the balance sheet included $310 million in principal, $19.8 million in PIK notes issued; $1.1 million in accrued PIK interest and is net of $12.6 million in aggregate unamortized debt issue costs. Initial debt issue costs consist of $7.7 million in original issue discount, $13.5 million in third-party costs and $20.8 million for the Secured Note warrants’ initial fair value.

2. As of June 30, 2013, the Unsecured Notes due February 2015 include $240 million in principal and $1.4 million in unamortized debt issue costs (initially $7.1 million). The Company repurchased $5 million in face value of Unsecured Notes in July 2013.

18

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(11) Fair Value Measurement

Alion applies ASC 820 – Fair Value Measurements and Disclosures in determining the fair value to be disclosed for financial and nonfinancial assets and liabilities. The Company has no assets or liabilities, other than its redeemable common stock, which it is required to report at fair value. Valuation techniques utilized in the fair value measurement of assets and liabilities for each period presented were unchanged from prior practice.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy and a framework which requires categorizing assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. Level 1inputs are unadjusted, quoted market prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. Level 3 inputs include unobservable inputs that are supported by little, infrequent, or no market activity and reflect management’s own assumptions about inputs used in pricing the asset or liability. The Company uses the following valuation techniques to measure fair value.

Level 1 primarily consists of financial instruments, such as overnight bank re-purchase agreements or money market mutual funds whose value is based on quoted market prices published by financial institutions, exchange funds, exchange-traded instruments and listed equities.

Level 2 assets include U.S. Government and agency securities whose valuations are based on market prices from a variety of industry-standard data providers or pricing that considers various assumptions, including time value, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments, and broker and dealer quotes. All are observable in the market or can be derived principally from or corroborated by observable market data for which the Company can obtain independent external valuation information.

Level 3 consists of unobservable inputs. Assets and liabilities are considered Level 3 when their fair value inputs are unobservable or not available, including situations involving limited market activity, where determination of fair value requires significant judgment or estimation.

The table below sets out the face value, net carrying value and fair value of Alion’s Secured and Unsecured Notes. The fair values disclosed below are based on quoted market prices for Alion’s outstanding notes. This is a Level 2 measurement.

19

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	June 30, 2013						September 30, 2012
	(In thousands)
	Secured Notes			Unsecured Notes			Secured Notes			Unsecured Notes
Face value of original notes outstanding	$	310,000		$	240,000		$	310,000		$	245,000
PIK interest notes issued		19,788			—			13,293			—
Face value of outstanding notes	$	329,788		$	240,000		$	323,293		$	245,000
PIK interest notes to be issued		1,099			—			2,692			—
Face value of notes outstanding and notes to be issued	$	330,887		$	240,000		$	325,985		$	245,000
Less: unamortized debt issue costs		(12,572	)		(1,403	)		(19,483	)		(2,077	)
Carrying value	$	318,315		$	238,597		$	306,502		$	242,923
Fair value of outstanding notes	$	332,700		$	140,575		$	303,598		$	141,605

(12) Secured Note Common Stock Warrants

On March 22, 2010, Alion issued 310,000 Units consisting of $1,000 of Secured Note face value and a warrant to purchase 1.9439 shares of Alion common stock. The Secured Note warrants entitle holders to purchase a total of 602,614 shares of Alion common stock. Each Secured Note warrant has an exercise price of a penny per share; the Secured Note warrants are not redeemable for cash.

The Company registered the Secured Notes, but is not required to register the warrants. The Units separated into Secured Notes and warrants on June 22, 2010. Each warrant became exercisable on March 22, 2011 and expires on March 15, 2017.

The Secured Note warrants had an initial fair value of approximately $20.8 million based on Alion’s former share price of $34.50. Alion recognized the value of the warrants as part of the debt issue costs for the Secured Notes and recorded a corresponding credit to equity. The Company accounts for the Secured Note warrants as equity and reassesses this classification each reporting period. The Company identified no required changes in accounting treatment as of June 30, 2013.

(13) Leases

Future minimum lease payments under non-cancelable operating leases for buildings, equipment and automobiles at June 30, 2013 are set out below. Alion has subleased some excess capacity to subtenants under non-cancelable operating leases.

Lease Payments for Fiscal Years Ending	(In thousands)
2013 (for the remainder of fiscal year)	$	6,992
2014		25,445
2015		24,789
2016		20,999
2017		17,803
2018		14,931
And thereafter		19,109
Gross lease payments	$	130,068
Less: non-cancelable subtenant receipts		(1,854	)
Net lease payments	$	128,214

20

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Composition of Total Rent Expense
	Nine Months Ended
	June 30,
	2013			2012
	(In thousands)
Minimum rentals	$	16,179		$	15,722
Less: Sublease rental income		(452	)		(110	)
Total rent expense, net	$	15,727		$	15,612

(14) ESOP Expense

Alion makes 401(k) matching contributions in shares of its common stock. The Company matches the first 3% and one-half of the next 2% of eligible employee salary deferrals by contributing shares of Alion common stock to the ESOP Trust on March 31 and September 30 each year. The Company also makes profit sharing contributions of Alion common stock to the ESOP Trust on the same dates.

Based on the value of common stock contributed and to be contributed to the Plan, Alion recognized $3.3 million and $10.5 million in Plan expense for the three and nine months ended June 30, 2013 and $3.4 million and $10.5 million in Plan expense for the three and nine months ended June 30, 2012.

(15) Long Term Incentive Compensation Plan

Alion adopted a long-term cash incentive compensation plan for certain executives in December 2008. The Company amended its incentive compensation plan in January 2010 and amended and restated it in June 2013. The most recent amendment creates new change in control provisions that apply to future grants. Individual incentive compensation grants contain specific financial and performance goals and vest over varying periods. Some grants are for a fixed amount; others provide a range of values from a minimum of 50% to a maximum of 150% of initial grant value. The Company periodically evaluates the probability that individuals will achieve stated financial and performance goals.

Alion recognizes long term incentive compensation expense based on outstanding grants’ stated values, estimated probability of achieving stated goals and estimated probable future grant values. The Company recognized credits to incentive compensation expense of $7 thousand and $234 thousand for the three months ended June 30, 2013 and 2012 due to forfeitures. The Company recognized $1.5 million and $658 thousand in incentive compensation expense for the nine months ended June 30, 2013 and 2012.

(16) Stock Based Compensation

Alion initially adopted its Stock Appreciation Rights (SAR) Plan in 2004. The Company amended and restated the SAR Plan in January 2007; amended it in January 2010; and amended and restated the SAR Plan in June 2013. The SAR Plan expires in November 2016. The most recent SAR Plan amendment revises certain change in control provisions.

The chief executive officer may award SARs as he deems appropriate. Awards vest ratably over four years with payment following the grant date fifth anniversary. Grants with no intrinsic value expire on their year-five payment date. The SAR Plan provides for accelerated vesting in the event of death or disability and provides for accelerated vesting of existing grants on a change in control. Approximately 738 thousand SARs were outstanding at June 30, 2013, at a weighted average grant date fair value of $25.02 per share. No outstanding grant has any intrinsic value.

In June 2013, the Company amended and restated its Phantom Stock Plan and its Performance Shares and Retention Phantom Stock Plan. No grants are outstanding under either of these plans.

Alion recognized $21 thousand and $79 thousand in stock based compensation expense for the three and nine months ended June 30, 2013. The Company recognized $36 thousand in stock based compensation expense for the three months ended June 30, 2012. For the nine months ended June 30, 2012, the Company recognized a $30 thousand credit to stock based compensation expense.

The Company uses a Black-Scholes-Merton option pricing model based on the fair market value of a share of its common stock to recognize stock –based compensation expense. There is no established public trading market for Alion’s common stock. The ESOP Trust owns all outstanding common stock. Alion does not expect to pay any dividends on its common stock and intends to retain future earnings, if any, for operating its business.

21

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(17) Income Taxes

Deferred Taxes

Alion is subject to income taxes in the U.S., various states, India and Canada. Tax statutes and regulations within each jurisdiction are subject to interpretation requiring management to apply significant judgment. Alion recorded $1.7 million in goodwill related deferred tax expense and liabilities this quarter and $5.2 million in goodwill related deferred tax expense and liabilities for the nine months ended June 30, 2013.

The Company expects to be able to use existing and anticipated net operating losses (NOL) to offset taxes that may become due in the future if Alion has future taxable income. Even though Alion recorded a full valuation allowance for all deferred tax assets, the Company does not expect to pay any income taxes for the foreseeable future. Alion’s ability to utilize NOL tax benefits will depend upon how much future taxable income it has and may be limited under certain circumstances. Alion does not have any NOL tax benefits it can carry back to prior years.

The Company’s effective tax rate for the nine months ended June 30, 2013 was -23.8% and –19.6% for the nine months ended June 30, 2012. As of June 30, 2013 and September 30, 2012 the net deferred tax liability was:

	June 30, 2013			September 30, 2012
	(In thousands)
Current deferred tax asset	$	9,324		$	11,207
Noncurrent deferred tax asset		83,021			67,207
Valuation allowance		(92,345	)		(78,414	)
Noncurrent deferred tax liability		(56,386	)		(51,156	)
Net deferred tax liability	$	(56,386	)	$	(51,156	)

Tax Uncertainties

Based on the latest available information, Alion periodically assesses its liabilities and contingencies for all periods open to examination by tax authorities. Where management believes there is more than a 50 percent chance the Company’s tax position will not be sustained, Alion records its best estimate of the resulting tax liability, including interest. Interest or penalties related to income taxes are reported separately from income tax expense. The Company has analyzed its tax positions and has not recorded any liabilities for tax uncertainties.

Alion may become subject to federal or state income tax examination for tax years ended September 2010 and forward. Alion’s former status as a pass-through entity owned by a tax-exempt trust makes an examination unlikely and the possibility of an adverse determination remote. The Company does not expect resolution of tax matters for any open years to materially affect its operating results, financial condition, cash flows or effective tax rate.

(18) Segment Information

Alion operates as a single segment, providing advanced engineering, information technology and operational solutions to strengthen national security and drive business results under contracts with the U.S. government, state and local governments, and commercial customers.

U.S. government customers typically exercise independent contracting authority. U.S. government agencies, department offices or divisions may use Alion’s services as a separate customer directly, or through a prime contractor, if they have independent decision-making and contracting authority within their organization. U.S. government prime contracts accounted for approximately 87% and 85% of total contract revenue for the nine months ended June 30, 2013, and 2012.

22

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(19) Commitments and Contingencies

Legal Proceedings

We are involved in routine legal proceedings occurring in the ordinary course of business that we believe are not material to our financial condition, operating results, or cash flows. As a government contractor, from time to time we may be subject to DCAA audits and federal government inquiries. The federal government may suspend or debar for a period of time any federal contractor it finds has violated the False Claims Act, and any contractor indicted or convicted of violations of other federal laws. The federal government could also impose fines or penalties.

Alion depends on federal government contracts; suspension or debarment could have a material, adverse effect on our business, financial condition, operating results, cash flows and our ability to meet our financial obligations. We are not aware of any such pending federal government claims or investigations.

Government Audits

Federal government cost-reimbursement contract revenues and expenses in the unaudited condensed consolidated financial statements are subject to DCAA audit and possible adjustment. Alion is a major contractor and DCAA maintains an office on site to perform various audits throughout the year. The Company has settled indirect rates through 2005 based on completed DCAA audits. All subsequent years are open. Alion has recorded federal government contract revenue based on amounts it expects to realize upon final settlement.

(20) Guarantor/Non-guarantor Unaudited Condensed Consolidated Financial Information

Certain of Alion’s wholly-owned domestic subsidiaries have jointly, severally, fully and unconditionally guaranteed both the Secured Notes and the Unsecured Notes which are general obligations of the Company. In March 2010, the Unsecured Note Indenture was amended to include as Unsecured Note guarantors all subsidiaries serving as Secured Note guarantors.

The following information presents unaudited condensed consolidating balance sheets as of June 30, 2013 and September 30, 2012; unaudited condensed consolidating statements of operations and comprehensive loss for the three and nine month periods ended June 30, 2013 and 2012; and unaudited condensed consolidating statements of cash flows for the nine months ended June 30, 2013 and 2012 of Alion, its guarantor subsidiaries and its non-guarantor subsidiaries. Investments include Alion’s investments in its subsidiaries presented using the equity method of accounting.

23

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Balance Sheet as of June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$	19,950		$	(4	)	$	30		$	—		$	19,976
Accounts receivable, net		181,900			2,930			367			—			185,197
Receivable due from ESOP Trust		—			—			—			—			—
Prepaid expenses and other current assets		6,242			151			(102	)		—			6,291
Total current assets		208,092			3,077			295			—			211,464
Property, plant and equipment, net		9,166			468			6			—			9,640
Intangible assets, net		2,356			—			—			—			2,356
Goodwill		398,921			—			—			—			398,921
Investment in subsidiaries		28,267			—			—			(28,267	)		—
Intercompany receivables		1,865			27,759			—			(29,624	)		—
Other assets		10,479			—			5			—			10,484
Total assets	$	659,146		$	31,304		$	306		$	(57,891	)	$	632,865
Current liabilities:
Interest payable	$	15,749		$	—		$	—		$	—		$	15,749
Trade accounts payable		66,478			121			—			—			66,599
Accrued liabilities		42,889			130			39			—			43,058
Accrued payroll and related liabilities		36,946			594			56			—			37,596
Billings in excess of revenue earned		4,174			74			3			—			4,251
Total current liabilities		166,236			919			98			—			167,253
Intercompany payables		27,759			100			1,765			(29,624	)		—
Secured notes		318,315			—			—			—			318,315
Unsecured notes		238,597			—			—			—			238,597
Accrued compensation and benefits, excluding current portion		6,090			—			—			—			6,090
Non-current portion of lease obligations		12,484			462			—			—			12,946
Deferred income taxes		56,386			—			—			—			56,386
Commitments and contingencies
Redeemable common stock		111,017			—			—			—			111,017
Common stock warrants		20,785			—			—			—			20,785
Common stock of subsidiaries		—			4,084			—			(4,084	)		—
Accumulated other comprehensive loss		(149	)		—			—			—			(149	)
Accumulated deficit		(298,374	)		25,739			(1,557	)		(24,183	)		(298,375	)
Total liabilities, redeemable common stock and accumulated deficit	$	659,146		$	31,304		$	306		$	(57,891	)	$	632,865

24

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Balance Sheet as of September 30, 2012 (unaudited)

	Parent			Guarantor			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$	27,271		$	(44	)	$	—		$	—		$	27,227
Accounts receivable, net		172,365			2,783			145			—			175,293
Receivable due from ESOP Trust		1,129			—			—			—			1,129
Prepaid expenses and other current assets		5,378			70			—			—			5,448
Total current assets		206,143			2,809			145			—			209,097
Property, plant and equipment, net		10,064			529			12			—			10,605
Intangible assets, net		5,242			—			—			—			5,242
Goodwill		398,921			—			—			—			398,921
Investment in subsidiaries		27,994			—			—			(27,994	)		—
Intercompany receivables		1,438			27,475			—			(28,913	)		—
Other assets		11,427			—			4			—			11,431
Total assets	$	661,229		$	30,813		$	161		$	(56,907	)	$	635,296
Current liabilities:
Interest payable	$	17,658		$	—		$	—		$	—		$	17,658
Trade accounts payable		44,582			201			10			—			44,793
Accrued liabilities		52,265			190			5			—			52,460
Accrued payroll and related liabilities		39,305			589			32			—			39,926
Billings in excess of costs revenue earned		2,656			6			4			—			2,666
Total current liabilities		156,466			986			51			—			157,503
Intercompany payables		27,476			—			1,437			(28,913	)		—
Secured Notes		306,502			—			—			—			306,502
Unsecured Notes		242,923			—			—			—			242,923
Accrued compensation and benefits, excluding current portion		5,905			—			—			—			5,905
Non-current portion of lease obligations		11,858			506			—			—			12,364
Deferred income taxes		51,156			—			—			—			51,156
Redeemable common stock		110,740			—			—			—			110,740
Common stock of subsidiaries		—			4,084			—			(4,084	)		—
Commitments and contingencies
Common stock warrants		20,785			—			—			—			20,785
Accumulated other comprehensive loss		(149	)		—			—			—			(149	)
Accumulated surplus (deficit)		(272,433	)		25,237			(1,327	)		(23,910	)		(272,433	)
Total liabilities, redeemable common stock and accumulated deficit	$	661,229		$	30,813		$	161		$	(56,907	)	$	635,296

25

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations		Consolidated
	(In thousands)
Contract revenue	$	218,344			2,414			189			—	$	220,947
Direct contract expense		172,741			1,476			97			—		174,314
Gross profit		45,603			938			92			—		46,633
Operating expenses		20,365			460			104					20,929
General and administrative		13,370			632			15			—		14,017
Operating income (loss)		11,868			(154	)		(27	)		—		11,687
Other income (expense):
Interest income		10			—			—			—		10
Interest expense		(18,982	)		—			—			—		(18,982	)
Other		(59	)		35			—			—		(24	)
Gain on debt extinguishment		1,966			—			—			—		1,966
Equity in net income (loss) of subsidiaries		(146	)					—			146		—
Total other expenses		(17,211	)		35			—			146		(17,030	)
(Loss) income before taxes		(5,343	)		(119	)		(27	)		146		(5,343	)
Income tax expense		(1,744	)		—			—			—		(1,744	)
Net loss	$	(7,087	)	$	(119	)	$	(27	)	$	146	$	(7,087	)
Other comprehensive income
Postretirement actuarial gains		—			—			—			—		—
Comprehensive income (loss)	$	(7,087	)	$	(119	)	$	(27	)	$	146	$	(7,087	)

26

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	207,952		$	3,492		$	70		$	—		$	211,514
Direct contract expense		162,939			2,077			26			—			165,042
Gross profit		45,013			1,415			44			—			46,472
Operating expenses		22,099			740			87			—			22,926
General and administrative		12,000			(67	)		24			—			11,957
Operating income (loss)		10,914			742			(67	)		—			11,589
Other income (expense):
Interest income		15			—			—			—			15
Interest expense		(18,793	)		—			—			—			(18,793	)
Other		71			(4	)		—			—			67
Equity in net income of subsidiaries		671			—			—			(671	)		—
Total other (expense) income		(18,036	)		(4	)		—			(671	)		(18,711	)
(Loss) income before taxes		(7,122	)		738			(67	)		(671	)		(7,122	)
Income tax expense		(1,744	)		—			—			—			(1,744	)
Net income (loss)	$	(8,866	)	$	738		$	(67	)	$	(671	)	$	(8,866	)
Other comprehensive income:
Postretirement actuarial gains		—			—			—			—			—
Comprehensive income (loss)	$	(8,866	)	$	738		$	(67	)	$	(671	)	$	(8,866	)

27

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	639,186		$	6,969	$	402		$	—		$	646,557
Direct contract expense		505,326			4,241		344			—			509,911
Gross profit		133,860			2,728		58			—			136,646
Operating expenses		63,034			1,578		229			—			64,841
General and administrative		38,283			683		59			—			39,025
Operating income (loss)		32,543			467		(230	)		—			32,780
Other income (expense):
Interest income		44			—		—			—			44
Interest expense		(56,814	)		—		—			—			(56,814	)
Other		(19	)		35		—			—			16
Gain on debt extinguishment		1,966			—		—			—			1,966
Equity in net income of subsidiaries		272			—		—			(272	)		—
Total other (expense) income		(54,551	)		35		—			(272	)		(54,788	)
(Loss) income before taxes		(22,008	)		502		(230	)		(272	)		(22,008	)
Income tax expense		(5,231	)		—		—			—			(5,231	)
Net income (loss)	$	(27,239	)	$	502	$	(230	)	$	(272	)	$	(27,239	)
Other comprehensive income:		—
Postretirement actuarial gains		—			—		—			—			—
Comprehensive income (loss)	$	(27,239	)	$	502	$	(230	)	$	(272	)	$	(27,239	)

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ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	587,043			11,038		436			—		$	598,517
Direct contract expense		455,469			6,105		243			—			461,817
Gross profit		131,574			4,933		193			—			136,700
Operating expenses		67,118			2,106		169						69,393
General and administrative		37,658			75		140			—			37,873
Operating income (loss)		26,798			2,752		(116	)		—			29,434
Other income (expense):
Interest income		56			—		—			—			56
Interest expense		(56,130	)		—		—			—			(56,130	)
Other		(60	)		10		—			—			(50	)
Equity in net income (loss) of subsidiaries		2,646					—			(2,646	)		—
Total other expenses		(53,488	)		10		—			(2,646	)		(56,124	)
(Loss) income before taxes		(26,690	)		2,762		(116	)		(2,646	)		(26,690	)
Income tax expense		(5,231	)		—		—			—			(5,231	)
Net loss	$	(31,921	)	$	2,762	$	(116	)	$	(2,646	)	$	(31,921	)
Other comprehensive income
Postretirement actuarial gains		—			—		—			—			—
Comprehensive income (loss)	$	(31,921	)	$	2,762	$	(116	)	$	(2,646	)	$	(31,921	)

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ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies		Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	1,130		$	40		$	30	$	1,200
Cash flows from investing activities:
Capital expenditures		(952	)		—			—		(952	)
Net cash used in investing activities		(952	)		—			—		(952	)
Cash flows from financing activities:
Repurchase Unsecured Notes		(3,005	)		—			—		(3,005	)
Revolver borrowings		3,201			—			—		3,201
Revolver payments		(3,201	)		—			—		(3,201	)
Loan to ESOP Trust		(1,907	)		—			—		(1,907	)
ESOP loan repayment		1,907			—			—		1,907
Redeemable common stock purchased from ESOP Trust		(6,660	)		—			—		(6,660	)
Redeemable common stock sold to ESOP Trust		2,166			—			—		2,166
Net cash used in financing activities		(7,499	)		—			—		(7,499	)
Net (decrease) increase in cash and cash equivalents		(7,321	)		40			30		(7,251	)
Cash and cash equivalents at beginning of period		27,271			(44	)		—		27,227
Cash and cash equivalents at end of period	$	19,950		$	(4	)	$	30	$	19,976

30

ALION SCIENCE AND TECHNOLOGY CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies		Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	(7,139	)	$	(41	)	$	1	$	(7,179	)
Cash flows from investing activities:
Capital expenditures		(2,341	)		2			—		(2,339	)
Net cash used in investing activities		(2,341	)		2			—		(2,339	)
Cash flows from financing activities:
Revolver borrowings		26,000			—			—		26,000
Revolver payments		(26,000	)		—			—		(26,000	)
Loan to ESOP Trust		(477	)		—			—		(477	)
ESOP loan repayment		477			—			—		477
Redeemable common stock purchased from ESOP Trust		(4,836	)		—			—		(4,836	)
Redeemable common stock sold to ESOP Trust		1,302			—			—		1,302
Net cash provided by financing activities		(3,534	)		—			—		(3,534	)
Net increase (decrease) in cash and cash equivalents		(13,014	)		(39	)		1		(13,052	)
Cash and cash equivalents at beginning of period		20,845			(27	)		—		20,818
Cash and cash equivalents at end of period	$	7,831		$	(66	)	$	1	$	7,766

(21) Subsequent Event

On July 16, 2013, Alion used its revolving credit facility to repurchase $5.0 million worth of Unsecured Notes in an open market transaction at a discount to face value. Alion recognized approximately $1.9 million as a debt extinguishment gain from its July 2013 Unsecured Note repurchase.

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

The following discussion and analysis is intended to assist the reader’s understanding of Alion’s financial condition, results of operations, liquidity and capital resources. This discussion should be read together with the unaudited condensed consolidated financial statements and related notes in Item 1. This discussion updates the information contained in our Annual Report on Form 10-K for the year ended September 30, 2012 and contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and presumes that readers have access to, and will have read, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in those reports.

Forward Looking Statements

Information included and incorporated by reference in this Form 10-Q may contain forward-looking statements that involve risks and uncertainties. These statements relate to future plans, objectives, expectations and intentions and are for illustrative purposes only. These statements may be identified by the use of words such as “believe,” “expect,” “intend,” “plan,” “anticipate,” “likely,” “will,” “pro forma,” “forecast,” “projections,” “could,” “estimate,” “may,” “potential,” “should,” “would,” and similar expressions.

Factors that could cause actual results to differ materially from anticipated results include, but are not limited to:

• U.S. government debt ceiling limitations, sequestration, continuing resolutions, or other similar federal government budgetary or funding issues;

• U.S. government shutdowns;

• U.S. government decisions to reduce funding for projects we support;

• Failure to retain our existing government contracts, win new business and win re-competed contracts;

• Failure of government customers to exercise contract options;

• Limits on financial and operational flexibility given our substantial debt and debt covenants;

• Government contract bid protest and termination risks;

• Competitive factors such as pricing pressures and competition to hire and retain employees;

• Results of current and future legal proceedings and government agency proceedings which may arise from operations and attendant risks of fines, liabilities, penalties, suspension and debarment;

• Tax law changes that could affect tax liabilities or Alion’s effective tax rate;

• ERISA law changes related to the KSOP;

• Changes in SEC rules, and other corporate governance requirements;

• Undertaking acquisitions that increase costs or liabilities or are disruptive;

• Taking on additional debt to fund acquisitions;

• Failing to adequately integrate acquired businesses;

• Any future inability to maintain adequate internal control over financial reporting or covenant compliance measurement;

• Risks from private securities litigation, regulatory proceedings or government enforcement actions relating to prior covenant compliance disclosures;

• Material changes in laws or regulations affecting our businesses;

• Material changes to our capital structure including financing transactions which may dilute ESOP participants’ interest in Alion’s capital stock; and

• Other risk factors discussed in Alion’s annual report on Form 10-K for the year ended September 30, 2012 filed with the SEC on December 17, 2012 and any subsequent reports.

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Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s view only as of August 8, 2013. We undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectations or otherwise. This discussion addresses only continuing operations.

Overview

Alion delivers advanced engineering, IT, and operational solutions to strengthen national security and drive business results. For customers in defense, civilian government, foreign governments and commercial industries worldwide, Alion’s engineered solutions support smarter decision-making and enhanced readiness in rapidly-changing environments.

Our engineering, scientific expertise and program management services support a range of specialized core business areas, from naval architecture to systems engineering to modeling, simulation and training. Alion builds on a 75-year history of delivering highly technical, yet practical and cost-effective solutions to resolve our customers’ fundamental challenges and help them accomplish their missions.

The legislative and executive branches of the federal government remain committed to achieving cost controls and budget reductions to defense and civilian agencies, which affect routine operations and specific programs. The Budget Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012) established a “baseline” from which certain programs and operations may see significant cutbacks or funding limitations and automatic spending cuts to be implemented over time beginning in March, 2013 known as sequestration. Programmatic and budgetary reductions are expected to decrease government spending and affect contractor revenues in the defense and civilian government sector.

Alion is not exempt from federal government funding and budgetary constraints. The Secretary of Defense has directed his organization to implement expense reductions mandated by sequestration. Therefore, Alion’s customers may face constraints on their ability to add funding, or maintain current funding levels to existing contracts and to execute new contracts. As with others in the defense contracting sector, there may be the possibility of significant funding reductions on a number of our contracts and programs.

Alion has responded to the budgetary challenge by reducing costs and headcount for indirect and administrative staff, lowering facilities costs and striving to position the Company to serve its customers more effectively and efficiently. While we believe our customers will continue to seek our high-end engineering and technical expertise and solutions, we are not unaffected by today’s current market pressures. However, we think the legislative and executive branch focus on controlling and reducing costs will ultimately help us to sell our services and solutions to our government customers so they can improve their operating efficiency and effectiveness. Due to the nature of our high-end engineering and technical services, we believe we are positioned to meet the challenges of a changing professional services market place.

To date, funding for most of Alion’s contracts has not been materially adversely affected by Department of Defense budget reductions for specific programs, or by delays or reductions for other programs due to sequestration. Our future financial performance could be materially adversely affected by sequestration, budget reductions, government shutdowns and other market factors which we identified in our Annual Report on Form 10-K for our fiscal year ended 2012. Any one of more of these risks could reduce our future revenue and operating income below current or prior year levels and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Results of Operations

Quarter Ended June 30, 2013, Compared to Quarter Ended June 30, 2012

Despite a challenging defense market, the Company continues to win new contracts and execute on our existing base of business. Our fiscal 2013 third quarter revenues increased 4.5% over fiscal 2012 third quarter revenue. As with our increase in revenue, our gross margin and operating income posted modest increases as compared to last year’s third quarter results.

Revenue increases were attributed in part to growing our existing base of business which includes Special Operations Command, the Naval Warfare Centers, Rapid Equipping Force, Naval Sea Systems Command, and the Tank Automotive Research Development and Engineering Center. In addition, we continue to expand our business with new customers such as our work in India performing Naval Architecture and Marine Engineering services and providing high-end nuclear engineering services at several international nuclear power plants.

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Risks related to sequestration, budget reductions, government shutdown and other market factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 could slow or reverse the revenue growth we have experienced in fiscal 2013 which could have a material, adverse effect on our business, financial condition, results of operations and cash flows in future periods. In fiscal 2013 the Company has not been significantly impacted by reductions related to sequestration or other budget cuts, although we have experienced decreases in our funding levels on several of our U.S. Navy programs and training related support work. Funding reductions associated with sequestration may impact the company to a greater degree in the fourth quarter, and in to our fiscal year 2014. At this time, the impact of these possible reductions cannot be measured with any degree of certainly.

Revenue

Third quarter revenue in 2013 was $220.9 million, up $9.4 million (4.5%) over 2012 third quarter results. This growth was driven in part by our high-end agile engineering, rapid prototyping and technology integration work in the Systems Analysis, Design and Engineering core business area, which increased $20.5 million (36.6%) compared to third quarter of last year. This core business area supported customers such as the U.S. Special Forces Command, the Tank Automotive Research Development and Engineering Center, the Night Vision and Electronic Sensors Directorate, Navy Warfare Development Command, Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare programs, and the Rapid Equipping Force. Support for new and existing customers drove an $11.0 million overall increase in third quarter Department of Defense revenue as work with the U.S. Special Forces Command, the Tank Automotive Research Development and Engineering Center, Naval Surface Warfare Center, U. S. Marine Corps and Department of Homeland Security has expanded.

The $2.6 million increase in our third quarter Commercial and International business is related to the Naval Architecture and Marine Engineering work we are performing for the new generation Naval Offshore Patrol Vessel (NOPV) in India. High-end nuclear engineering work at several international nuclear power plants also boosted our Commercial and International business. In addition, work on our PMS 377 and Team Submarine contracts increased in the third quarter, but these gains were offset by reduced activity on several ship design and construction support contracts related to the timing of the build cycles on several programs. These decreases, along with funding delays and reductions related to budget cuts and sequestration led to declines in our third quarter U.S. Navy revenue as well as our Naval Architecture and Marine Engineering revenue. Civilian agency revenue also declined $4.1 million compared to last year as tasking in our high-end consulting business has decreased due to budgetary pressures.

Sources of Revenue

The U.S. government continues to be our principal customer. As in the past, we expect the majority of our revenue will be derived from Department of Defense and other federal agency contracts. Although the Company is investing to expand our international and commercial business, we believe commercial and international revenue will continue to be a low percentage of our total revenue. The table below summarizes our revenue by customer for the second quarter of both fiscal year 2013 and 2012.

	Three Months Ended June 30,
	2013					2012
Revenue by Customer			% of revenue					% of revenue
U.S. Air Force	$	48.4		21.9	%	$	54.1		25.6	%
U.S. Army		20.3		9.2	%		28.2		13.3	%
U.S. Navy		93.3		42.2	%		104.3		49.4	%
Other Department of Defense customers		41.6		18.8	%		6.0		2.8	%
Sub-total Department of Defense customers		203.6		92.1	%		192.6		91.1	%
Other Federal Agencies		8.9		4.0	%		13.1		6.2	%
Sub-total U.S. Government customers		212.5		96.1	%		205.7		97.3	%
Commercial and International customers		8.5		3.9	%		5.8		2.7	%
Total Revenue	$	221.0		100.0	%	$	211.5		100.0	%

Certain quarterly revenue by customer for the three months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

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We provide professional engineering, program management and information technology services and scientific expertise in a range of specialized core business areas. We recently reorganized our business areas to more closely align our services with the demands of the marketplace. Our revised core business areas track internal resource realignments and consolidations we made to foster greater collaboration across Alion. We expect this will improve our efficiency and enhance our ability to provide complete customer solutions. Factors impacting the growth of our Naval Architecture and Marine Engineering and Systems Analysis, Design and Engineering are noted in the preceding Revenue and Sources of Revenue sections. Reductions in the Modeling, Simulation, Training and Analysis are due, in part, to award delays on our Software, Networks, Information, Modeling and Simulation (SNIM) contract, slower than anticipated ramp-up periods on new contract awards, as well as sequestration related reductions in our customer’s training and travel budgets which decreased our support activity in several modeling and simulation centers we manage for our customers. The table below summarizes our third quarter fiscal 2013 and 2012 revenue by core business area.

	Three Months Ended June 30,
Core Business Area Revenue	2013				2012
Naval Architecture and Marine Engineering	$	90.4	40.9	%	$	91.6	43.3	%
Systems Analysis, Design and Engineering		76.5	34.6	%		56.0	26.5	%
Modeling, Simulation, Training and Analysis		54.0	24.5	%		63.9	30.2	%
Total Revenue	$	220.9	100.0	%	$	211.5	100.0	%

Certain quarterly revenue by core business area for the three months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

Cost-reimbursement revenue increased $12.1 million (6.8%) and provided 85.6% of 2013 third quarter revenue as our customers, including the Naval Sea Systems Command and the Defense Technical Information Center’s Information Analysis Center (IAC) contracts, continue to utilize this method of contracting with Alion. Fixed price contract revenue was up $4.7 million to 8.8% of third quarter revenue as a result of our international Naval Architecture and Marine Engineering work and high-end nuclear engineering contracts. Time and material contract revenue fell $7.4 million to less than 6% of third quarter revenue. The table below summarizes our third quarter fiscal 2013 and 2012 revenue by contract billing type.

	Three Months Ended June 30,
Revenue by Contract Billing Type	2013				2012
Cost reimbursable contracts	$	189.0	85.6	%	$	176.9	83.7	%
Fixed price contracts		19.4	8.8	%		14.7	7.0	%
Time and material contracts		12.5	5.6	%		19.9	9.3	%
Total Revenue	$	220.9	100.0	%	$	211.5	100.0	%

Certain quarterly revenue by contract billing type for the three months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

Third quarter prime contract revenue was up $16.6 million, a 9.1% increase compared to last year. Revenue from our work as a subcontractor was down $7.2 million this quarter as we continue to increase our position as a prime contractor on larger, more complex programs. As a prime contractor, we deliver services to customers by deploying our own staff and managing the efforts of other contractors. We also procure additional materials to support our customers who utilize our agile engineering and rapid prototyping support services. Costs for companies that work for us as subcontractors on our prime contracts and costs for materials often generate lower contract fee percentages, which in turn, place downward pressure on our gross margins. The table below summarizes our third quarter fiscal 2013 and 2012 prime and subcontract revenue.

	Three Months Ended June 30,
Prime and Subcontract Revenue	2013				2012
Prime contracts	$	198.3	89.8	%	$	181.7	85.9	%
Subcontracts from other companies		22.6	10.2	%		29.8	14.1	%
Total Revenue	$	220.9	100.0	%	$	211.5	100.0	%

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Certain quarterly revenue for prime and subcontracts for the three months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

The trend by our customers to execute work through IDIQ (Indefinite Delivery Indefinite Quantity) contract vehicles continued in the third quarter. Third quarter revenue from IDIQ contract vehicles increased by 14.6% as our customers utilized our contract vehicles such as our Weapons System Information Analysis Center and Seaport-E contracts, as well as other IDIQ contract vehicles. The table below summarizes our third quarter fiscal 2013 and 2012 revenue by contract vehicle type.

	Three Months Ended June 30,
Contract Vehicles	2013				2012
IDIQ Contracts	$	145.0	65.6	%	$	126.5	59.8	%
Individual contracts and delivery orders		75.9	34.4	%		85.0	40.2	%
Total Revenue	$	220.9	100.0	%	$	211.5	100.0	%

Certain quarterly revenue for IDIQ contracts for the six months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

Selected Financial Information

The table below summarizes our third quarter fiscal 2013 and 2012 revenues and income from operations. Third quarter revenue increased by $9.4 million (4.5%) year over year and our gross margins posted a modest increase of $161 thousand. Total third quarter operating expenses were stable year over year, increasing $63 thousand as $2.0 million in higher general and administrative costs were offset by nearly $2.0 million in savings from other operating expenses. This led to an operating income increase of $98 thousand.

	Three Months Ended June 30,
	2013					2012
	(Dollars in thousands)
			% of					% of
Selected Financial Information			revenue					revenue
Total contract revenue	$	220,947				$	211,514
Total direct contract costs		174,314		78.9	%		165,042		78.0	%
Direct labor costs		64,642		29.3	%		64,511		30.5	%
Materials and subcontracts		106,350		48.1	%		95,249		45.0	%
Other direct costs		3,322		1.5	%		5,282		2.5	%
Gross profit		46,633		21.1	%		46,472		22.0	%
Total operating expense		34,946		15.8	%		34,883		16.5	%
Major components of operating expense:
Overhead and G&A expenses		26,077		11.8	%		24,006		11.3	%
Rental and occupancy expense		7,554		3.4	%		8,006		3.8	%
Depreciation and amortization		1,315		0.6	%		2,871		1.4	%
Operating income	$	11,687		5.3	%	$	11,589		5.5	%

Direct Contract Expense and Gross Profit

Third quarter 2013 direct contract expenses were $9.3 million higher, up 5.6% to $174.3 million compared to last year’s direct costs of $165.0 million. This increase is consistent with higher quarterly revenue. Direct labor costs increased $131 thousand to $64.6 million (29.3% of revenue) as compared to last year. This increase was attributed to the new work in the Commercial and International core business area, and the expansion of our agile engineering, rapid prototyping and high-end engineering businesses. The agile engineering, rapid prototyping and high-end engineering businesses also drove the increase in our purchased materials and subcontractor costs, which increased $10.7 million (11.3%). Our other direct contract costs were down $2.0 million as many of our customers reduced their travel budgets due to sequestration and other budget cuts.

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Our third quarter 2013 gross profit was $46.6 million, up by approximately $161 thousand compared to 2012. Our gross profit margins declined to 21.1% of revenue as compared to the 22.0% of revenue reported last year, and increased 20 basis points as compared to our second quarter results for fiscal year 2013. Expanded use of subcontractors by Alion on our larger, more complex prime contracts and higher levels of purchased materials used in our agile engineering and rapid prototyping work contributed to our reduced gross margins.

Operating and General and Administrative Expenses

Third quarter 2013 operating expenses increased $63 thousand (0.2%) compared to the same period last year. Overhead and general administrative expenses increased approximately $2.1 million as the Company incurred costs related to its refinancing efforts. Depreciation and amortization charges declined more than $1.6 million compared to last year as amortization charges for contracts we obtained when we acquired JJMA in 2005 continue to decrease over time. In an effort to become more efficient and lower the cost of operations the Company reduced our occupancy expense by $452 thousand as compared to last year. Operating expenses, excluding refinancing related charges, continue to trend downward as they have since last year.

Operating Income

Third quarter 2013 operating income was $11.7 million, as compared to $11.6 million in third quarter operating income last year. This was due to higher revenue, higher direct costs, stable gross margin dollars and stable operating expenses which allowed us to maintain operating income at 5.3% of revenue for the quarter, and provide an increase from the second quarter of fiscal year 2013. The costs associated with our on-going refinancing efforts put downward pressure on our operating margins as compared to last year as our operating margins declined by 20 basis points.

Other Expense

Third quarter 2013 aggregate interest income and interest expense and other expense was approximately $285 thousand higher than last year’s comparable third quarter expense. Alion’s Senior Secured Note principal increases each time the Company issues notes in lieu of paying interest. Higher Senior Secured Note principal drives higher cash pay interest expense and higher non-cash and deferred interest charges. This quarter, we repurchased $5.0 million of our Unsecured Notes at a discount and recognized a $2.0 million gain on these repurchases.

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Cash Pay Interest
Revolver	$	201	$	228
Secured Notes		8,217		8,055
Unsecured Notes		6,261		6,278
Other cash pay interest and fees		14		16
Sub-total cash pay interest		14,693		14,577
Deferred and Non-cash Interest
Secured Notes PIK interest		1,644		1,612
Debt issue costs and other non-cash items		2,645		2,604
Sub-total non-cash interest		4,289		4,216
Total interest expense	$	18,982	$	18,793

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Income Tax Expense

Third quarter deferred income tax expense was $1.7 million both this year and last year. Our expense relates to tax-deductible goodwill.

We continue to record a full valuation allowance for any tax benefit we are entitled to recognize because our history of losses makes it unlikely we will be able to realize the full benefit of our deferred tax assets.

Net Loss

This quarter our net loss totaled $7.1 million. Third quarter operating income was stable year over year. However, as a result of the gain we recognized on repurchasing some of our Unsecured Notes at a discount to their face value, our bottom line improved and our net loss this quarter was $1.8 million less than it was in the third quarter of 2012.

Results of Operations

Nine Months Ended June 30, 2013 Compared to Nine Months Ended June 30, 2012

Despite a challenging defense market, the Company continues to win new contracts and execute on our existing base of business. Our fiscal 2013 year-to-date revenues increased 8.0% over fiscal 2012 year-to-date revenue while operating income outpaced our revenue growth by increasing 11.4%.

Revenue increases were attributed to growing our existing base of business, which includes our support of the Special Operations Command, the Naval Warfare Centers, Rapid Equipping Force, Naval Sea Systems Command, and the Tank Automotive Research Development and Engineering Center. In addition, we continue to expand our business with new customers, such as our work in India performing Naval Architecture and Marine Engineering services and providing high-end nuclear engineering services at several international nuclear power plants.

Company initiatives continue to drive efficiencies throughout the business and have reduced overhead expenses by more than $1.0 million and occupancy costs by $842 thousand as compared to last year. Contract amortization charges are declining over time as planned. Refinancing related expenses adversely affected general and administrative costs which have increased $1.2 million.

Risks related to sequestration, budget reductions government shutdown and other market factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 could slow or even reverse the revenue growth we have experienced this year, and could have a material, adverse effect on our business, financial condition, results of operations and cash flows. Funding reductions associated with sequestration may impact the company to a greater degree in the fourth quarter, and into fiscal year 2014. At this time, these possible reductions cannot be measured with any degree of certainty.

Revenue

Third quarter year to date revenue in 2013 was up $48.1 million (8.0%) to $646.6 million, compared to $598.5 million for the comparable period last year. This growth was driven by our high-end engineering, rapid prototyping and technology integration work in the Systems Analysis, Design and Engineering core business area, which increased $75.0 million (51.4%). Support for several new and existing customers drove an overall $51.5 million increase in work for our Department of Defense customers and a $71.6 million increase in work for Other Department of Defense customers. This work supported customers such as the Special Forces Command, the Tank Automotive Research Development and Engineering Center, the Night Vision and Electronic Sensors Directorate, Naval Surface Warfare Center, U. S. Marine Corps, Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare programs, and the Rapid Equipping Force.

Air Force revenue increased $2.4 million over the same time frame, driven partly by our work for the Air Force Research Laboratory. Navy related revenue was down year over year by $19.4 million (6.5%) due to reduced activity on several ship design and construction support contracts. This relates to the timing of the build cycles on several programs, as well as funding delays and reductions due to budget cuts and sequestration. These declines also affected Naval Architecture and Marine Engineering revenue which was down $5.6 million. Civilian agency revenue was also down $10.0 million compared to last year. Commercial and international customer work increased $6.6 million as we expanded Naval Architecture and Marine Engineering work overseas and executed new programs in our high-end nuclear engineering services.

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Sources of Revenue

The U.S. government continues to be our principal customer. As in the past, we expect the majority of our revenue will be derived from Department of Defense and other federal agency contracts. As the company invests to expand our international and commercial base of business, we believe the commercial, state, local and international revenue will remain to be a low percentage of our Revenue bases. The table below summarizes our year to date fiscal year 2013 and 2012 revenue by customer.

	Nine Months Ended June 30,
	2013					2012
Revenue by Customer			% of revenue					% of revenue
U.S. Air Force	$	153.2		23.7	%	$	150.8		25.2	%
U.S. Army		72.1		11.2	%		75.2		12.6	%
U.S. Navy		278.3		43.0	%		297.7		49.8	%
Other Department of Defense customers		91.8		14.2	%		20.2		3.4	%
Sub-total Department of Defense customers		595.4		92.1	%		543.9		91.0	%
Other Federal Agencies		29.2		4.5	%		39.2		6.5	%
Sub-total U.S. Government customers		624.6		96.6	%		583.1		97.5	%
Commercial and International customers		22.0		3.4	%		15.4		2.5	%
Total Revenue	$	646.6		100.0	%	$	598.5		100.0	%

Certain year to date revenue by customer for the nine months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

We provide professional engineering, program management and information technology services and scientific expertise in a range of specialized core business areas. We recently reorganized our business areas to more closely align our services with the demands of the marketplace. Our revised core business areas track internal resource realignments and consolidations we made to foster greater collaboration across Alion. We expect this will improve our efficiency and enhance our ability to provide complete customer solutions. Factors impacting the growth of our Naval Architecture and Marine Engineering and Systems Analysis, Design and Engineering are noted in the preceding Revenue and Sources of Revenue sections. Reductions in Modeling, Simulation, Training and Analysis are due, in part, to award delays on our Software, Networks, Information, Modeling and Simulation (SNIM) contract, slower than anticipated ramp-up periods on new awards, as well as reductions in our customer’s training and travel budgets related to sequestration. This decreased our support activity in several modeling and simulation centers we manage for our customers. The table below summarizes our year to date fiscal 2013 and 2012 revenue by core business area.

	Nine Months Ended June 30,
Core Business Area Revenue	2013				2012
Naval Architecture and Marine Engineering	$	260.6	40.3	%	$	266.2	45.1	%
Systems Analysis, Design and Engineering		221.0	34.2	%		90.0	23.3	%
Modeling, Simulation, Training and Analysis		165.0	25.5	%		122.4	31.6	%
Total Revenue	$	646.6	100.0	%	$	387.0	100.0	%

Certain year to date revenue by core business area for the nine months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

Cost-reimbursement revenue increased $55.2 million (11.2%) accounting for 84.8% of 2013 third quarter year to date revenue as our customers, including the Naval Sea Systems Command and the Defense Technical Information Center, continue to utilize this method of contracting with Alion. Fixed price contract revenue grew $14.9 million to 9.2% of year to date revenue as a result of our International Naval Architecture and high-end nuclear engineering contracts. Time and material contract revenue declined $22.0 million to 6.0% of third quarter year-to-date revenue. The table below summarizes our year to date third quarter fiscal 2013 and 2012 revenue by contract billing type.

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	Nine Months Ended June 30,
Revenue by Contract Billing Type	2013				2012
Cost reimbursable contracts	$	548.4	84.8	%	$	493.2	82.5	%
Fixed price contracts		59.4	9.2	%		44.5	7.4	%
Time and material contracts		38.8	6.0	%		60.8	10.1	%
Total Revenue	$	646.6	100.0	%	$	598.5	100.0	%

Certain year to date revenue by contract billing type for the nine months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains unchanged.

Prime contracts accounted for 89.3% of our year to date revenue. Prime contract revenue increased $65.5 million year over year, up 12.8% compared to last year. Revenue from our work as a subcontractor was down $17.4 million year to date. We continue to increase our position as a prime contractor on larger, more complex programs. As a prime contractor, we deliver services to customers by deploying our own staff and managing the efforts of other contractors. We also procure additional materials to support our customers who utilize our agile engineering and rapid prototyping support services, as well as other services. Costs for companies that work for us as subcontractors on our prime contracts and costs for materials often generate lower contract fee percentages, which in turn, place downward pressure on our gross margins. The table below summarizes our year to date fiscal 2013 and 2012 prime and subcontract revenue.

	Nine Months Ended June 30,
Prime and Subcontract Revenue	2013				2012
Prime contracts	$	577.1	89.3	%	$	511.6	85.5	%
Subcontracts from other companies		69.5	10.7	%		86.9	14.5	%
Total Revenue	$	646.6	100.0	%	$	598.5	100.0	%

Certain year to date revenue for prime and subcontracts for the nine months ended June 30, 2012 disclosed above differs from amounts previously disclosed due to customers re-defining individual contracts, task orders and programs. While this re-classification may shift reported revenue from one classification to another, our total revenue for the period remains

The trend by our customers to execute work through IDIQ contract vehicles continued in the third quarter. Year to date revenue from IDIQ contract vehicles increased by 15.5% as our customers utilized our contract vehicles such as our Weapons System Information Analysis Center and Seaport-E contracts, as well as other IDIQ contract vehicles. The table below summarizes our year to date 2013 and 2012 revenue by contract vehicle type.

	Nine Months Ended June 30,
Contract Vehicles	2013				2012
IDIQ Contracts	$	420.8	65.1	%	$	364.4	60.9	%
Individual contracts and delivery orders		225.8	34.9	%		234.1	39.1	%
Total Revenue	$	646.6	100.0	%	$	598.5	100.0	%

Year to date revenue by contract vehicle described above may differ slightly for fiscal year 2012 from amounts previously reported as individual contracts, task orders and programs are further defined by our customers and management team.

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Selected Financial Information

The table below summarizes our year to date fiscal 2013 and 2012 revenue and income from operations. Year to date revenue increased by $48.0 million while total operating expenses declined by $3.4 million. The Company benefitted from continuing efforts to reduce Alion’s cost structure declining contract amortization charges. Costs associated with the Company’s refinancing efforts eroded some of these savings.

	Nine Months Ended June 30,
	2013					2012
	(Dollars in thousands)
Selected Financial Information			% of revenue					% of revenue
Total contract revenue	$	646,557				$	598,517
Total direct contract costs		509,911		78.9	%		461,817		77.2	%
Direct labor costs		187,448		29.0	%		191,933		32.1	%
Materials and subcontracts		308,801		47.8	%		256,337		42.8	%
Other direct costs		13,662		2.1	%		13,547		2.3	%
Gross profit		136,646		21.1	%		136,700		22.8	%
Total operating expense		103,866		16.1	%		107,266		17.9	%
Major components of operating expense:
Overhead and G&A expenses		75,064		11.6	%		74,945		12.5	%
Rental and occupancy expense		22,878		3.5	%		23,720		4.0	%
Depreciation and amortization		5,924		0.9	%		8,601		1.4	%
Operating income	$	32,780		5.1	%	$	29,434		4.9	%

Direct Contract Expense and Gross Profit

Year to date direct contract expenses were $48.1 million higher, up 10.4% to $510.0 million compared to last year’s direct costs of $461.8 million. This change is consistent with increased year to date revenue. Direct labor costs were down $4.5 million (2.3%) to $187.4 million as compared to last year. This decline was attributed, in part, to the reduced activity on several U.S. Navy ship design and construction support contracts related to the timing of the build cycles on several programs and the effect of budget cuts and sequestration related funding reductions. Expansion of our agile engineering, rapid prototyping and high-end engineering businesses drove the increase in our material and subcontract costs, which grew 20.3% ($52.1 million) year over year to $308.8 million and 47.8% of year to date revenue. Other direct costs increased $115 thousand (0.8%) to 2.1% of overall revenue.

Our year to date 2013 gross profit was $136.6 million, down $54 thousand as compared to 2012. Our gross profit margins declined to 21.1% of revenue as compared to the 22.8% of revenue we posted last year. Expanded use of subcontractors by Alion on our larger, more complex prime contracts and higher levels of purchased materials used in our agile engineering and rapid prototyping work contributed to the reduced gross margins.

Operating and General and Administrative Expenses

Third quarter year to date 2013 operating expenses were down $3.4 million (3.2%) compared to the same period last year. Overhead and general administrative expenses increased by $119 thousand. Expenses related to the Company’s refinancing efforts largely offset the effects of staffing reductions and ongoing expense curtailment initiatives, including the $842 thousand reduction of our occupancy expense. Depreciation and amortization charges declined more than $2.7 million compared to last year as amortization charges for contracts we obtained when we acquired JJMA in 2005 continue to tail off over time. Operating expenses have been trending downward since last year.

Operating Income

In 2013, year to date operating income was up more than $3.3 million to $32.8 million compared to $29.4 million in 2012 as a result of lower operating expenses. Operating income rose to 5.1 % of year to date revenue as the Company continues to drive efficiencies throughout the organization. Last year, operating income was 4.9% of year to date revenue.

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Other Expense

Year to date aggregate interest income, interest expense and other expense was approximately $630 thousand higher in 2013 than it was in 2012 Alion’s Senior Secured Note principal increases each time the Company issues notes in lieu of paying interest. Higher Senior Secured Note principal drives higher cash pay interest expense and higher non-cash and deferred interest charges. In 2013, we repurchased $5.0 million worth of our Unsecured Notes and recognized a $2.0 million gain on the transaction.

	Nine Months Ended June 30,
	2013		2012
	(In thousands)
Cash Pay Interest
Revolver	$	602	$	593
Secured Notes		24,517		24,034
Unsecured Notes		18,817		18,834
Other cash pay interest and fees		56		55
Sub-total cash pay interest		43,992		43,516
Deferred and Non-cash Interest
Secured Notes PIK interest		4,902		4,806
Debt issue costs and other non-cash items		7,920		7,808
Sub-total non-cash interest		12,822		12,614
Total interest expense	$	56,814	$	56,130

Income Tax Expense

Year to date deferred income tax expense was $5.2 million in both 2013 and last year. Deferred tax expense relates to tax-deductible goodwill. We continue to record a full valuation allowance for any deferred tax assets we recognize because our history of losses makes it unlikely we will be able to realize the full benefit of our deferred tax assets.

Net Loss

Our year to date net loss totaled $27.2 million. Reduced operating expenses coupled with our debt extinguishment gain generated a $4.7 million improvement in our bottom line compared to last year.

Backlog

Executed Contract Value

The value of Alion’s base of executed contracts remains strong. As of June 30, 2013, our executed contract value available for funding totaled $2.0 billion. This amount slightly decreased from our March 2013 total of $2.1 billion. The reduction is mainly due to the delays in new awards, and, in some cases, the government opting to provide Alion with one-year bridge contracts during the delay period rather than awarding new multi-year contracts. This is due, in part, to Congress employing budget and funding reductions and the effect of sequestration.

There can be no assurance that our executed contracts will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable. There is a higher degree of risk in this regard with respect to unfunded backlog. The actual receipt and timing of any revenue is subject to various contingencies, many of which are beyond our control. The actual recognition of revenue on contracts included in our backlog may never occur or may change because a program schedule could change; the program could be canceled; a contract could be reduced, modified, or terminated early, whether for the convenience of the government or otherwise; or an option that we had assumed would be exercised could not be exercised. The primary risks that could affect our ability to recognize such revenue on a timely basis or at all include: schedule changes, contract modifications, and our ability to assimilate and deploy new staff against funded backlog; cost cutting initiatives and other efforts to reduce U.S. government spending, which could reduce or delay funding for orders for services; and delayed funding of our contracts due to delays in the completion of the U.S. government’s budgeting process and the use of continuing resolutions by the U.S. government to fund its operations, as described under Item 1A Risk Factors of our annual report Form 10-K for the fiscal year ended September 30, 2012. The estimates used to compile remaining contract backlog are based on our experience under our contracts, and we believe the estimates are reasonable.

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Management’s Estimate of Future Revenue from Existing Contracts

As of June 30, 2013 management estimates the amount of future revenues to be recognized under our executed contracts to be approximately $1.4 billion, of which, approximately $309 million is funded.

Our executed contracts are categorized as funded backlog and unfunded backlog, each of which are described below. The executed contract values and management’s estimated revenues do not include any unexecuted task orders or ceiling value under ID/IQ contracts, including GWACs and GSA schedules, except to the extent that task orders have been awarded to us under those contracts.

• Funded Backlog. Funded backlog represents the estimated revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. We expect to recognize a substantial portion of our funded backlog as revenue within the next twelve months.

• Unfunded Backlog. Unfunded backlog represents the estimated revenue value of orders for services under existing contracts for which funding has not been appropriated or otherwise authorized.

Our backlog includes work orders under contracts that in some cases extend for several years. The U.S. Congress generally appropriates funds for our clients on a yearly basis, even though contracts may call for performance that is expected to take a number of years. As a result, contracts typically are only partially funded at any point during their term and all or some of the work to be performed under the contracts may remain unfunded until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.

Over the course of fiscal year 2013, we have experienced reductions in our estimated future revenues from our executed contracts as a result of delays of new awards, slower contract funding on certain programs, and to a lesser degree, reductions in the scope of work on some of our programs. These fluctuations are due, in part, to sequestration and reductions in the federal budgets. As new awards are executed, contract funding increased and the scope of work on specific work orders is expanded, management will revise our estimated revenues accordingly.

Effects of Inflation

Inflation and uncertainties in the macroeconomic environment, such as conditions in the financial markets, could impact our labor rates beyond predetermined escalation factors. However, we generally have been able to price our time and material and fixed price contracts to accommodate the rates of inflation experienced in recent years. Labor rates on our time and material contracts are usually adjusted annually by predetermined escalation factors. Our cost reimbursable contracts automatically adjust for changes in our costs. Generally, we have not been adversely affected by near-term inflation. Purchases of equipment and materials directly for contracts are usually cost reimbursable.

Liquidity and Capital Resources

Our primary uses of cash have been to fund operations and service our debt. On June 30, 2013, the Company had $20.0 million in cash and cash equivalents. At June 30, 2013, we were contingently liable under $4.0 million in letters of credit outstanding against our $35.0 million revolving credit facility, and we had no borrowings outstanding under our revolving credit facility. Outstanding letters of credit reduce our ability to borrow under our credit facility. The maximum available borrowing capacity under our credit facility at June 30, 2013 was approximately $31.0 million. At June 30, 2013, we had $329.8 million in outstanding Secured Notes due November 2014 and $240.0 million in outstanding Unsecured Notes due February 2015. In July 2013, we repurchased $5.0 million face value in Unsecured Notes in an open market transaction which reduced the outstanding Unsecured Note principal to $235 million. For additional information concerning our Credit Agreement, our Secured Notes and our Unsecured Notes, see Notes 10 and 21 to our unaudited condensed consolidated financial statements in Item 1 to this Quarterly Report on Form 10-Q.

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In general, cash provided by operating activities is adequate to fund our operations, including quarterly interest payments for our Secured and Unsecured Notes. Fluctuations in our cash flows and level of operations occasionally make it necessary for Alion to access our revolving credit facility to meet cash demands. We have not had to access our revolving credit facility to meet periodic interest payment demands or fund operations since May 2012. In June and July 2013, we accessed the revolving credit facility to repurchase $10.0 million of our outstanding Unsecured Notes. Our current credit facility expires in June of 2014.

Cash flows used in operating activities

	Nine months ended June 30,
	2013		2012
	(In thousands)
Net cash flow provided by (used in) operating activities	$	1,200	$	(7,179	)

Our operating cash flows are primarily affected by our ability to invoice and collect from our clients in a timely manner, our ability to manage our vendor payments, and the overall profitability of our contracts. We bill most of our customers monthly after services are rendered. Some contracts permit us to bill our customers twice monthly. Operating cash outflows during the nine months ended June 30, 2013, increased approximately $8.4 million compared to the same period in 2012 and were affected by:

• increased billings to customers

• improvements in the timing of collection of our receivables

• the timing of vendor payments

• lower net losses

• lower non-cash expenses for depreciation and amortization, and incentive compensation

We collected approximately $641 million in receivables during the nine months ended June 30, 2013 compared to $588 million we collected during the comparable period in 2012. We collected approximately $239 million in receivables this quarter, compared to $201 million in the third quarter of 2012. Year to date collections as of June 30, 2013 were $5.6 million less than year to date revenue, a $17 million improvement since March 2013.

We believe as a result of sequestration, the federal government altered some of its accelerated payment practices and the overall payment cycle of our invoices. We believe we have recovered from most of the effects of these changes which we estimate reduced our second quarter collections by approximately $11 million as compared to pre-sequestration collection levels earlier this fiscal year. Management cannot forecast whether sequestration will adversely affect timing of Alion’s collection of its receivables in the future. Based on trailing twelve month revenue, our accounts receivable days sales outstanding (DSO) were 78.1 for the nine months ended June 30, 2013 and 90.5 days for the same period in 2012. From March to June 2013, improved collections reduced DSO by almost eight days as we were able to invoice and collect amounts we had not previously been able to bill to customers.

In the third quarter Alion was able to moderate the effects of previous sequestration-related payment delays the company experienced in its second quarter this year. Even though Alion has been affected by sequestration-related funding delays, we made progress in obtaining contract funding for unfunded customer-requested work. At June 30, 2013, we had $18.6 million in unfunded receivables for customer-requested work compared to $19.0 million at September 30, 2012 and $31.0 million at June 30, 2012. Since last September, we have only experienced a modest increase in unfunded customer requested work while during the same period revenue increased by $48.1 million compared to June 2012.

Cash used in investing activities

	Nine months ended June 30,
	2013			2012
	(In thousands)
Net cash used in investing activities	$	(952	)	$	(2,339	)

We use some of our cash to invest in equipment and software, leasehold improvements and internally-developed software. During the nine months ended June 30, 2013 and 2012, we spent $952 thousand and $2.3 million for these types of capital expenditures. We expect our investing activities and capital expenditures to continue at comparable levels for the balance of the current fiscal year.

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Cash used in financing activities

	Nine months ended June 30,
	2013			2012
	(In thousands)
Net cash used in financing activities	$	(7,499	)	$	(3,534	)

In the nine months ended June 30, 2013, we used $7.5 million for financing activities. ESOP transactions accounted for $4.5 million of our financing activities and debt repurchases accounted for the remaining $3.0 million of cash we used.

We paid $6.7 million to redeem ESOP shares from former employees. We received $2.2 million for ESOP Trust purchases of Alion common stock from employee salary deferrals for the second half fiscal 2012 and the first half of fiscal 2013. In 2013, we lent the ESOP Trust $1.9 million for it to fund statutorily required diversification of ESOP participant investments. The ESOP Trust repaid the loan in full prior to March 31, 2013.

During our third quarter this year, we briefly accessed our revolving credit facility to borrow funds to repurchase $5 million of our outstanding Unsecured Notes in open market transactions. As permitted by our debt agreements, we borrowed $3.2 million to acquire $5.0 million in Unsecured Notes (face value) and prepay the interest on the notes we repurchased. We repaid all borrowed funds prior to June 30, 2013. The largest loan balance outstanding was $1.5 million. Our weighted average loan balance for the brief period over which we borrowed funds was $1.0 million. The weighted average outstanding loan balance for 2013 is $37 thousand.

Last year, we used $3.5 million for ESOP-related financing activities through June 30, 2012 and did not repurchase any of our outstanding debt. We paid $4.8 million to redeem ESOP shares from former employees. We received $1.3 million from the ESOP Trust for purchases of Alion common stock. Last year, we also lent the ESOP Trust $0.5 million for it to fund statutorily required diversification of ESOP participant investments. The ESOP Trust repaid the loan in full prior to March 31, 2012.

In 2012, we used the revolving credit facility to offset the effects of delays in customer payments. Over the nine months ended June 30, 2012, we borrowed and repaid a total of $26.0 million. May 12, 2012 was the last date in 2012 on which there was any balance drawn on the revolving credit facility.

Discussion of Debt Structure

Alion’s current debt structure includes a $35 million revolving credit facility, $329.8 million in Secured Notes ($310 million in initial face value plus $19.8 million in PIK interest notes issued), and $240.0 million in Unsecured Notes ($235 million as of July 2013). Our credit arrangements, including our Unsecured and Secured Note Indentures and our revolving credit facility, include a number of covenants. We expect to be able to comply with our indenture covenants and our credit facility financial covenants for at least the next twelve months. The Company is in compliance with each of the affirmative, negative and financial covenants in its existing debt agreements. See Note 10 to our unaudited condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for a detailed discussion of Alion’s current debt structure and a list of relevant terms and limitations in existing long-term debt agreements — our Credit Agreement, Secured Note Indenture and Unsecured Note Indenture.

Credit Agreement – Covenant Compliance

Alion’s Credit Agreement defines Consolidated EBITDA and requires the Company to achieve a minimum Consolidated EBITDA threshold in order to maintain access to the revolving credit facility and avoid potential cross default on the Secured and Unsecured Notes. Neither EBITDA nor Consolidated EBITDA is a measure of financial performance in accordance with generally accepted accounting principles.

The Credit Agreement permits Alion to exclude certain expenses and requires it to exclude certain one-time gains when computing Consolidated EBITDA. The Credit Agreement required Alion to have a minimum $63.0 million in Consolidated EBITDA for the twelve months ended June 30, 2013. We had approximately $72.3 million in Consolidated EBITDA for the twelve months ended June 30, 2013, and exceeded the requirement by approximately $9.3 million.

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Secured Note Indenture and Unsecured Note Indenture

There are no financial covenants in either the Secured Note Indenture or the Unsecured Note Indenture. Certain provisions in the Secured Note Indenture and the Unsecured Note Indenture limit our ability to incur additional debt or pay dividends if our ratio of Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0. The Secured and Unsecured Note Indentures define Adjusted EBITDA and Consolidated Interest Expense. Adjusted EBITDA under the Secured Note Indenture and the Unsecured Note Indenture differs from Consolidated EBITDA as defined in our Credit Agreement. Adjusted EBITDA is less than Consolidated EBITDA because it does not include employee investments in Alion common stock. Set out below are our actual ratios of Adjusted EBITDA to Consolidated Interest Expense as of June 30, 2013 and September 30, 2012.

	June 30, 2013		September 30, 2012
Trailing twelve-month Adjusted EBITDA	$	72.3 million	$	69.3 million
Trailing twelve-month Consolidated Interest Expense	$	75.6 million	$	74.9 million
Ratio		0.96 to 1.0		0.93 to 1.0

Capital Resources

	June 30, 2013			June 30, 2012
Available Liquidity	(In thousands)
Cash and cash equivalents	$	19,976		$	7,766
Revolving credit facility		35,000			35,000
Less: Letters of Credit		(4,000	)		(3,900	)
Net available liquidity	$	50,976		$	38,876

We believe the capital resources available to us from our $20.0 million in cash on hand at June 30, 2013, our $31 million available capacity under our revolving credit facility, and cash from our operations are adequate to fund anticipated cash requirements for at least the next twelve months, including quarterly interest payments for our Secured and Unsecured Notes. At June 30, 2013, we had no outstanding borrowings under our revolving credit facility, and we had $4 million in outstanding letters of credit. For additional information concerning our Credit Agreement, see Note 10 to our unaudited condensed consolidated financial statements in Item 1 to this Quarterly Report on Form 10-Q.

We expect to be able to meet the existing Credit Agreement debt covenants even though clearance levels may narrow as the required Consolidated EBITDA threshold increases. We believe Alion can attain the minimum Consolidated EBITDA levels required in the Credit Agreement even though delays in contract awards could adversely affect our ability to increase our revenue on the timeline we seek to achieve. We believe Alion will be able to meet its financial covenants over the remaining life of the credit facility and thus be able borrow funds as and when necessary through the Credit Agreement’s August 2014 maturity date.

In each of the past three fiscal years, Alion generated sufficient cash flow from operations to fulfill its financial commitments. Nevertheless, management does not expect current operations to generate sufficient cash flow for Alion to be able to repay its outstanding debt when it becomes due in fiscal 2015. The Company has retained Goldman Sachs and Wells Fargo to assist it in its refinancing efforts.

Short-term Borrowings

From time-to-time, we borrow funds against our revolving credit facility for working capital requirements, to fund operations and to repurchase our Unsecured Notes at a discount to face value. Borrowings under our revolving credit facility bear interest at one of the following variable rates as selected by the Company at the time of the borrowing: an 8.5% Eurodollar rate or an 8.5% alternative base rate.

In the next twelve months we may use, as needed, our revolving credit facility or additional sources of borrowings in order to fund our anticipated cash requirements. We do not currently forecast that we will need to draw significant amounts on the revolving credit facility for extended periods. However, we may need to use the revolving credit facility for short periods of time based on collections cycles subject to government delays or to repurchase any of our outstanding notes at a discount in open market transactions.

If the federal government were to implement further changes to its current payment practices, as a result of sequestration, budget cuts, policy changes or otherwise, we might have to use our revolving credit facility to a more significant extent than we currently forecast. Such changes could adversely affect our short-term cash flows and increase our interest expense to the extent we borrow larger amounts more frequently than we currently do under our revolving credit facility.

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The following table summarizes the activity under our revolving credit facility for the nine months ended June 30, 2013 and 2012.

	Nine months ended June 30,
	2013			2012
Short-term borrowings	(In thousands)
Aggregate revolving credit facility borrowings	$	3,201		$	26,000
Aggregate revolving credit facility repayments		(3,201	)		(26,000	)
Net change in revolving credit facility balance payable	$	—		$	—

Cash Management

To the extent possible, we invest our available cash in short-term, investment grade securities with the priorities of maintaining the safety of our principal, maintaining the liquidity of our investments, maximizing the yield on our investments and investing our cash to the fullest extent possible. Cash and cash equivalents include cash on hand, amounts due from banks and short-term investments with maturity dates of three months or less at the date of purchase.

Cash flow effects and risks associated with equity-related obligations

We cannot accurately predict the extent to which ESOP repurchases and diversification demands may increase in future years. As more employees meet statutory and Plan-specific age and length of service requirements, potential diversification demands are likely to increase. These demands can increase further with any increase in the price of a share of Alion common stock. While a decline in our share price could reduce the value of each individual Plan participant’s beneficial interest, such a potential price decline could be offset by increased diversification demands and thus might not reduce the aggregate value of near-term demands on our cash to fund ESOP-related transactions. We monitor future potential repurchase liability cash flow demands by relying in part on internal and external financial models that incorporate Plan census data and financial inputs intended to simulate changes in Alion’s share price.

Changes in the price of a share of Alion common stock do not affect warrant-related interest expense. Our outstanding Secured Note warrants are permanent equity. The warrants have a one penny exercise price and are in the money. They do not have a cash liquidation option and therefore Alion only recognizes interest expense for the debt issue cost associated with the initial fair value of these warrants.

Alion faces no significant stock-based compensation liabilities. Outstanding SARs have little, if any, intrinsic value. Management is unable to forecast the share price the ESOP Trustee will determine in future valuations and therefore cannot predict future cash flow demands that might arise from existing SARs.

Although current financial information includes the effects of the most recent ESOP Trust transactions, future expenses for stock-based compensation are likely to differ from estimates as the price of a share of Alion common stock changes. Our next regularly scheduled ESOP valuation period ends in September 2013. Interest rates, market-based factors and volatility, as well as Alion’s financial results will affect the future value of a share of our common stock. Certain stock-based compensation grantees can choose to defer their payments by having us deposit funds in a rabbi trust we own. Any such deferrals will not materially affect planned payments or overall anticipated cash outflows.

After each semi-annual valuation period, the Plan permits former employees and beneficiaries to request distribution of their vested ESOP account balances. Consistent with the terms of the Plan, IRC requirements, and our recent business practice, we intend to pay distribution requests in five annual installments and to defer initial payments as permitted. The Plan allows Alion to defer initial installment distributions for six years for former employees who are not disabled, deceased or retired. We plan to meet future distribution demands through operating cash flows, and if necessary, access to Alion’s revolving credit facility.

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Cash flow demands from existing debt agreement obligations

During the rest of the current fiscal year and for the next two fiscal years, we expect we will have to make the estimated interest and principal payments set forth below for Alion’s existing long-term debt. Based on our current capital structure, we do not forecast that we will have material interest expense on our revolving credit facility as we do not expect to borrow material amounts for any significant period of time. Our forecast interest expense is based on amounts we expect to pay in commitment fees for unused balances on the revolving credit facility throughout its remaining life. We may access the revolving credit facility from time to time if the Company determines it is advantageous to make additional repurchases of our outstanding notes.

We do not expect Alion will have any tax-related cash obligations for the foreseeable future. We have significant net operating loss deductions available. We do not forecast having taxable income for the next several years.

We believe the Company will be unable to generate sufficient cash flow from operations to retire its debt as it comes due. We can offer no assurance that Alion will be able to obtain new financing at sufficient levels and on acceptable terms, if at all. The following table discloses the estimated interest and principal payments the Company expects to pay on its long term indebtedness during the remainder of its fiscal year 2013 and in its fiscal years 2014 and 2015.

	Fiscal Year
	2013		2014		2015
Estimated Minimum Payments—Existing Debt Agreements	(In thousands)
Revolving credit facility (1)
Interest	$	157	$	555	$	—
Secured Notes (2)
Interest		—		33,144		16,821
Principal and PIK Interest Notes		—		—		339,788
Unsecured Notes (3)
Interest (4)		12,300		24,600		12,300
Principal (5)		—		—		240,000
Total interest paid in cash	$	12,457	$	58,299		29,121
Total principal and PIK Interest paid in cash		—		—		577,788
Total estimated minimum debt payments	$	12,457	$	58,299		608,909

(1) We expect we may occasionally use our $35.0 million revolving credit facility to meet working capital needs through 2014 and for other general corporate purposes. Management expects the average utilized revolver balance will be immaterial and that interest expense will consist primarily 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. The 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 Unsecured Notes bear interest at 10.25% and mature February 1, 2015. As of June 30, 2013, the Company had repurchased $10 million worth of Unsecured Notes: $2 million in November 2010; $3 million in June 2011 and $5 million in June 2013 in open market transactions. In July 2013, the Company repurchased an additional $5 million worth of Unsecured Notes in an open market transaction. See Note 21 to our unaudited condensed consolidated financial statements in Item 1 to this Quarterly Report on Form 10-Q.

(4) Interest expense for the Unsecured Notes is forecast based on the $240 million outstanding balance as of June 30, 2013. The $5 million in Unsecured Notes the Company repurchased July 2013 will reduce each future semi-annual interest payment by $256 thousand and by $768 thousand in total over the remaining life of the Unsecured Notes.

(5) The Company retired $5 million in Unsecured Note face value in July 2013. Principal due in 2015 declined to $235 million. See Note 21 to our unaudited condensed consolidated financial statements in Item 1 to this Quarterly Report on Form 10-Q.

Contingent Obligations

Contingent obligations which will impact the Company’s cash flow

Management forecasts that continuing net operating losses for income tax purposes will permit Alion to avoid significant cash outflows for income taxes. Other contingent obligations which will affect our cash flow include:

• ESOP share repurchase and diversification obligations; and

• Long-term incentive compensation plan obligations.

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As of June 30, 2013, Alion had spent a cumulative total of $98.2 million to repurchase shares of its common stock to satisfy ESOP distribution and diversification requests from former employees and Plan beneficiaries. Beginning in March 2008, we stopped making lump sum distributions and began paying ESOP beneficiaries over the five-year distribution period permitted by ERISA and the terms of the Plan. Alion intends to continue this practice for the foreseeable future in part to offset the cash flow effects of annual employee diversification requests which are expected to continue for the foreseeable future. Our debt agreements limit our ability to fund certain discretionary ESOP diversification demands on our cash flow. The table below lists current and prior year share re-purchases.

Date	Shares Repurchased		Share Price		Total Value Purchased
					(In thousands)
November 2011		1,481	$	20.95	$	31
December 2011		106,505	$	20.95		2,231
January 2012		22,782	$	20.95		477
May 2012		3,104	$	18.00		56
June 2012		113,342	$	18.00		2,040
August 2012		418	$	18.00		8
November 2012		485	$	16.45		8
December 2012		119,555	$	16.45		1,967
January 2013		759	$	16.45		12
February 2013		5,593	$	16.45		92
March 2013		115,933	$	16.45		1,907
June 2013		164,548	$	16.25		2,674
Total		654,506			$	11,503

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk

We face interest rate risk for periodic borrowings on our $35.0 million senior revolving credit facility. Outstanding balances, if any, bear interest at a variable rate based on Credit Suisse’s prime rate plus a maximum spread of 600 basis points. Variable rates increase the risk that interest charges could increase materially if both market interest rates and outstanding balances were to increase.

We currently do not forecast maintaining any material balance on our revolving credit facility for any significant period of time. Therefore, any rate increase is not expected to materially affect Alion’s operating results or cash flows for any period from now through August 2014 when our revolving credit facility matures.

Our Secured Notes and Unsecured Notes are fixed-rate obligations. Other than the current revolving credit facility, Alion currently has no variable rate debt. We do not use derivatives for trading purposes. We invest excess cash in short-term, investment grade, and interest-bearing securities.

Foreign currency risk

Expenses and revenues from international contracts are generally denominated in U.S. dollars. Alion does not believe operations are subject to material risks from currency fluctuations.

Risk associated with value of Alion common stock

Changes in the fair market value of Alion’s common stock affect our estimated ESOP share repurchase obligation, and to a lesser extent, our stock appreciation rights obligation. The number of employees who seek to redeem shares of Alion common stock following termination of employment and the number of shares they seek to redeem affect the timing and amount of cash outflows for repurchase obligations. The number of employees who exercise stock appreciation rights during any particular time period can affect the timing and amount of our stock appreciation right obligations. Based on our current share price, outstanding stock appreciation rights have little, if any, intrinsic value.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it is required to file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosures. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective and timely.

Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2013, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in routine legal proceedings occurring in the ordinary course of business that we believe are not material to our financial condition, operating results, or cash flows. See Note 19 to the unaudited condensed consolidated financial statements included in Part 1 of this Report.

As a government contractor, from time to time we may be subject to DCAA audits and federal government inquiries. The federal government may suspend or debar for a period of time any federal contractor it finds has violated the False Claims Act, and any contractor indicted or convicted of violations of other federal laws. The federal government could also impose fines or penalties.

Item 1A. Risk Factors

As of June 30, 2013, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered securities during the quarter ended June 30, 2013.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit
No.	Description
10.36	Alion Science and Technology Corporation Long-Term Incentive Plan (amended and restated as of June 25, 2013) *(a)
10.37	Alion Science and Technology Corporation 2004 Stock Appreciation Rights Plan (amended and restated as of June 25, 2013) *(a)
10.38	Alion Science and Technology Corporation Performance Shares and Retention Phantom Stock Plan (amended and restated as of June 25, 2013) *(a)
10.39	Alion Science and Technology Corporation Phantom Stock Plan (amended and restated as of June 25, 2013) *(a)
10.40	Employment Agreement between Alion Science and Technology Corporation and Thomas E. McCabe *(a)
31.1	Certification of Chief Executive Officer of Alion Science and Technology Corporation pursuant to Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. (a)
31.2	Certification of Chief Financial Officer of Alion Science and Technology Corporation pursuant to 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. (a)
32.1	Certification of Chief Executive Officer of Alion Science and Technology Corporation, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (a)
32.2	Certification of Chief Financial Officer of Alion Science and Technology Corporation, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (a)
101.INS	XBRL Instance Document +
101.SCH	XBRL Taxonomy Extension Schema Document +
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document +
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document +
101.LAB	XBRL Taxonomy Extension Label Linkbase Document +
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document +

* Denotes management contract and/or compensatory arrangement.

(a) Filed with this Form 10-Q for the quarter ended June 30, 2013.

+ As provided in Rule 406T of Regulation S-T, this information is furnished herewith and not filed for purposes of Sections 11 and 12 of the Securities Act and Section 18 of the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 8, 2013

ALION SCIENCE AND TECHNOLOGY CORPORATION
By:	/s/ Barry M. Broadus
Name:	Barry M. Broadus
Title:	Chief Financial Officer and Duly Authorized Officer

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EX-10.36

EXHIBIT 10.36

ALION SCIENCE AND TECHNOLOGY CORPORATION

AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN

(Amended and Restated as of June 25, 2013

ARTICLE I: ESTABLISHMENT, PURPOSE AND DURATION

1.1. Establishment of the Plan. Alion Science and Technology Corporation (“Alion” or the “Company”) hereby establishes an incentive compensation plan to be known as the “Alion Science and Technology Corporation Long-Term Incentive Plan” (the “Plan”), as set forth in this document. The Plan permits the payment of annual or periodic cash awards based upon the achievement of predefined performance goals established by the Board or the Compensation Committee of the Board. The Plan initially became effective as of November 1, 2008 (the “Effective Date”). The Plan is hereby amended and restated effective as of June 25, 2103. The Plan shall remain in effect as provided in Section 1.3 hereof.

1.2. Purposes of the Plan. The purposes of the Plan are:

(a) to provide Participants with an incentive for excellence in individual performance and

(b) to retain key employees.

1.3. Duration of the Plan. The Plan shall remain in effect, subject to the right of the Board of Directors to alter, amend, suspend, or terminate the Plan at any time pursuant to Article V hereof.

ARTICLE II: DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

2.1. “Affiliate” means an entity which is a member of a “controlled group” of corporations with Alion under Code Section 414(b) or a trade or business under common control with Alion under Code Section 414(c); provided, however, that an ownership threshold of “at least 50 percent” will be used instead of “at least 80 percent” each place it appears.

2.2. “Award” means a grant of the opportunity to receive a cash incentive payment earned by and paid to a Participant pursuant to the terms of the Plan and Award Agreement.

2.3. “Award Agreement” means an agreement entered into by the Company and each Participant setting forth the terms and provisions applicable to the determination and payment of Awards paid to such Participant under the Plan.

2.4. “Award Opportunity(ies)” means the Award or Awards that a Participant earns upon the achievement of a certain preestablished performance goal or performance goals during a Performance Period as specified in the Participant’s Award Agreement and pursuant to the terms of the Plan.

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2.5. “Board” means the Board of Directors of the Company.

2.6. “Cause” means:

(a) The Participant’s conviction of, entry of a plea of guilty or nolo contendere or no contest to a charge of, or admission of a felony or a crime involving moral turpitude; or

(b) The Participant’s commission of an act constituting fraud, deceit, or material misrepresentation with respect to the Company; or

(c) The Participant’s commission of any negligent or willful act or omission that causes material damage (by reason, without limitation, of financial exposure or loss, damage to reputation or goodwill, or exposure to civil or criminal penalties or to other prosecutorial action by any governmental authority) to the Company or any parent or subsidiary corporation thereof; or

(d) The Participant’s willful or material violation of any provision of the Company’s Code of Ethics, Conduct and Responsibility; or

(e) Willful and material misstatement knowingly made or caused to be made by the Participant in any filing with the Securities and Exchange Commission or other governmental authority; or

(f) The Participant’s willful or material violation of any of the covenants contained in his or her Employment Agreement, Employee Agreement, or CIC Severance Agreement, as applicable.

For purposes of this definition, no act or omission by the Participant shall be considered “willful” unless it is done or omitted in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Any act or failure to act by the Participant based upon and consistent with: (i) authority given pursuant to a resolution duly adopted by the Board; or (ii) written advice of counsel for the Company with written notice given by such counsel to the Board prior to such act or failure to act, shall be conclusively presumed to be done or omitted to be done by the Participant in good faith and in the best interests of the Company.

2.7. “Change in Control” means the occurrence of any of the following events:

(a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of either (1) the then outstanding shares of common stock of the Company or (2) the combined voting power of the then outstanding capital stock of the Company, which voting power may be manifested through the entitlement to vote generally in the election of directors, by contract through the right to convert non-voting securities into voting securities or otherwise, provided, however, that the phrase “more than fifty percent (50%)” shall be substituted for the phrase “thirty percent (30%) or more” with respect to Awards granted before June 25, 2013 unless otherwise agreed by the Company and the applicable Participant in an amendment to the applicable Award Agreement;

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(b) such time as when individuals who on the Effective Date constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors of the Company or whose nomination for election by the shareholders of the Company was approved by a majority vote of the directors of the Company) cease for any reason to constitute a majority of the Board of Directors of the Company then in office;

(c) the adoption of a plan relating to the liquidation or dissolution of the Company; and

(d) the merger or consolidation of the Company with or into any other entity or the merger of any other entity with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another person or entity other than (A) a transaction in which the survivor or transferee is an entity controlled by the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust or (B) a transaction following which (i) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the voting power of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Person surviving such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before the transaction and (ii) in the case of a sale of assets transaction, each transferee assumes substantially all of the obligations of the Company and becomes an affiliate of the Company.

2.8. “Code” means the Internal Revenue Code of 1986, as amended, and related rules, regulations and interpretations.

2.9. “Committee” means the Compensation Committee of the Board, or such person or persons as the Compensation Committee shall designate, unless the Board resolves to act itself as the Committee.

2.10. “Company” means Alion Science and Technology Corporation, a Delaware corporation.

2.11. “Effective Date” means November 1, 2008.

2.12. “Employee” shall mean any person who is employed by an Employer as an employee, as reported on the Employer’s payroll, and whose wages are subject to withholding under the Federal Insurance Contributions Act, codified in Code Section 3121, or would be subject to such withholding if paid in the US.

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2.13. “Employer” shall mean the Company and any Affiliate that, with the consent of the Company, elects to participate in the Plan and any successor entity that adopts the Plan.

2.14. “Employment Agreement” shall mean the employment contract specifying the terms of a Participant’s employment with his or her Employer.

2.15. “Good Reason” means, without the Participant’s express prior written agreement, the occurrence of any one or more of the following events within two (2) years following a Change in Control:

(a) The assignment to the Participant by the Company of duties materially inconsistent with, or the material reduction of the powers and functions associated with, the Participant’s position, duties, responsibilities, and status with the Company;

(b) A reduction of five percent (5%) or more by the Company in the Participant’s Base Salary, or a material reduction in aggregate target bonus and other performance compensation opportunity, or the failure of the Company to pay any compensation to the Participant when due and payable;

(c) The Company requiring the Participant to be based at a location more than twenty (20) miles from the Company’s current principal executive offices or the location where the Participant is based, requiring the Participant to relocate or resulting in a materially longer commute to the Participant;

(d) Any material breach by the Company of any provision of this Agreement; or

(e) Any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company effected in accordance with the provisions of Article 3(b).

The Participant must provide the Company with written notice of intent to terminate and request for cure within ninety (90) days after the occurrence of the Good Reason event, which notice shall provide the Company with a reasonable opportunity (not less than thirty (30) days) to cure the event. If the Company cures the Good Reason event within the time provided, the Participant’s notice of intent to terminate shall automatically be withdrawn and of no effect.

2.16. “Participant” shall mean an Employee who has been granted an Award Agreement under the Plan.

2.17. “Performance Period” means the time period during which performance goals must be achieved for a Participant to earn an Award, as determined by the Board or the Committee and as specified in the Participant’s Award Agreement.

2.18. “Plan” means the Alion Science and Technology Corporation Long-Term Incentive Plan, as amended from time to time.

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2.19. “Target Award Opportunity” means the target award opportunity specified in the participant’s Award Agreement, as determined by the Board or the Committee.

2.20. “Termination of Employment” means the severing of employment with the Company and its Affiliates for any reason. Whether a Participant incurs a termination of employment with the Company or an Affiliate will be determined by the Committee in accordance with the requirements of Code Section 409A and Treasury Regulation Section 1.409A-1(h) governing separations from service.

ARTICLE III: PARTICIPATION

Individual Participants in the Plan shall be selected by the Committee in its sole discretion from key Employees of the Company prior to or as soon as practicable after the beginning of each applicable Performance Period. Awards granted at the same time or at different times need not contain similar provisions.

ARTICLE IV: AWARD OPPORTUNITIES

4.1. Setting Award Opportunities. The Committee shall determine the duration of each Performance Period and set each Participant’s Award Opportunities with respect to a Performance Period. In addition, the Board or the Committee shall establish the performance goal or performance goals that must be achieved during a Performance Period for a Participant to earn and be paid his Award. The Committee shall specify the foregoing in each Participant’s Award Agreement.

4.2. Earning Awards. Subject to the terms of the Plan and the Award Agreement, an Award shall be earned by and paid to a Participant for a Performance Period based on the achievement of the performance goal or performance goals for such Performance Period as set forth in his Award Agreement.

4.3. Award Agreement. The grant of an Award shall be authorized by the Committee and shall be evidenced by Award Agreement in a form approved by the Committee, between the Company and the Participant. Each Award Agreement shall set forth the Performance Period, the Participant’s Target Award Opportunity for the Performance Period, the performance measures and related performance goals for earning an Award, and the determination of the Participant’s Award, Each such Award Agreement shall be subject to the express terms and conditions of this Plan, and shall be subject to such other terms and conditions that, in the reasonable judgment of the Committee, are appropriate and not inconsistent with this Plan.

4.4. Vesting of Awards. A Participant shall have no right to any payment with respect to an Award until it has vested in accordance with its terms. The terms for vesting of Awards shall be established by the Committee and set forth in the Award Agreement. The effect of a Participant’s Termination of Employment during a Performance Period or subsequent vesting period, if any, on his right to be paid an Award shall be specified in the Participant’s Award Agreement.

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4.5. Effect of a Change in Control.

(a) For Awards Granted After June 25, 2013. For Awards granted after June 25, 2013, if, within the two (2) year period following a Change in Control, a Participant’s employment has been terminated by the Company without Cause or by the Participant for Good Reason, all of such Participant’s Awards which were granted after June 25, 2013 shall fully vest and shall be paid in full in a lump sum within ten (10) days after the termination of employment.

(b) For Awards Granted Before June 25, 2013. For Awards granted before June 25, 2013 that are outstanding but unvested as of June 25, 2013, the effect of a Change in Control during a Performance Period or subsequent vesting period, if any, on a Participant’s right to earn and be paid an Award shall be specified in the Award Agreement. The Compensation Committee and the Chief Executive Officer, and each of them, are hereby authorized to enter into agreements with Participants to amend the Award Agreements relating to such Awards to provide that (1) the vesting and payment of such Awards in the event of a Change in Control shall be determined under Section 4.5(a) above rather than as specified in the original Award Agreement, and (2) the present value of the amount to be paid to the applicable Participant in such event shall be an amount determined by the Compensation Committee in accordance with Treasury Regulation Section 1.409A-1(d) to be materially greater than the present value of the amount the Participant otherwise would have received.

4.6. Form and Timing of Payment of Awards. Payment of an Award shall be made solely in cash at such time or times as are specified in a Participant’s Award Agreement consistent with Section 409A. Notwithstanding the foregoing, payment of a vested Award may be accelerated, with the consent of the Committee, solely to the extent permitted under Code Section 409A.

4.7. 409A Compliance Provisions. No payment shall be made in violation of Section 409A or any other applicable provisions of the Code and the rules and regulations thereunder. If the Committee reasonably determines that the making of any payment required under the Plan at the date specified in the Plan would jeopardize the ability of the Company to continue as a going concern, the payment will be treated as made upon the date specified under the Plan if the payment is made during the first taxable year of the Company in which the making of the payment would not have such effect. In addition, payment may be delayed (without imputation of earnings, interest or other gains or losses after the payment date), solely to the extent necessary, upon such events and conditions as permitted under Code Section 409A and the rules and regulations thereunder, provided that payment is made as soon as possible after the reason for delay no longer applies.

4.8. Withholding. The Company shall have the right to deduct from all amounts paid pursuant to the Plan any Federal, State or local income tax, social security contribution or other payroll taxes required by law, whether domestic or foreign, to be withheld with respect to such payments. The Company shall also have the right to deduct FICA contributions required at vesting from normal salary and wages or other cash compensation to be paid to the Participant.

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ARTICLE V: AMENDMENT AND TERMINATION

5.1. Adjustment of Awards. The Committee may, in its discretion, modify outstanding Awards and Award Opportunities to reflect extraordinary transactions or occurrences during the Performance Period that affect the Company or any subsidiary or participating affiliate. Such extraordinary transactions or occurrences shall be of such a nature that it is clear that the Committee would have considered such event in establishing Awards or Award Opportunities had it been aware of the event at the beginning of the Performance Period, including by way of illustration and not of limitation, the divestiture of a significant subsidiary, the acquisition or discontinuance of a material business or product line, changes in accounting procedures/policies, or governmental changes that affect Award performance criteria.

5.2. Amendment. The Board may amend the Plan or any Award Agreement at any time and from time to time, provided that no amendment shall deprive any person of any rights earned under the Plan before the effective date of such amendment without such person’s consent. Notwithstanding the foregoing, the Committee may unilaterally amend the Plan or any outstanding Award Agreement as necessary to cause the Plan or Award to comply with Code Section 409A.

5.3. Termination. The Board reserves the right to terminate the Plan in whole or in part at any time, without the consent of any person granted any rights under the Plan. Termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. Notwithstanding the foregoing, termination of the Plan shall not result in the acceleration of payment of any Award except as permitted by the Committee and consistent with the requirements of Code Section 409A.

ARTICLE VI: ADMINISTRATION

6.1. General. The Plan shall be administered by the Committee. The Committee shall have the full and final authority, in its discretion, to interpret conclusively the provisions of the Plan; to adopt such rules for carrying out the Plan as it may deem advisable; to decide all questions of fact arising in the application of the Plan; and to make all other determinations necessary or advisable for the administration of the Plan. Without limiting the foregoing, the Committee shall have full power and authority to (a) construe the Plan and any Award under the Plan; (b) select the Employees to whom Awards may be granted and the time or times at which Awards shall be granted; (c) determine the Target Award Opportunities with respect to each Award; (d) determine and modify from time to time the terms and conditions, including restrictions and the timing of payment, of any Award and to approve the form of Award Agreements; and (e) impose limitations on Awards, including limitations on transfer provisions.

6.2. Procedure. The Committee shall meet at such times and places and upon such notice as it may determine. A majority of the members of the Board or committee serving as Committee hereunder shall constitute a quorum. Any acts by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all of the members of the Board or committee serving as Committee hereunder shall be valid acts of the Committee. Members of the Board or Committee who are either eligible for Awards or have been granted Awards may vote on any matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Committee during which action is taken with respect to the granting of an Award to him or her.

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6.3. Limited Liability. To the maximum extent permitted by law, no member of the Board or committee serving as Committee hereunder shall be liable for any action taken or decision made in good faith relating to the Plan or any Award.

6.4. Effect of Committee’s Decision. All actions taken and decisions and determinations made by the Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Committee’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company, its stockholders, any Participants in the Plan and any other employee of the Company, and their respective successors in interest.

ARTICLE VII: MISCELLANEOUS PROVISIONS

7.1. No Guarantee of Employment. Neither the Plan nor any Award granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Employer. Nothing in this Plan shall prevent, interfere with or limit in any way the right of the Employer to terminate a Participant’s employment at any time, whether or not such termination would result in: (a) the failure of any Award to vest; (b) the forfeiture of any unvested or vested portion of any Award under the Plan; and/or (c) any other adverse effect on the Participant’s interests under the Plan.

7.2. Indemnification of Board and Plan Committee. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or Employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

7.3. Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.

7.4. Non-Assignability. Any Award granted to a Participant may not be transferred or assigned other than by will or by the laws of descent and distribution. If the Participant attempts to alienate, assign, pledge, hypothecate, or otherwise dispose of his or her Award or any right thereunder, except as provided for in the Plan or the Award Agreement, or in the event of any levy, attachment, execution, or similar process upon the right or interest conferred by this Plan or the Award Agreement, the Committee shall terminate the Participant’s Award by notice to him or her, and it shall thereupon become null and void.

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7.5. Company Charter and Bylaws. The Plan is subject to the charter and by-laws of the Company, as they may be amended from time to time.

7.6. No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company; however, in the event of commencement of a voluntary or involuntary case of bankruptcy against or by the Company, all vested and unvested Awards made hereunder shall be canceled and void.

7.7. Governing Law. All questions arising with respect to this Plan and any Award Agreement executed hereunder shall be determined by reference to the laws of the State of Delaware in effect at the time of their adoption and execution, respectively, without implementing its laws regarding choice of law.

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EX-10.37

EXHIBIT 10.37

ALION SCIENCE AND TECHNOLOGY CORPORATION

2004 STOCK APPRECIATION RIGHTS PLAN

(Amended and Restated as of June 25, 2013)

ARTICLE I

GENERAL

1.1. Plan Name. The name of the plan is the Alion Science and Technology Corporation 2004 Stock Appreciation Rights Plan (the “Plan”).

1.2. Purpose. The purpose of the Plan is to attract, retain and reward persons providing services to Alion Science and Technology Corporation (“Alion”), its Affiliates and any successor corporation(s) thereto (collectively, the “Company”) and to motivate such persons to contribute to the growth and future success of the Company.

1.3. Effective Date; Term. The Plan was initially effective as of November 9, 2004. The Plan is hereby amended and restated effective as of June 25, 2013. No Award shall be granted under the Plan after the close of business on the day immediately preceding the twelfth (12^th) anniversary of the initial effective date of the Plan. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.

1.4. Shares Subject to the Plan. No actual shares of Stock are reserved hereunder. References to shares of Stock are for accounting and valuation purposes only, and not to grant any voting or other rights associated with ownership of Stock.

ARTICLE II

DEFINITIONS

For purposes of the Plan, the following terms shall be defined as set forth below:

2.1. “Administrative Committee” means the Compensation Committee of the Board, or such person or persons as the Compensation Committee shall designate, unless the Board resolves to act itself as the Administrative Committee.

2.2. “Affiliate” means an entity which is a member of a “controlled group” of corporations with Alion under Code Section 414(b) or a trade or business under common control with Alion under Code Section 414(c); provided, however, that in applying Code Sections 1563(a)(1), (2) or (3) and for the purposes of Code Section 414(b), the language “at least 50 percent” will be used instead of “at least 80 percent” each place it appears, and in applying Treasury Regulation Section 1.414(c)-2 for purposes of Code Section 414(c), the language “at least 50 percent” will be used instead of “at least 80 percent” each place it appears. In addition, to the extent the Administrative Committee determines that legitimate business criteria exist to use a reduced ownership percentage to determine whether an entity is an Affiliate for purposes of determining whether a Termination of Employment has occurred, the Administrative Committee may designate an entity that would meet the definition of “Affiliate” by substituting “20 percent” in place of “50 percent” in the preceding sentence as an Affiliate. Such designation shall be made by December 31, 2007 or, if later, at the time a 20 percent or more ownership interest in such entity is acquired.

2.3. “Award” means any SARs granted pursuant to the Plan.

2.4. “Board” means the Board of Directors of Alion.

2.5. “Cause” means, for purposes of this Plan:

(a) With respect to an individual who is party to a written agreement with the Company which contains a definition of “cause” or “for cause” or words of similar import for purposes of termination of employment thereunder by the Company, “cause” or “for cause” as defined in such agreement.

(b) In all other cases (i) the Participant’s intentional, persistent failure, dereliction, or refusal to perform such duties as are reasonably assigned to him or her by the officers or directors of the Company; (ii) the Participant’s fraud, dishonesty or other deliberate injury to the Company in the performance of his or her duties on behalf of, or for, the Company; (iii) the Participant’s conviction of a crime which constitutes a felony involving moral turpitude, fraud or deceit regardless of whether such crime involves the Company; (iv) the willful commission by the Participant of a criminal or other act that causes substantial economic damage to the Company or substantial injury to the business reputation of the Company; (v) the Participant’s material breach of his or her employment or engagement agreement, if any; or (vi) the Participant’s breach of any material provision of the Participant’s Grant Agreement representing an Award. For purposes of the Plan, no act, or failure to act, on the part of any person shall be considered “willful” unless done or omitted to be done by the person other than in good faith and without reasonable belief that the person’s action or omission was in the best interest of the Company.

2.6. “CEO” means the Chief Executive Officer of Alion.

2.7. “Change in Control” shall mean and shall be deemed to have occurred as of the date of the first to occur of the following events:

(a) any Person or Group acquires stock of the Alion that, together with stock held by such Person or Group, constitutes more than fifty percent (50%) of the total Fair Market Value or total voting power of the stock of Alion. However, if any Person or Group is considered to own more than fifty percent (50%) of the total Fair Market Value or total voting power of the stock of Alion, the acquisition of additional stock by the same Person or Group is not considered to cause a Change in Control of Alion. An increase in the percentage of stock owned by any Person or Group as a result of a transaction in which Alion acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this subsection. This subsection applies only when there is a transfer of stock of Alion (or issuance of stock of Alion) and stock in Alion remains outstanding after the transaction;

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(b) any Person or Group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Group) ownership of stock of Alion possessing thirty percent (30%) or more of the total voting power of the stock of Alion, provided, however, that the phrase “more than fifty percent (50%)” shall be substituted for the phrase “thirty percent (30%) or more” with respect to any Awards granted after January 22, 2010.

(c) a majority of members of Alion’s Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of Alion’s Board prior to the date of the appointment or election; or

(d) any Person or Group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Group) assets from Alion that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of Alion immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of Alion, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. However, no Change in Control shall be deemed to occur under this subsection (d) as a result of a transfer to:

(i) A shareholder of Alion (immediately before the asset transfer) in exchange for or with respect to its stock;

(ii) An entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by Alion;

(iii) A Person or Group that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of Alion; or

(iv) An entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (3) above.

For these purposes, the term “Person” shall mean an individual, corporation, association, joint-stock company, business trust or other similar organization, partnership, limited liability company, joint venture, trust, unincorporated organization or government or agency, instrumentality or political subdivision thereof (other than an employee benefit trust established or maintained for the benefit of employees of the Company). The term “Group” shall have the meaning set forth in Rule13d-5 of the Securities Exchange Commission (“SEC”), modified to the extent necessary to comply with Treasury Regulation Section 1.409A-3(i)(5), or any successor thereto in effect at the time a determination of whether a Change in Control has occurred is being made. If any one Person, or Persons acting as a Group, is considered to effectively control the Company as described in subsections (b) or (c) above, the acquisition of additional control by the same Person or Persons is not considered to cause a Change in Control.

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2.8. “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

2.9. “Disability” means that the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expect to last for a continuous period of not less than 12 months; (b) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company; or (c) has been determined to be totally disabled by the Social Security Administration.

2.10. “Fair Market Value” on any given date means the value of one share of Stock as determined by the Administrative Committee in its sole discretion, based upon the most recent valuation of the Stock made by an independent appraisal that meets the requirements of Code Section 401(a)(28)(C) and the regulations thereunder as of a date that is no more than 12 months before the relevant transaction to which the valuation is applied.

2.11. “Grant Agreement” means the agreement between the Company and the Participant pursuant to which the Company authorizes an Award hereunder. Each Grant Agreement entered into between the Company and a Participant with respect to an Award granted under the Plan shall incorporate the terms of this Plan and shall contain such terms and conditions, consistent with the provisions of the Plan, as may be established by the Administrative Committee. Provisions in any Grant Agreement relating to matters such as noncompetition, nonsolicitation and protection of intellectual property are hereby deemed to be consistent with the Plan.

2.12. “Grant Date” means the date on which the Administrative Committee formally acts to grant an Award to a Participant or such other date as the Administrative Committee shall so designate at the time of taking such formal action.

2.13. “Participant” means any director, officer, employee or consultant of the Company to whom any Award is granted pursuant to the Plan.

2.14. “Payment Date” means the first anniversary of the date a Participant’s Award becomes 100% Vested, or such other date as the Administrative Committee shall designate with respect to a Vested amount in the Participant’s Grant Agreement, or, if earlier, the date set forth in Section 5.6 of the Plan.

2.15. “SAR” means a stock appreciation right, as awarded under Article V.

2.16. “Stock” means the voting common stock, $0.01 par value per share, of Alion, subject to adjustments pursuant to the Plan.

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2.17. “Termination of Employment” means the severing of employment with the Company and its Affiliates for any reason. A Termination of Employment will be deemed to have occurred if the facts and circumstances indicate that the Company and Participant reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the Participant will perform for the Company or any Affiliate after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than the lesser of (a) 19 hours of bona fide services per week, or (b) fifty percent (50%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the Participant has been providing services to the Company and its Affiliates). A Participant will not be deemed to have incurred a Termination of Employment while he or she is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months or such longer period as the Participant’s right to reemployment with the Company or any Affiliate is provided either by statute or by contract. If the period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the Termination of Employment will be deemed to occur on the first date immediately following such six-month period. Whether a Participant incurs a termination of employment with the Company or an Affiliate will be determined in accordance with the requirements of Code Section 409A.

2.18. “Vested” or “Vesting” refers to the extent to which an Award ceases to be subject to a risk of forfeiture under Section 5.6(a) or (d). Subject to the provisions of Section 5.6 below, unless the Administrative Committee determines otherwise in the Grant Agreement, Awards shall vest at a rate of twenty percent (25%) per year on the annual anniversary of the Grant Date. Any Award which is given to a member of the Board of Directors will vest annually on a pro-rata basis over the term or remainder of any term which such director is serving from the date of Award.

ARTICLE III

ADMINISTRATION

3.1. General. The Plan shall be administered by the Administrative Committee. The Administrative Committee shall have the full and final authority, in its discretion, to interpret conclusively the provisions of the Plan; to adopt such rules for carrying out the Plan as it may deem advisable; to decide all questions of fact arising in the application of the Plan; and to make all other determinations necessary or advisable for the administration of the Plan.

3.2. Procedure. The Administrative Committee shall meet at such times and places and upon such notice as it may determine. A majority of the members of the Board or committee serving as Administrative Committee hereunder shall constitute a quorum. Any acts by the Administrative Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all of the members of the Board or committee serving as Administrative Committee hereunder shall be valid acts of the Administrative Committee. Members of the Board or committee who are either eligible for Awards or have been granted Awards may vote on any matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Administrative Committee during which action is taken with respect to the granting of an Award to him or her.

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3.3. Duties. The Administrative Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrative Committee deems necessary or advisable, all within the Administrative Committee’s sole and absolute discretion. The Administrative Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to:

(a) construe the Plan and any Award under the Plan;

(b) select the directors, officers, employees and consultants of the Company to whom Awards may be granted and the time or times at which Awards shall be granted;

(c) determine the number of shares of Stock to be covered by or used for reference purposes for any Award;

(d) determine and modify from time to time the terms and conditions, including restrictions, of any Award and to approve the form of Grant Agreements;

(e) impose limitations on Awards, including limitations on transfer provisions; and

(f) modify, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards.

3.4. Delegation of Authority. The Administrative Committee hereby delegates to the CEO the authority to exercise the duties set forth in section 3.3(b), and the amount(s) of any such Awards made in accordance with such duties, for all officers, employees and consultants of the Company, except for Awards made to executive officers of the Company. The CEO shall exercise this authority in accordance with this Plan, including without limitation sections 1.4, 5.1 and 5.5. The CEO shall provide the Administrative Committee with a detailed written report of all such Awards made under this delegated authority on a quarterly basis. With respect to executive officers of the Company, the Administrative Committee hereby delegates to the CEO the authority to nominate persons to receive Awards, which nomination shall be subject to the approval of the Administrative Committee. The Administrative Committee may revoke or amend the terms of this delegation at any time, but such revocation shall not invalidate prior actions of the CEO that were consistent with the terms of the Plan. All Awards are subject to the approval of the Administrative Committee.

3.5. Limited Liability. To the maximum extent permitted by law, no member of the Board or committee serving as Administrative Committee hereunder shall be liable for any action taken or decision made in good faith relating to the Plan or any Award.

3.6. Indemnification. To the maximum extent permitted by law and by the Company’s charter and by-laws, the members of the Board or committee serving as Administrative Committee hereunder shall be indemnified by the Company in respect of all their activities under the Plan.

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3.7. Effect of Administrative Committee’s Decision. All actions taken and decisions and determinations made by the Administrative Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrative Committee’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company, its stockholders, any Participants in the Plan and any other employee of the Company, and their respective successors in interest.

ARTICLE IV

ELIGIBILITY AND PARTICIPATION

4.1. Eligibility. Directors, officers, employees and consultants of, or to, as the case may be, the Company who, in the opinion of the Administrative Committee, are responsible for the continued growth and development and future success of the business shall be eligible to participate in the Plan.

4.2. Participation. An eligible individual shall become a Participant hereunder when he or she is granted an Award hereunder, as evidenced by a Grant Agreement executed by the Company and the Participant.

ARTICLE V

STOCK APPRECIATION RIGHTS

5.1. Award of SARs. Subject to the other applicable provisions of the Plan, the Administrative Committee may at any time and from time to time grant SARs to eligible Participants, as it determines. Notwithstanding the foregoing, no grant of SARs may be made to any “Disqualified Person” (within the meaning of Sections 409(p)(4) and 4979A of the Code) for any period during which the Company maintains an employee stock ownership plan as described in and qualified under section 4975(e)(7) and 401(a) of the Code, respectively. Any grant of SARs made in violation of this provision shall be null and void ab initio. In addition, no grant of SARs may be made to any eligible individual if and to the extent that such grant would cause such individual to become a Disqualified Person. SARs shall be evidenced by Grant Agreements, executed by the Company and the Participant, stating the number of SARs and the terms and conditions of such SARs, including the terms and conditions governing the Vesting of Awards, in such form as the Administrative Committee may from time to time determine. The Participant shall have none of the rights of a stockholder with respect to any shares of Stock represented by a SAR.

5.2. Amount of Payment Upon Maturation of SARs. A SAR shall entitle the Participant to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the product of (1) the excess of (i) the Fair Market Value on the Payment Date of one share of Stock over (ii) the base price per share specified in the Grant Agreement (which shall be the Fair Market Value of one share of Stock on the Grant Date), times (2) the number of shares specified by the SAR which are then Vested. Notwithstanding the foregoing, for SARs granted prior to June 25, 2013 that are not fully vested as of June 25, 2013, in the event of a Change in Control, except to the extent an applicable Grant Agreement provides otherwise, Fair Market Value under (1)(i) of the preceding sentence shall be equal to the share price of one share of Alion Common Stock based on the transaction price of the Change in Control transaction, or the most recently determined per share Fair Market Value, whichever is greater.

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5.3. Payment of SARs. Except as provided in Section 5.4, a Participant will receive payment for all of a Vested Award by the delivery of cash in a lump sum sixty (60) days following the Payment Date. All federal, state and local taxes, as well as other appropriate items, will be withheld from payments. However, in lieu of payment of an Award under the preceding sentence, a Participant granted an SAR under this Plan before November 9, 2005, was permitted to elect in accordance with Internal Revenue Service Notice 2005-1, Q-20(a), to receive payment of any such Award in calendar year 2005 or, if later, in the taxable year in which amounts under the Award become earned and vested.

5.4. Election to Defer Benefits. A Participant who is (or is eligible to become) a participant in the Alion Science and Technology Corporation Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) may elect to defer the amount of benefit that would otherwise be payable with respect to an Award that is 100% Vested upon a Payment Date into the Deferred Compensation Plan. Any such election shall be made in a writing acceptable to the Administrative Committee and filed with the Administrative Committee at least one year prior to the Payment Date; provided, however, that an election to defer the receipt of a payment under this Section 5.4 that would, absent such a deferral election, be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) must be made as of a date permitted by the Administrator that is at least one year prior to the date such payment ceases to be subject to a substantial risk of forfeiture. Such election shall become effective upon the Payment Date (or the date such payment ceases to be subject to a substantial risk of forfeiture, as applicable) and shall specify a time for payment and method of distribution available under the Deferred Compensation Plan, provided that such election may not provide for a time of distribution (other than as a result of Termination of Employment, Change in Control, death or Disability) earlier than five years after the Payment Date. If the Participant has elected a time of payment or method of distribution under the Deferred Compensation Plan that will apply to amounts deferred hereunder and is different from the time or method of distribution specified in Section 5.6(a), (b) or (c), as applicable, the deferral election under this Section 5.4 shall be treated as a change election under Treasury Regulation Section 1.409A-2(b) and Section 5.2(b) of the Deferred Compensation Plan. This Section 5.4 shall not apply to amounts payable under the second sentence of Section 5.3.

5.5. Disqualified Persons. If Participant is or becomes a Disqualified Person as described in Section 5.1 above, then the full amount of any then outstanding Award that has not yet Vested shall be forfeited and no amount of an Award shall become Vested, if, as a result of such Vesting, the Participant would become a Disqualified Person and the Vesting of any such grant would result in a “nonallocation year” (within the meaning of Code Section 409(p)(3)).

5.6. Termination and Forfeiture of Awards.

(a) Termination of Employment. Except as further provided below, a Participant who has a Termination of Employment for any reason other than death or Disability shall forfeit his or her rights to all unvested Awards. The Payment Date of any then outstanding Vested Awards shall be the date of Termination of Employment.

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(b) Death or Disability. If a Participant incurs a Termination of Employment due to death or Disability, the Participant shall become fully Vested in any outstanding Awards, and the Payment Date shall be the date of the Participant’s Termination of Employment due to death or Disability.

(c) Change in Control.

(i) For Awards Granted Before June 25, 2013 That Are Not Fully Vested As Of June 25, 2013. For Awards granted before June 25, 2013 that are not fully vested as of June 25, 2013, in the event of a Change in Control, if and to the extent provided in the applicable Grant Agreement, a Participant shall become fully Vested in any outstanding Awards under the Grant Agreement, and the Payment Date shall be the date of the Change in Control.

(ii) For Awards Granted After June 25, 2013. A Change in Control shall have no effect on any Award granted after June 25, 2013.

(d) Termination for Cause. If a Participant has a Termination of Employment for Cause, such Participant shall forfeit his or her rights to all unvested Awards.

5.7. Nontransferability. No Award shall be transferable by a Participant except by will or by the laws of descent and distribution or pursuant to a gift of any Vested Awards to such Participant’s spouse, parents, children and grandchildren, whether directly or indirectly or by means of a trust, partnership, or otherwise. Any transfer or purported transfer in violation of this paragraph shall be void and of no effect.

5.8. Acceleration of Payment Date. Notwithstanding the foregoing, the Payment Date of a Vested Award may be accelerated, with the consent of the Administrative Committee, under the following circumstances:

(a) Compliance with Domestic Relations Order: To permit payment to an individual other than the Participant as necessary to comply with the provisions of a domestic relations order (as defined in Code Section 414(p)(1)(B));

(b) Conflicts of Interest: To permit payment as necessary to comply with the provisions of a Federal government ethics agreement or to avoid violation of applicable Federal, state, local or foreign ethics law or conflicts of interest law;

(c) Payment of Employment Taxes: To permit payment of federal employment taxes under Code Sections 3101, 3121(a) or 3121(v)(2), or to comply with any federal tax withholding provisions or corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of federal employment taxes, and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes; or

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(d) Section 409(p): To prevent the occurrence of a nonallocation year (within the meaning of Code Section 409(p)(3)) in the plan year of an employee stock ownership plan next following the plan year in which such payment is made, provided that the amount distributed may not exceed 125% of the minimum amount of distribution necessary to avoid the occurrence of a nonallocation year; or

(e) Tax Event: Upon a good faith, reasonable determination by the Company, upon advice of counsel, that the Plan or an Award fails to meet the requirements of Code Section 409A and regulations thereunder. Such payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A.

5.9. Delay of Payments. If the Committee reasonably determines that the making of any payment required under the Plan at the date specified in the Plan would jeopardize the ability of the Company to continue as a going concern, the payment will be treated as made upon the date specified under the Plan if the payment is made during the first taxable year of the Company in which the making of the payment would not have such effect. In addition, a payment otherwise required to be made under the terms of the Plan may be delayed solely to the extent necessary under the following circumstances, provided that payment is made as soon as possible within the first taxable year of the Participant after the reason for delay no longer applies:

(a) Payments Subject to the Deduction Limitation: The Company reasonably anticipates that such payment would otherwise violate Code Section 162(m);

(b) Violation of Law: The Administrator reasonably determines that making the payment will violate Federal securities or other applicable laws; or

(c) Other Permitted Event: Upon such other events and conditions as the Commissioner of Internal Revenue shall prescribe in generally applicable guidance.

5.10. Compliance with Code Section 409A. No payment shall be made in violation of Section 409A or any other applicable provisions of the Code and the rules and regulations thereunder.

ARTICLE VI

TRANSACTIONS

6.1. Adjustment of Number and Price of Shares. Any other provision of the Plan notwithstanding, if through, or as a result of, any merger, consolidation, sale of all or substantially all of the assets of Alion, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of Alion, or additional shares or new or different shares or other securities of Alion or other non-cash assets are distributed with respect to such shares of Stock or other securities, the Administrative Committee shall make an appropriate or proportionate adjustment in the Awards as it deems appropriate, in its sole discretion. The adjustment by the Administrative Committee shall be final, binding and conclusive.

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6.2. Adjustments Due to Special Circumstances. The Administrative Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrative Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

6.3. Compliance with Code Section 409A. Notwithstanding the foregoing, the Administrative Committee shall not make an adjustment under this Article VI which results in a violation of Code Section 409A.

ARTICLE VII

AMENDMENT AND TERMINATION

7.1. Amendment. The Board may amend the Plan at any time and from time to time, provided that (a) no amendment shall deprive any person of any rights granted under the Plan before the effective date of such amendment without such person’s consent; and (b) amendments may be subject to shareholder approval to the extent needed to comply with applicable law. Notwithstanding the foregoing, the Board may amend the Plan or any outstanding Award subject to Section 409A as necessary to cause the Plan or such Award to comply with Code Section 409A.

7.2. Termination. The Board reserves the right to terminate the Plan in whole or in part at any time, without the consent of any person granted any rights under the Plan. Termination of the Plan shall not affect the Administrative Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. Notwithstanding the foregoing, termination of the Plan shall not result in the acceleration of payment of any Award except as permitted by the Administrative Committee and consistent with the requirements of Code Section 409A.

ARTICLE VIII

MISCELLANEOUS

8.1. Restrictive Legends. The Company may at any time place legends referencing any restrictions described in the Grant Agreement and any applicable federal or state securities law restrictions on all Awards.

8.2. Compliance with Governmental Regulations. Notwithstanding any provision of the Plan or the terms of any Grant Agreement entered into pursuant to the Plan, Alion shall not be required to issue any securities hereunder prior to registration of the offer or sale securities subject to the Plan under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, if such registration shall be necessary, or before compliance by the Alion or any Participant with any other provisions of either of those acts or of regulations or rulings of the Securities and Exchange Commission thereunder, or before compliance with other federal and state laws and regulations and rulings thereunder, including the rules any applicable securities exchange or quotation system. Alion shall use its best efforts to effect such registrations and to comply with such laws, regulations and rulings forthwith upon advice by its counsel that any such registration or compliance is necessary.

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8.3. Company Charter and Bylaws. This Plan is subject to the charter and by-laws of Alion, as they may be amended from time to time.

8.4. No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company; however, in the event of commencement of a voluntary or involuntary case of bankruptcy against or by Alion, all Vested and unvested Awards made hereunder shall be canceled and void.

8.5. No Guarantee of Employment. Participation in this Plan shall not be construed to confer upon any Participant the legal right to be retained in the employ of the Company or give any person any right to any payment whatsoever, except to the extent of the benefits provided for hereunder. Each Participant shall remain subject to discharge to the same extent as if this Plan had never been adopted. Nothing in this Plan shall prevent, interfere with or limit in any way the right of the Company to terminate a Participant’s employment at any time, whether or not such termination would result in: (i) the failure of any Award to vest; (ii) the forfeiture of any unvested or vested portion of any Award under the Plan; and/or (iii) any other adverse effect on the Participant’s interests under the Plan.

8.6. No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements (whether such arrangements be generally applicable or applicable only in specific cases) as the Administrative Committee, in its discretion determines desirable, including without limitation the granting of stock options, stock awards, stock appreciation rights or phantom stock units otherwise than under the Plan; provided that income recognized by a Participant in payment of a SAR shall be excluded from the calculation of benefits under any pension, profit-sharing, ESOP or any other benefit plan maintained by the Company unless such benefit plan provides otherwise, making specific reference to SARs.

8.7. Governing Law. The provisions of this Plan shall be governed by, construed and administered in accordance with applicable federal law; provided, however, that to the extent not in conflict with federal law, this Plan shall be governed by, construed and administered under the laws of Delaware, other than its laws respecting choice of law.

8.8. Severability. If any provision of the Plan shall be held invalid, the remainder of this Plan shall not be affected thereby and the remainder of the Plan shall continue in force.

8.9. Identity. If, at any time, any doubt exists as to the identity of any person entitled to any payment hereunder or the amount of time of such payment, the Administrative Committee shall be entitled to hold such sum until such identity or amount or time is determined or until an order of a court of competent jurisdiction is obtained. The Administrative Committee shall also be entitled to pay such sum into court in accordance with the appropriate rules of law. Any expenses incurred by the Company or the Administrative Committee incident to such proceeding or litigation shall be charged against the account of the affected Participant.

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8.10. Incompetence. If the Administrative Committee determines that any person to whom a benefit is payable under the Plan is incompetent by reason of a physical or mental disability, the Administrative Committee shall have the power to cause the payments becoming due to such person to be made to another person for his or her benefit without the responsibility of the Administrative Committee or the Company to see to the application of such payments. Any payment made pursuant to such power shall, as to such payment, operate as a complete discharge of the Administrative Committee and the Company.

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EX-10.38

EXHIBIT 10.38

ALION SCIENCE AND TECHNOLOGY CORPORATION

PERFORMANCE SHARES AND RETENTION PHANTOM STOCK PLAN

(Amended and Restated as of June 25, 2013)

The Alion Science and Technology Corporation Performance Shares and Retention Phantom Stock Plan (the “Plan”) was initially established by Alion Science and Technology Corporation, a Delaware corporation (“Alion” or the “Company”), effective as of January 24, 2005. The Plan is hereby amended and restated effective as of June 25, 2013.

ARTICLE I

PURPOSE

The purpose of the Plan is to attract and retain key management employees of the Company and to provide such persons with a proprietary interest in the Company and an incentive to increase shareholder value through the granting of phantom shares of common stock of the Company.

ARTICLE II

DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

2.1. “Administrative Committee” means the Compensation Committee of the Board, or such person or persons as the Compensation Committee shall designate, unless the Board resolves to act itself as the Administrative Committee.

2.2. “Affiliate” means an entity which is a member of a “controlled group” of corporations with Alion under Code Section 414(b) or a trade or business under common control with Alion under Code Section 414(c); provided, however, that in applying Code Sections 1563(a)(1), (2) or (3) and for the purposes of Code Section 414(b), the language “at least 50 percent” will be used instead of “at least 80 percent” each place it appears, and in applying Treasury Regulation Section 1.414(c)-2 for purposes of Code Section 414(c), the language “at least 50 percent” will be used instead of “at least 80 percent” each place it appears. In addition, to the extent the Administrative Committee determines that legitimate business criteria exist to use a reduced ownership percentage to determine whether an entity is an Affiliate for purposes of determining whether a Termination of Employment has occurred, the Administrative Committee may designate an entity that would meet the definition of “Affiliate” by substituting “20 percent” in place of “50 percent” in the preceding sentence as an Affiliate. Such designation shall be made by December 31, 2007 or, if later, at the time a 20 percent or more ownership interest in such entity is acquired.

2.3. “Award” means a grant of the opportunity to receive Performance Share Phantom Stock or Retention Phantom Stock under this Plan.

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2.4. “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated by the Participant to receive benefits under this Plan upon his or her death. The Administrative Committee may establish such forms and procedures that it deems appropriate for the designation of a Beneficiary. If the Participant has not designated a Beneficiary, the Participant’s Beneficiary shall be his or her estate.

2.5. “Board” means the Board of Directors of the Company.

2.6. “Cause” or “Just Cause” shall have the same meaning as defined in the relevant Participant’s Employment Agreement.

2.7. “Change in Control” means the occurrence of any of the following events:

(a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of either (1) the then outstanding shares of common stock of the Company or (2) the combined voting power of the then outstanding capital stock of the Company, which voting power may be manifested through the entitlement to vote generally in the election of directors, by contract through the right to convert non-voting securities into voting securities or otherwise;

(b) such time as when individuals who on the Effective Date constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors of the Company or whose nomination for election by the shareholders of the Company was approved by a majority vote of the directors of the Company) cease for any reason to constitute a majority of the Board of Directors of the Company then in office;

(c) the adoption of a plan relating to the liquidation or dissolution of the Company; and

(d) the merger or consolidation of the Company with or into any other entity or the merger of any other entity with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another person or entity other than (A) a transaction in which the survivor or transferee is an entity controlled by the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust or (B) a transaction following which (i) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the voting power of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Person surviving such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before the transaction and (ii) in the case of a sale of assets transaction, each transferee assumes substantially all of the obligations of the Company and becomes an affiliate of the Company.

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2.8. “Code” means the Internal Revenue Code of 1986, as amended, and related rules, regulations and interpretations.

2.9. “Common Stock” means the voting common stock, $0.01 par value per share, of the Company, subject to adjustments pursuant to the Plan.

2.10. “Company” means Alion Science and Technology Corporation, a Delaware corporation.

2.11. “Disability” means that the Participant: (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; (b) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company; or (c) has been determined to be totally disabled by the Social Security Administration.

2.12. “Employee” shall mean any person who is employed by the Company, is on the Company’s payroll, and whose wages are subject to withholding under the Federal Insurance Contributions Act, codified in Code Section 3121, or would be subject to such withholding if paid in the US.

2.13. “Employer” shall mean the Company and any Affiliate that, with the consent of the Company, elects to participate in the Plan and any successor entity that adopts the Plan. If any such entity withdraws, is excluded from participation in the Plan or terminates its participation in the Plan, such entity shall thereupon cease to be an Employer.

2.14. “Employment Agreement” shall mean the employment contract specifying the terms of a Participant’s employment with his or her Employer.

2.15. “Fair Market Value” on any given date means the value of one share of Common Stock, as determined by the Administrative Committee in its sole discretion, based upon the most recent valuation of the Common Stock made by an independent appraisal that meets the requirements of Code Section 401(a)(28)(C) and the regulations thereunder as of a date that is no more than 12 months before the relevant transaction to which the valuation is applied.

2.16. “Grant Date” means the effective date on which an Award is made to a Participant as set forth in the applicable Phantom Stock Agreement.

2.17. “Participant” shall mean an Employee of the Company who has an Employment Agreement to whom an Award is granted under this Plan.

2.18. “Payment Date” means the date established in Section 6.2 of the Plan.

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2.19. “Performance Share Phantom Stock Agreement” or “Retention Phantom Stock Agreement” (collectively referred to as “Phantom Stock Agreement”) means the agreement between the Company and the Participant pursuant to which the Company authorizes an Award hereunder. Each Phantom Stock Agreement entered into between the Company and a Participant with respect to an Award granted under the Plan shall incorporate the terms of this Plan and shall contain such terms and conditions, consistent with the provisions of the Plan, as may be established by the Administrative Committee. Provisions in any Phantom Stock Agreement relating to matters such as non-competition, non-solicitation and protection of intellectual property are hereby deemed to be consistent with the Plan.

2.20. “Performance Share Phantom Stock” or “Retention Phantom Stock” (collectively referred to as “Phantom Stock”) means a unit granted to a Participant that entitles the Participant to receive a payment in cash equal to the Fair Market Value of a share of Common Stock on the date the respective grants of Phantom Stock pay out.

2.21. “Plan” means the Alion Science and Technology Corporation Performance Shares and Retention Phantom Stock Plan, as amended from time to time.

2.22. “Target Performance Share Award” means the nominal shares awarded to a Participant on a Grant Date pursuant to a Performance Share Phantom Stock Agreement, which shares are subject to vesting upon the achievement of a predetermined Fair Market Value price per share of the Company’s Common Stock.

2.23. “Termination of Employment” means the severing of employment with the Company and its Affiliates for any reason. A Termination of Employment will be deemed to have occurred if the facts and circumstances indicate that the Company and Participant reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the Participant will perform for the Company or any Affiliate after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than the lesser of (a) 19 hours of bona fide services per week, or (b) fifty percent (50%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the Participant has been providing services to the Company and its Affiliates). A Participant will not be deemed to have incurred a Termination of Employment while he or she is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months or such longer period as the Participant’s right to reemployment with the Company or any Affiliate is provided either by statute or by contract. If the period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the Termination of Employment will be deemed to occur on the first date immediately following such six-month period. Whether a Participant incurs a termination of employment with the Company or an Affiliate will be determined in accordance with the requirements of Code Section 409A.

2.24. “Valuation Date” shall mean a date as of which the Fair Market Value of Common Stock of the Company is determined.

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ARTICLE III

ADMINISTRATION

3.1. General. The Plan shall be administered by the Administrative Committee. The Administrative Committee shall have the full and final authority, in its discretion, to interpret conclusively the provisions of the Plan; to adopt such rules for carrying out the Plan as it may deem advisable; to decide all questions of fact arising in the application of the Plan; and to make all other determinations necessary or advisable for the administration of the Plan.

3.2. Procedure. The Administrative Committee shall meet at such times and places and upon such notice as it may determine. A majority of the members of the Board or committee serving as Administrative Committee hereunder shall constitute a quorum. Any acts by the Administrative Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all of the members of the Board or committee serving as Administrative Committee hereunder shall be valid acts of the Administrative Committee. Members of the Board or Administrative Committee who are either eligible for Awards or have been granted Awards may vote on any matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Administrative Committee during which action is taken with respect to the granting of an Award to him or her.

3.3. Duties. The Administrative Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrative Committee deems necessary or advisable, all within the Administrative Committee’s sole and absolute discretion. The Administrative Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to:

(a) construe the Plan and any Award under the Plan;

(b) select the Employees to whom Awards may be granted and the time or times at which Awards shall be granted;

(c) determine the number of shares of Common Stock to be covered by or used for reference purposes for any Award;

(d) determine and modify from time to time the terms and conditions, including restrictions, of any Award and to approve the form of Phantom Stock Agreements;

(e) impose limitations on Awards, including limitations on transfer provisions;

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(f) modify, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards subject to restrictions or limitations of the Code; or

(g) prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws.

3.4. Limited Liability. To the maximum extent permitted by law, no member of the Board or committee serving as Administrative Committee hereunder shall be liable for any action taken or decision made in good faith relating to the Plan or any Award.

3.5. Effect of Administrative Committee’s Decision. All actions taken and decisions and determinations made by the Administrative Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrative Committee’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company, its stockholders, any Participants in the Plan and any other employee of the Company, and their respective successors in interest.

ARTICLE IV

PARTICIPATION

Individual Participants in the Plan shall be selected by the Administrative Committee in its sole discretion from key executive Employees of the Company. Awards may be granted by the Administrative Committee at any time and from time to time to new Participants, or to existing Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Administrative Committee shall determine. Except as required by the Plan, Awards granted at different times need not contain similar provisions.

ARTICLE V

GRANT OF PHANTOM STOCK

5.1. Shares Subject to the Plan. Subject to adjustments as provided in Article X, the shares of Common Stock that may be used for reference purposes with respect to Awards granted under this Plan shall not exceed 2,000,000 shares of Common Stock, reduced by any shares of Common Stock used for reference purposes with respect to awards issued under the Alion Science and Technology Corporation Board of Directors Phantom Stock Plan and the Alion Science and Technology Corporation Phantom Stock Plan (whether or not such awards have expired, terminated unexercised, or become unexercisable, or have been forfeited or otherwise terminated, surrendered or cancelled). No actual shares of Common Stock are reserved hereunder. References to shares of Common Stock are for accounting and valuation purposes only, and not to grant any voting or other rights associated with ownership of Common Stock.

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5.2. Grant of Award. Subject to Section 5.3 and other applicable provisions of the Plan, the Administrative Committee may at any time and from time to time grant Awards of Phantom Stock to eligible Participants, as it deems appropriate. The grant of an Award shall be authorized by the Administrative Committee and shall be evidenced by a Performance Share Phantom Stock Agreement or a Retention Phantom Stock Agreement in a form approved by the Administrative Committee, between the Company and the Participant. Each Phantom Stock Agreement shall set forth its Grant Date, the number of shares of Retention Phantom Stock awarded or the formula for determining the amount of Performance Share Phantom Stock payment based on a Target Performance Share Award (meaning the nominal shares awarded to a Participant on a Grant Date pursuant to a Performance Share Phantom Stock Agreement), which shares are subject to vesting upon the achievement of a predetermined Fair Market Value price per share of the Company’s Common Stock. Failure to achieve the minimum threshold price shall result in the vesting of no Performance Share Phantom Stock under the Plan. Achievement of a Fair Market Value per share equal to the predetermined target price per share shall result in the vesting of Performance Share Phantom Stock equal to the Target Performance Share Award. Achievement of a Fair Market Value per share in excess of the predetermined target price per share shall result in the vesting of Performance Share Phantom Stock in excess of the number of Target Performance Shares up to the maximum percentage specified in the underlying Performance Share Phantom Stock Agreement. Each such Phantom Stock Agreement shall be subject to the express terms and conditions of this Plan, and shall be subject to such other terms and conditions that, in the reasonable judgment of the Administrative Committee, are appropriate and not inconsistent with this Plan.

5.3. Disqualified Persons. Notwithstanding the foregoing, no grant of Phantom Stock may be made to any “Disqualified Person” (within the meaning of Sections 409(p)(4) and 4979A of the Code) for any period during which the Company maintains the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Plan or any other employee stock ownership plan as described in and qualified under Sections 4975(e)(7) and 401(a) of the Code, respectively. Any grant of Phantom Stock made in violation of this provision shall be null and void ab initio. In addition, no grant of Phantom Stock may be made to any eligible individual if and to the extent that such grant would cause such individual to become a Disqualified Person.

ARTICLE VI

RIGHT TO PAYMENT

6.1. Vesting.

(a) Performance Phantom Stock. For grants of Performance Share Phantom Stock awarded November 9, 2005 and thereafter, a Participant shall have no right to any share of Performance Share Phantom Stock until it is vested, except in the event of the Participant’s death, Disability, or involuntary Termination of Employment without Cause, or a Change in Control as set forth in the Performance Shares Phantom Stock Agreement at the Grant Date. Except as provided in Section 6.2, vesting shall occur at the third anniversary of the Grant Date. At vesting, a predetermined Target Performance Share Award, stated in the Performance Shares Phantom Stock Agreement at Grant Date, combined with the Fair Market Value of Common Stock in effect on the date of vesting, shall be used in the calculation of the actual number of shares of Performance Shares Phantom Stock that will be vested for all Participants.

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(b) Retention Phantom Stock. For grants of Retention Phantom Stock awarded November 9, 2005 and thereafter, a Participant shall have no right to any share of Retention Phantom Stock until it is vested, except in the event of the Participant’s death, Disability, or involuntary Termination of Employment without Cause, or a Change in Control as set forth in the Retention Phantom Stock Agreement at the Grant Date. Vesting shall occur in accordance with the applicable provisions expressed in the individual Retention Phantom Stock Agreements.

6.2. Payment Date and Vesting Events.

(a) Payment Date. The Payment Date is the date certain specified in the Performance Share Phantom Stock Agreement or Retention Phantom Stock Agreement executed by the Company and the Participant as of the Grant Date, for the conversion of Performance Share Phantom Stock and/or Retention Phantom Stock into an amount certain in cash. The Payment Date shall not be earlier than the date on which the Participant becomes 100% vested in the Performance Share Phantom Stock or Retention Phantom Stock covered by the respective Phantom Stock Agreement, except as provided below with respect to the Participant’s death, Disability, Termination of Employment or Change in Control. Nothing in this Plan shall be construed to require an identical Payment Date for any grants of Performance Share Phantom Stock or Retention Phantom Stock as of a particular date.

(b) Termination of Employment. Except as set forth in the respective Phantom Stock Agreement or elsewhere in the Plan, a Participant who has a Termination of Employment shall forfeit his or her rights to all unvested Awards.

(c) Death. If a Participant dies prior to terminating employment with the Company, the Participant’s Beneficiary shall be paid out any vested amount as set forth in the respective Phantom Stock Agreement. Except as otherwise provided in the applicable Phantom Stock Agreement, the Payment Date shall be the date of the Participant’s death.

(d) Disability. If a Participant incurs a Termination of Employment due to Disability, the Participant shall be paid out any vested amount as set forth in the respective Phantom Stock Agreement. Except as otherwise provided in the applicable Phantom Stock Agreement, the Payment Date shall be the date of the Participant’s Termination of Employment due to Disability.

(e) Change in Control. Upon a Change in Control, Participants shall immediately vest in the Target Performance Share Award and Retention Phantom Stock Award as and to the extent specified in the respective Phantom Stock Grant Agreements. Except as otherwise provided in the applicable Phantom Stock Agreement, the Payment Date shall be the date of the Change in Control.

(f) Disqualified Persons. If Participant is or becomes a Disqualified Person as described in Section 5.3 above, then the full amount of any then outstanding Award that has not yet vested shall be forfeited; and no amount of an Award shall become vested, if, as a result of such vesting, the Participant would become a Disqualified Person and the vesting of any such Award would result in a “nonallocation year” (within the meaning of Code Section 409(p)(3)).

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ARTICLE VII

PAYMENT OF PHANTOM STOCK BENEFITS

7.1. Amount and Timing of Payment.

(a) Retention Phantom Stock. For grants of Retention Phantom Stock, a Participant shall be entitled to a cash payment on the Payment Date, equal to the number of vested shares of Retention Phantom Stock multiplied by the Fair Market Value as of the Valuation Date coincident with or immediately preceding the Payment Date; provided, however, that in the case of payment due to a Change in Control, the Fair Market Value as of the date of the Change in Control or the immediately preceding Valuation Date, whichever is higher, shall be used. Except as provided below in this Article VII, the Company shall make payment on a Payment Date by the delivery to the Participant of cash in a lump sum sixty (60) days after the Payment Date, less any applicable withholdings required by the Code or other similar regulations.

(b) Performance Share Phantom Stock. For grants of Performance Share Phantom Stock, a Participant shall be entitled to a cash payment on a Payment Date, equal to the amount generated by the calculation of the vested Target Performance Share Award contained in individual Performance Share Phantom Stock Agreements; provided, however, that in the case of payment due to a Change in Control, the Fair Market Value as of the date of the Change in Control or the immediately preceding Valuation Date, whichever is higher, shall be used. Except as provided below in this Article VII, the Company shall make payment on a Payment Date by the delivery to the Participant of cash in a lump sum sixty (60) days after the Payment Date, less any applicable withholdings required by the Code or other similar regulations.

(c) Compliance with Code Section 409A. No payment shall be made in violation of Section 409A or any other applicable provisions of the Code and the rules and regulations thereunder.

7.2. Acceleration of Payment Date. Notwithstanding the foregoing, the Payment Date of a vested Award may be accelerated, with the consent of the Administrative Committee, under the following circumstances:

(a) Compliance with Domestic Relations Order: To permit payment to an individual other than the Participant as necessary to comply with the provisions of a domestic relations order (as defined in Code Section 414(p)(1)(B));

(b) Conflicts of Interest: To permit payment as necessary to comply with the provisions of a Federal government ethics agreement or to avoid violation of applicable Federal, state, local or foreign ethics law or conflicts of interest law;

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(c) Payment of Employment Taxes: To permit payment of federal employment taxes under Code Sections 3101, 3121(a) or 3121(v)(2), or to comply with any federal tax withholding provisions or corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of federal employment taxes, and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes;

(d) Code Section 409(p): To prevent the occurrence of a nonallocation year (within the meaning of Code Section 409(p)(3)) in the plan year of an employee stock ownership plan next following the Plan Year in which such payment is made, provided that the amount distributed may not exceed 125% of the minimum amount of distribution necessary to avoid the occurrence of a nonallocation year; or

(e) Tax Event: Upon a good faith, reasonable determination by the Company, upon advice of counsel, that the Plan or an Award fails to meet the requirements of Code Section 409A and regulations thereunder. Such payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A.

7.3. Delay of Payments. If the Committee reasonably determines that the making of any payment required under the Plan at the date specified in the Plan would jeopardize the ability of the Company to continue as a going concern, the payment will be treated as made upon the date specified under the Plan if the payment is made during the first taxable year of the Company in which the making of the payment would not have such effect. In addition, payment may be delayed (without imputation of earnings, interest or other gains or losses after the Payment Date) solely to the extent necessary under the following circumstances, provided that payment is made as soon as possible within the first taxable year of the Participant after the reason for delay no longer applies:

(a) Payments Subject to Section 162(m). The Company reasonably anticipates that its deduction with respect to such payment would otherwise be limited or eliminated by application of Code Section 162(m).

(b) Payments that Would Violate Law. The Company reasonably determines that payment would violate Federal securities laws or other applicable law.

(c) Other Permitted Event: Upon such other events and conditions as the Commissioner of Internal Revenue shall prescribe in generally applicable guidance.

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7.4. Election to Defer Benefits. A Participant hereunder who is also a participant in, or eligible to become a participant in, the Alion Science and Technology Corporation Executive Deferred Compensation Plan (the “Deferred Compensation Plan”), may elect to defer receipt of all or a portion of the Plan benefit otherwise payable to him or her by electing to contribute such benefit to the Deferred Compensation Plan in the amount that would otherwise have been payable on the applicable Payment Date under Section 7.1. Any such election shall be made in a writing acceptable to the Administrative Committee and filed with the Administrative Committee at least one year prior to the Payment Date; provided, however, that an election to defer the receipt of a payment under this Section 7.6 that would, absent such a deferral election, be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) must be made as of a date permitted by the Administrator that is at least one year prior to the date such payment ceases to be subject to a substantial risk of forfeiture. Such election shall become effective upon the applicable Payment Date and shall specify a time for payment and method of distribution available under the Deferred Compensation Plan, provided that such election may not provide for a time of distribution (other than as a result of Termination of Employment, death or Disability) earlier than five years after the Payment Date. If the Participant has elected a time of payment or method of distribution under the Deferred Compensation Plan that will apply to amounts deferred hereunder and is different from the time or method of distribution specified in Section 7.1 with respect to any distribution event, the deferral election under this Section 7.4 shall be treated as a change election under Treasury Regulation Section 1.409A-2(b) and Section 5.2(b) of the Deferred Compensation Plan. This Section 7.4 shall not apply to amounts withheld under Section 7.6.

7.5. Discharge. Any payment made by the Company in good faith in accordance with the provisions of this Plan and a Participant’s Phantom Stock Agreement shall fully discharge the Company from all further obligations with respect to such payment and such Phantom Stock Agreement.

7.6. Withholding. The Company shall have the right to deduct from all amounts paid pursuant to the Plan any Federal, State or local income tax, social security contribution or other payroll taxes required by law, whether domestic or foreign, to be withheld with respect to such payments. The Company shall also have the right to deduct FICA contributions required at vesting from normal salary and wages or other cash compensation to be paid to the Participant.

ARTICLE VIII

AMENDMENT AND TERMINATION

8.1. Amendment. The Board may amend the Plan at any time and from time to time, provided that (a) no amendment shall deprive any person of any rights granted under the Plan before the effective date of such amendment without such person’s consent; and (b) amendments may be subject to shareholder approval to the extent needed to comply with applicable law. Notwithstanding the foregoing, the Board may unilaterally amend the Plan or any outstanding Award subject to Code Section 409A as necessary to cause the Plan or such Award to comply with Code Section 409A.

8.2. Termination. The Board reserves the right to terminate the Plan in whole or in part at any time, without the consent of any person granted any rights under the Plan. Termination of the Plan shall not affect the Administrative Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. Notwithstanding the foregoing, termination of the Plan shall not result in the acceleration of payment of any Award except as permitted by the Administrative Committee and consistent with the requirements of Code Section 409A.

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ARTICLE IX

TERM

The Plan shall be effective from the date that this Plan is approved by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on November 9, 2016, but Awards granted before this termination date will continue to be effective in accordance with their terms and conditions.

ARTICLE X

TRANSACTIONS

10.1. Adjustment of Number and Price of Shares. Any other provision of the Plan notwithstanding, if through, or as a result of, any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, the outstanding shares of Common Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, the Administrative Committee shall make an appropriate or proportionate adjustment in the Awards as it deems appropriate, in its sole discretion. The adjustment by the Administrative Committee shall be final, binding and conclusive.

10.2. Adjustments Due to Special Circumstances. The Administrative Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrative Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

10.3. Compliance with Code Section 409A. Notwithstanding the foregoing, the Administrative Committee shall not make an adjustment under this Article X which results in a violation of Code Section 409A.

ARTICLE XI

MISCELLANEOUS PROVISIONS

11.1. No Guarantee of Employment. Neither the Plan nor any Award granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company. Participation in the Plan shall not be construed to confer upon any Participant the legal right to be retained in the employ of the Company or give any person any right to any payment whatsoever, except to the extent of the benefits provided for hereunder. Each Participant shall remain subject to discharge to the same extent as if this Plan had never been adopted. Nothing in this Plan shall prevent, interfere with or limit in any way the right of the Company to terminate a Participant’s employment at any time, whether or not such termination would result in: (a) the failure of any Award to vest; (b) the forfeiture of any unvested or vested portion of any Award under the Plan; and/or (c) any other adverse effect on the Participant’s interests under the Plan.

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11.2. No Rights as a Shareholder. A Participant shall not have any rights as a shareholder with respect to any shares of Phantom Stock.

11.3. Indemnification of Board and Plan Administrative Committee. No member of the Board or the Administrative Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Administrative Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrative Committee and each and any officer or Employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

11.4. Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Administrative Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by a Phantom Stock Agreement, or any amendment thereto, duly authorized by the Administrative Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.

11.5. Non-Assignability. Phantom Stock granted to a Participant may not be transferred or assigned other than by will or by the laws of descent and distribution. If the Participant attempts to alienate, assign, pledge, hypothecate, or otherwise dispose of his or her Phantom Stock or any right thereunder, except as provided for in the Plan or the Phantom Stock Agreement, or in the event of any levy, attachment, execution, or similar process upon the right or interest conferred by this Plan or the Phantom Stock Agreement, the Administrative Committee shall terminate the Participant’s Phantom Stock by notice to him or her, and it shall thereupon become null and void.

11.6. Restrictive Legends. The Company may at any time place legends referencing any restrictions described in the Phantom Stock Agreement and any applicable federal or state securities law restrictions on all Awards.

11.7. Company Charter and Bylaws. The Plan is subject to the charter and by-laws of the Company, as they may be amended from time to time.

11.8. No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company; however, in the event of commencement of a voluntary or involuntary case of bankruptcy against or by the Company, all vested and unvested Awards made hereunder shall be canceled and void.

11.9. Governing Law. All questions arising with respect to this Plan and any Phantom Stock Agreement executed hereunder shall be determined by reference to the laws of the State of Delaware in effect at the time of their adoption and execution, respectively, without implementing its laws regarding choice of law.

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EX-10.39

EXHIBIT 10.39

ALION SCIENCE AND TECHNOLOGY CORPORATION

PHANTOM STOCK PLAN

(Amended and Restated as of June 25, 2013)

The Alion Science and Technology Corporation Phantom Stock Plan (the “Plan”) was initially established by Alion Science and Technology Corporation, a Delaware corporation (the “Company”), effective as of February 11, 2003. This Plan is hereby amended and restated effective as of June 25, 2013.

ARTICLE I

PURPOSE

The purpose of the Plan is to attract and retain key management employees of the Company and to provide such persons with a proprietary interest in the Company through the granting of phantom shares of common stock of the Company.

ARTICLE II

DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

2.1. “Administrative Committee” means the Compensation Committee of the Board, or such person or persons as the Compensation Committee shall designate, unless the Board resolves to act itself as the Administrative Committee.

2.2. “Affiliate” means any entity, whether now or hereafter existing, which at the time of reference, controls, is controlled by, or is under common control with, Alion (including, but not limited to, joint ventures, limited liability companies, and partnerships).

2.3. “Award” means a grant of Phantom Stock under this Plan.

2.4. “Board” means the Board of Directors of the Company.

2.5. “Cause” or “Just Cause” shall have the same meaning as defined in the relevant Participant’s Employment Agreement.

2.6. “Change in Control” means the occurrence of any of the following events:

(a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of either (1) the then outstanding shares of common stock of the Company or (2) the combined voting power of the then outstanding capital stock of the Company, which voting power may be manifested through the entitlement to vote generally in the election of directors, by contract through the right to convert non-voting securities into voting securities or otherwise;

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(b) such time as when individuals who on the Effective Date constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors of the Company or whose nomination for election by the shareholders of the Company was approved by a majority vote of the directors of the Company) cease for any reason to constitute a majority of the Board of Directors of the Company then in office;

(c) the adoption of a plan relating to the liquidation or dissolution of the Company; and

(d) the merger or consolidation of the Company with or into any other entity or the merger of any other entity with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another person or entity other than (A) a transaction in which the survivor or transferee is an entity controlled by the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust or (B) a transaction following which (i) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the voting power of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Person surviving such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before the transaction and (ii) in the case of a sale of assets transaction, each transferee assumes substantially all of the obligations of the Company and becomes an affiliate of the Company.

2.7. Code” means the Internal Revenue Code of 1986, as amended and any successor Code, and related rules, regulations and interpretations.

2.8. “Common Stock” means the voting common stock, $0.01 par value per share, of the Company, subject to adjustments pursuant to the Plan.

2.9. “Company” means Alion Science and Technology Corporation, a Delaware corporation.

2.10. “Disability” means that the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months; (b) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company; or (c) has been determined to be totally disabled by the Social Security Administration.

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2.11. “Employee” shall mean any person who is employed by the Company, is on the Company’s payroll, and whose wages are subject to withholding under the Federal Insurance Contributions Act, codified in Code Section 3121 or would be subject to such withholding if paid in the US.

2.12. “Employer” shall mean the Company and any Affiliate that, with the consent of the Company, elects to participate in the Plan and any successor entity that adopts the Plan. If any such entity withdraws, is excluded from participation in the Plan or terminates its participation in the Plan, such entity shall thereupon cease to be an Employer.

2.13. “Employment Agreement” shall mean the employment contract specifying the terms of Participant’s employment with Employer.

2.14. “Exercise Date” shall mean the date as of which a Participant surrenders Phantom Stock shares vested on or prior to December 31, 2004.

2.15. “Fair Market Value” on any given date means the value of one share of Common Stock as determined by the Administrative Committee in its sole discretion, based upon the most recent valuation of the Common Stock made by an independent appraisal that meets the requirements of Code Section 401(a)(28)(C) and the regulations thereunder as of a date that is no more than 12 months before the relevant transaction to which the valuation is applied.

2.16. “Grant Date” means the effective date on which an Award is made to a Participant as set forth in the applicable Phantom Stock Agreement.

2.17. “Participant” shall mean an Employee of the Company who has an Employment Agreement to whom an Award is granted under this Plan.

2.18. “Phantom Stock Agreement” means the agreement between the Company and the Participant pursuant to which the Company authorizes an Award hereunder. Each Phantom Stock Agreement entered into between the Company and a Participant with respect to an Award granted under the Plan shall incorporate the terms of this Plan and shall contain such terms and conditions, consistent with the provisions of the Plan, as may be established by the Administrative Committee. Provisions in any Phantom Stock Agreement relating to matters such as noncompetition, nonsolicitation and protection of intellectual property are hereby deemed to be consistent with the Plan.

2.19. “Phantom Stock” means a unit granted to a Participant that entitles the Participant to receive a payment in cash equal to the Fair Market Value of a share of Common Stock on the date the Phantom Stock vests.

2.20. “Plan” means the Alion Science and Technology Corporation Phantom Stock Plan, as amended from time to time.

2.21. “Surrender Date” means the date as of which a Participant surrenders Phantom Stock shares pursuant to Section 7.1 below.

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2.22. “Termination of Employment” means cessation of performance of services for the Company. For purposes of maintaining a Participant’s continuous status as an Employee and accrual of rights under any Award granted pursuant to the Plan, transfer of an Employee among Alion and any of its Affiliates shall not be considered a Termination of Employment with the Company. A Participant will not be deemed to have incurred a Termination of Employment while he or she is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months or such longer period as the Participant’s right to reemployment with the Company or an Affiliate is provided either by statute or by contract. If the period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the Termination of Employment will be deemed to occur on the first date immediately following such six-month period. For the avoidance of doubt, and by way of example only, if a Participant works for a wholly-owned subsidiary of the Company, then a sale of the subsidiary by the Company would be regarded as a Termination of Employment of such Participant for purposes of this Plan, notwithstanding the Participant’s continued employment with that former subsidiary. Whether an Employee of the Company incurs a termination of employment with the Company will be determined in accordance with the requirements of Code Section 409A.

2.23. “Valuation Date” shall mean a date as of which the Fair Market Value of Common Stock of the Company is determined.

ARTICLE III

ADMINISTRATION

3.1. General. The Plan shall be administered by the Administrative Committee. The Administrative Committee shall have the full and final authority, in its discretion, to interpret conclusively the provisions of the Plan; to adopt such rules for carrying out the Plan as it may deem advisable; to decide all questions of fact arising in the application of the Plan; and to make all other determinations necessary or advisable for the administration of the Plan.

3.2. Procedure. The Administrative Committee shall meet at such times and places and upon such notice as it may determine. A majority of the members of the Board or committee serving as Administrative Committee hereunder shall constitute a quorum. Any acts by the Administrative Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all of the members of the Board or committee serving as Administrative Committee hereunder shall be valid acts of the Administrative Committee. Members of the Board or committee who are either eligible for Awards or have been granted Awards may vote on any matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Administrative Committee during which action is taken with respect to the granting of an Award to him or her.

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3.3. Duties. The Administrative Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrative Committee deems necessary or advisable, all within the Administrative Committee’s sole and absolute discretion. The Administrative Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to:

(a) construe the Plan and any Award under the Plan;

(b) select the Employees of the Company to whom Awards may be granted and the time or times at which Awards shall be granted;

(c) determine the number of shares of Common Stock to be covered by or used for reference purposes for any Award;

(d) determine and modify from time to time the terms and conditions, including restrictions, of any Award and to approve the form of Phantom Stock Agreements;

(e) impose limitations on Awards, including limitations on transfer provisions;

(f) modify, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards; or

(g) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws.

3.4. Limited Liability. To the maximum extent permitted by law, no member of the Board or committee serving as Administrative Committee hereunder shall be liable for any action taken or decision made in good faith relating to the Plan or any Award.

3.5. Effect of Administrative Committee’s Decision. All actions taken and decisions and determinations made by the Administrative Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrative Committee’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company, its stockholders, any Participants in the Plan and any other employee of the Company, and their respective successors in interest.

ARTICLE IV

PARTICIPATION

Individual Participants in the Plan shall be selected by the Administrative Committee in its sole discretion from key executive Employees of the Company. Awards may be granted by the Administrative Committee at any time and from time to time to new Participants, or to existing Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Plan Administrative Committee shall determine. Except as required by this Plan, Awards granted at different times need not contain similar provisions.

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ARTICLE V

GRANT OF PHANTOM STOCK

5.1. Shares Subject to the Plan. Subject to adjustments as provided in Article X, the shares of Common Stock that may be used for reference purposes with respect to Awards granted under this Plan shall not exceed 2,000,000 shares of Common Stock, reduced by any shares of Common Stock used for reference purposes with respect to awards issued under the Alion Science and Technology Corporation Board of Directors Phantom Stock Plan and the Alion Science and Technology Corporation Performance Shares and Retention Phantom Stock Plan (whether or not such awards have expired, terminated unexercised, or become unexercisable, or have been forfeited or otherwise terminated, surrendered or cancelled). No actual shares of Common Stock are reserved hereunder. References to shares of Common Stock are for accounting and valuation purposes only, and not to grant any voting or other rights associated with ownership of Common Stock.

5.2. Grant of Award. Subject to Section 5.3 and other applicable provisions of the Plan, the Administrative Committee may at any time and from time to time grant Awards of Phantom Stock to eligible Participants, as it deems appropriate. The grant of an Award shall be authorized by the Administrative Committee and shall be evidenced by a Phantom Stock Agreement in a form approved by the Administrative Committee, between the Company and the Participant. Each such Phantom Stock Agreement shall set forth its Grant Date, the number of shares of Phantom Stock awarded, and the vesting provisions. Each such Phantom Stock Agreement shall be subject to the express terms and conditions of this Plan, and shall be subject to such other terms and conditions that, in the reasonable judgment of the Administrative Committee, are appropriate and not inconsistent with this Plan.

5.3. Disqualified Persons. Notwithstanding the foregoing, no grant of Phantom Stock may be made to any “Disqualified Person” (within the meaning of Sections 409(p)(4) and 4979A of the Code, as added by the Economic Growth and Tax Relief Reconciliation Act of 2001) for any period during which the Company maintains the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Plan or any other employee stock ownership plan as described in and qualified under Section 4975(e)(7) and 401(a) of the Code, respectively. Any grant of Phantom Stock made in violation of this provision shall be null and void ab initio. In addition, no grant of Phantom Stock may be made to any eligible individual if and to the extent that such grant would cause such individual to become a Disqualified Person.

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ARTICLE VI

RIGHT TO PAYMENT

6.1. Vesting. A Participant shall have no right to exercise or receive payment for any share of Phantom Stock until it is vested, as described below.

(a) For Awards granted on or before November 10, 2003, unless otherwise determined by the Administrative Committee in a Participant’s Phantom Stock Agreement, Awards shall vest in accordance with the following schedule:

Anniversary from Grant Date	Vested Amount
3rd		50	%
4th		25	%
5th		25	%

(b) For Awards granted on or after November 11, 2003, unless otherwise determined by the Administrative Committee in a Participant’s Phantom Stock Agreement, Awards shall vest in accordance with the following schedule:

Anniversary from Grant Date	Vested Amount
1st		20	%
2nd		20	%
3rd		20	%
4th		20	%
5th		20	%

6.2. Termination and Forfeiture of Awards. If a Participant incurs a Termination of Employment on or before becoming 100% vested in an Award, he or she shall forfeit any unvested portion of the Award, except as provided below:

(a) Voluntary Termination of Employment. If a Participant voluntarily terminates employment with the Company, then such Participant shall forfeit all rights to all unvested Awards, unless such termination is for Good Reason, as defined in the Participant’s Employment Agreement (but for this purpose only, without regard to whether the occurrence of one of the events is during the Protected Period, as defined by the Employment Agreement). If a Participant voluntarily terminates employment with the Company for Good Reason, then such Participant shall immediately vest in a prorated portion of his or her unvested Awards issued prior to November 9, 2005, based on a ratio the numerator of which is the number of months from the Grant Date through the end of the month of such termination and the denominator of which is sixty (60). For Awards made on or after November 9, 2005, if a Participant voluntarily terminates employment with the Company for Good Reason, then such Participant shall immediately vest in a prorated portion of his or her outstanding Awards equal to the greater of the amount vested under Section 6.1(b) and the amount determined based on a ratio the numerator of which is the number of months from the Grant Date through the end of the month of such termination and the denominator of which is sixty (60),

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(b) Involuntary Termination of Employment Without Cause. If a Participant is involuntarily terminated from employment with the Company for any reason other than for Cause or Just Cause, then he or she shall immediately vest in a prorated portion of his or her unvested Awards issued prior to November 9, 2005, based on a ratio the numerator of which is the number of months from the Grant Date through the end of the month of such termination and the denominator of which is sixty (60). For Awards made on or after November 9, 2005, if a Participant is involuntarily terminated from employment with the Company for any reason other than for Cause or Just Cause, then such Participant shall immediately vest in a prorated portion of his or her outstanding Awards equal to the greater of the amount vested under Section 6.1(b) and the amount determined based on a ratio the numerator of which is the number of months from the Grant Date through the end of the month of such termination and the denominator of which is sixty (60).

(c) Death or Disability. If the Participant’s Termination of Employment is due to death or Disability, any outstanding Awards at the time of such Termination of Employment shall immediately become 100% vested.

(d) Change in Control. If the Participant incurs a Termination of Employment for any reason on or after a Change in Control, any Awards granted prior to such Change in Control that are outstanding at the time of such Termination of Employment shall immediately become 100% vested.

(e) Disqualified Persons. If Participant is or becomes a Disqualified Person as described in Section 5.3 above, then the full amount of any then outstanding Award that has not yet vested shall be forfeited; and no amount of an Award shall become vested, if, as a result of such vesting, the Participant would become a Disqualified Person.

ARTICLE VII

PAYMENT OF PHANTOM STOCK BENEFITS

7.1. Exercise of Awards Vested on or before December 31, 2004. A Participant may elect to exercise any shares of Phantom Stock granted and vested on or before December 31, 2004, by filing a written election to exercise with the Administrative Committee at least six (6) months in advance of the Exercise Date and at least three (3) months in advance of the Valuation Date that will apply to such Exercise Date; provided, however, that the Phantom Stock that becomes vested on November 12, 2004 may be exercised as of November 12, 2004, based upon an election by the Participant filed no later than August 2, 2004. Notwithstanding the foregoing, the Exercise Date of vested shares of Phantom Stock shall not be earlier than the date the Phantom Stock becomes vested nor later than the earliest of (1) the date of the occurrence of a termination event described in Section 6.2 or any other Termination of Employment of the Participant; (2) the date of a Change in Control; or (3) the fifth (5^th) anniversary of the Grant Date of the Phantom Stock. An election to exercise Phantom Stock shall be made in such form and at such time as the Administrative Committee deems acceptable.

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7.2. Payment of Awards Granted before November 9, 2005, and Vesting on or after January 1, 2005. A Participant granted Phantom Stock under this Plan before November 9, 2005, but not vesting until on or after January 1, 2005, shall be entitled to a cash payment on the Surrender Date, which shall be the earlier of (i) the date on which the Participant becomes fully vested in the Award, or (ii) the date of the Participant’s Termination of Employment. Notwithstanding the foregoing, (a) the Surrender Date of a vested Award may be accelerated, with the consent of the Administrative Committee, under the circumstances set forth in Section 7.3(a) through (d); and (b) a Participant may elect, in accordance with Internal Revenue Service Notice 2005-1, Q-20(a), to receive payment of any Awards granted before November 9, 2005, and vesting on or after January 1, 2005, calendar year 2005 or, if later, the taxable year in which the amounts are earned and vested. Any such election shall be made in a form acceptable to the Administrative Committee and filed with the Administrative Committee no later than December 31, 2005.

7.3. Payment of Awards Granted on or after November 9, 2005. The Administrative Committee may, in its discretion, permit a Participant to elect whether the Surrender Date with respect to an Award granted on or after November 9, 2005 shall occur (a) with respect to any portion of an Award which has become vested under Section 6.1(b), the date on which such portion of the Award becomes vested; or (b) the date on which the entire amount of the Award becomes 100% vested or, if earlier, upon the Participant’s Termination of Employment. Any such election shall be made in a writing acceptable to the Administrative Committee and filed with the Administrative Committee prior to the Award Grant Date; provided, however, that in the case of a new Participant, such election shall be made within 30 days after the Participant becomes eligible to participate in the Plan. If the Administrative Committee does not permit an election under this provision, or if a Participant fails to make a timely election to the contrary hereunder, the Participant shall be deemed to have elected the Surrender Date described in clause (b) above. Notwithstanding the foregoing, the Surrender Date of a vested Award may be accelerated, with the consent of the Administrative Committee, under the following circumstances:

(a) Compliance with Domestic Relations Order: To permit payment to an individual other than the Participant as necessary to comply with the provisions of a domestic relations order (as defined in Code Section 414(p)(1)(B));

(b) Conflicts of Interest: To permit payment as necessary to comply with the provisions of a certificate of divestiture (as defined in Code Section 1043(b)(2));

(c) Payment of Employment Taxes: To permit payment of federal employment taxes under Code Sections 3101, 3121(a) or 3121(v)(2), or to comply with any federal tax withholding provisions or corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of federal employment taxes, and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes; or

(d) Tax Event: Upon a good faith, reasonable determination by the Company, upon advice of counsel, that the Plan or an Award fails to meet the requirements of Code Section 409A and regulations thereunder. Such payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A.

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7.4. Amount and Timing of Payment. A Participant shall be entitled to a cash payment upon exercise or surrender (as applicable) of an Award equal to the number of vested units of Phantom Stock subject to surrender, multiplied by the Fair Market Value as of the Valuation Date coincident with or immediately preceding the Surrender Date; provided, however, that, in the case of an Award outstanding on the date of a Change in Control, the Fair Market Value of such Phantom Stock units shall be determined based upon the Fair Market Value of Common Stock as of the Valuation Date coincident with or immediately preceding the Surrender Date, or the Valuation Date coincident with or immediately preceding the date of the Change in Control, whichever produces the higher Fair Market Value.

7.5. Time of Payment. Except as provided in Section 7.6, the Company shall make payment of the amount receivable upon the exercise of an Award by the delivery of cash in a lump sum within sixty days after the Exercise Date of an Award described in Section 7.1, or as soon as practicable after the Surrender Date of an Award described in Section 7.2 or 7.3, as applicable, but in any event within 2 ¹/₂ months after the end of the Plan Year in which the Surrender Date occurs. Notwithstanding the foregoing, payment under this Section 7.5 may be delayed (without imputation of earnings, interest or other gains or losses after the Surrender Date) solely to the extent necessary under the following circumstances, provided that payment is made as soon as possible after the reason for delay no longer applies:

(a) Unforeseeable Administrative or Financial Cause. The Compensation Committee reasonably determines that (1) it is administratively impracticable to make payment by the end of the applicable 2 ¹/₂ month period or that making such payment will jeopardize the solvency of the Company, and (2) such impracticability or insolvency was unforeseeable as of the Grant Date.

(b) Payments Subject to Section 162(m). The Company reasonably anticipates that its deduction with respect to such payment would otherwise be limited or eliminated by application of Code Section 162(m).

(c) Payments that Would Violate Loan Covenant or Similar Contractual Requirement. The Company reasonably anticipates that making the payment will violate a term of a loan agreement to which the Company is a party, including any ESOP loan agreement, or other similar contract to which the Company is a party, and such violation will cause material harm to the Company.

(d) Payments that Would Violate Law. The Company reasonably determines that payment would violate Federal securities laws or other applicable law.

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7.6. Election to Defer Benefits. If a Participant has elected as the Exercise Date for Phantom Stock granted and vested on or before December 31, 2004, the fifth (5^th) anniversary of the Grant Date of such Phantom Stock, and the Participant is also a participant in the Alion Science and Technology Corporation Executive Deferred Compensation Plan (the “Deferred Compensation Plan”), he or she may elect, at least 180 days prior to such Exercise Date, to defer receipt of all or a portion of the Plan benefit through a contribution to the Deferred Compensation Plan equal to the amount that would otherwise have been payable under Section 7.2. If a Participant has elected, or is deemed to have elected, as the Surrender Date of an Award under Section 7.2 or 7.3 the date on which the entire amount of the Award becomes 100% vested, then the Participant may elect to have the amount of payment for such Award that would otherwise be made upon the Surrender Date deferred into the Deferred Compensation Plan, provided that he or she has not incurred a Termination of Employment and is then (or is then eligible to become) a participant in the Deferred Compensation Plan. Any such election shall be made in a writing acceptable to the Administrative Committee and filed with the Administrative Committee at least one year prior to the Surrender Date. Such election shall become effective upon the Surrender Date and shall specify a time for payment and method of distribution available under the Deferred Compensation Plan, provided that such election may not provide for a time of distribution (other than as a result of Termination of Employment, death or Disability) earlier than five years after the Surrender Date.

7.7. Discharge. Any payment made by the Company in good faith in accordance with the provisions of this Plan and a Participant’s Phantom Stock Agreement shall fully discharge the Company from all further obligations with respect to such payment and the Phantom Stock Agreement.

7.8. Compliance with Code Section 409A. No payment shall be made in violation of Section 409A or any other applicable provisions of the Code and the rules and regulations thereunder.

7.9. Withholding. The Company shall have the right to deduct from all amounts paid pursuant to the Plan any Federal, State or local income tax, social security contribution or other payroll taxes required by law, whether domestic or foreign, to be withheld with respect to such payments. The Company shall also have the right to deduct FICA contributions required at vesting.

ARTICLE VIII

AMENDMENT AND TERMINATION

8.1. Amendment. The Board may amend the Plan at any time and from time to time, provided that (a) no amendment shall deprive any person of any rights granted under the Plan before the effective date of such amendment without such person’s consent; and (b) amendments may be subject to shareholder approval to the extent needed to comply with applicable law. Notwithstanding the foregoing, the Board may unilaterally amend the Plan or any outstanding Award subject to Section 409A as necessary to cause the Plan or such Award to comply with Code Section 409A.

8.2. Termination. The Board reserves the right to terminate the Plan in whole or in part at any time, without the consent of any person granted any rights under the Plan. Termination of the Plan shall not affect the Administrative Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. Notwithstanding the foregoing, termination of the Plan shall not result in the acceleration of payment of any Award except as permitted by the Administrative Committee and consistent with the requirements of Code Section 409A.

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ARTICLE IX

TERM

The Plan shall be effective from the date that this Plan is approved by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on February 11, 2013, but Awards granted before this termination date will continue to be effective in accordance with their terms and conditions.

ARTICLE X

TRANSACTIONS

10.1. Adjustment of Number and Price of Shares. Any other provision of the Plan notwithstanding, if through, or as a result of, any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, the outstanding shares of Common Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, the Administrative Committee shall make an appropriate or proportionate adjustment in the Awards as it deems appropriate, in its sole discretion. The adjustment by the Administrative Committee shall be final, binding and conclusive.

10.2. Adjustments Due to Special Circumstances. The Administrative Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrative Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

10.3. Compliance with Code Section 409A. Notwithstanding the foregoing, the Administrative Committee shall not make an adjustment under this Article X which results in a violation of Code Section 409A.

ARTICLE XI

MISCELLANEOUS PROVISIONS

11.1. No Guarantee of Employment. Neither the Plan nor any Award granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company. Participation in this Plan shall not be construed to confer upon any Participant the legal right to be retained in the employ of the Company or give any person any right to any payment whatsoever, except to the extent of the benefits provided for hereunder. Each Participant shall remain subject to discharge to the same extent as if this Plan had never been adopted. Nothing in this Plan shall prevent, interfere with or limit in any way the right of the Company to terminate a Participant’s employment at any time, whether or not such termination would result in: (a) the failure of any Award to vest; (b) the forfeiture of any unvested or vested portion of any Award under the Plan; and/or (c) any other adverse effect on the Participant’s interests under the Plan.

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11.2. No Rights as a Shareholder. A Participant shall not have any rights as a shareholder with respect to any shares of Phantom Stock.

11.3. Indemnification of Board and Plan Administrative Committee. No member of the Board or the Administrative Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Administrative Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrative Committee and each and any officer or Employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

11.4. Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Administrative Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by a Phantom Stock Agreement, or any amendment thereto, duly authorized by the Administrative Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.

11.5. Non-Assignability. Phantom Stock granted to a Participant may not be transferred or assigned other than by will or by the laws of descent and distribution. If the Participant attempts to alienate, assign, pledge, hypothecate, or otherwise dispose of his Phantom Stock or any right thereunder, except as provided for in this Plan or the Phantom Stock Agreement, or in the event of any levy, attachment, execution, or similar process upon the right or interest conferred by this Plan or the Phantom Stock Agreement, the Administrative Committee may terminate the Participant’s Phantom Stock by notice to him, and it shall thereupon become null and void.

11.6. Restrictive Legends. The Company may at any time place legends referencing any restrictions described in the Phantom Stock Agreement and any applicable federal or state securities law restrictions on all Awards.

11.7. Company Charter and Bylaws. This Plan is subject to the charter and by-laws of the Company, as they may be amended from time to time.

11.8. No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company; however, in the event of commencement of a voluntary or involuntary case of bankruptcy against or by the Company, all vested and unvested Awards made hereunder shall be canceled and void.

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11.9. Governing Law. All questions arising with respect to this Plan and any Phantom Stock Agreement executed hereunder shall be determined by reference to the laws of the State of Delaware in effect at the time of their adoption and execution, respectively, without implementing its laws regarding choice of law.

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EX-10.40

EXHIBIT 10.40

Employment Agreement

This Employment Agreement (the “Agreement”) is entered into and is effective as of August 6, 2013 (the “Effective Date”) in McLean, Virginia, by and between Alion Science and Technology Corporation, a Delaware corporation with its principal place of business at 1750 Tysons Boulevard, Suite 1300, McLean, Virginia 22102 (the “Company”) and Thomas E. McCabe, an individual (the “Executive”).

WHEREAS, the Company and Executive previously entered into a Change in Control Severance Agreement dated as of January 18, 2012 and an Employee Agreement dated as of March 1, 2010 (the “Prior Agreements”); and

WHEREAS, the Company and the Executive desire to replace the Prior Agreements in their entirety with this Agreement; and

WHEREAS, the Company and the Executive wish to set forth their agreement regarding Executive’s employment with the Company;

NOW, THEREFORE, in exchange for full and adequate consideration, the receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as follows:

Article 1. Employment and Duties.

Upon the terms and subject to the conditions contained herein, the Company hereby employs the Executive as Senior Vice President, General Counsel and Secretary. The Executive shall have all of the powers, duties and responsibilities customary to his position as are reasonably necessary to the operations of the Company and as may be assigned to him from time to time by the CEO or Board of Directors (the “Board”). The Executive shall further be responsible for supervising and directing other officers and employees of the Company as determined by the CEO. The Executive’s employment is at-will and for an indefinite period. The Executive or the Company may terminate the Executive’s employment at any time, subject to the terms and provisions of this Agreement.

Article 2. Compensation and Benefits.

The Company shall continue to pay the Executive a Base Salary of not less than Three Hundred Ten Thousand Five Hundred Dollars ($310,500) per year, subject to adjustments in the discretion of the Company. The Company shall further provide to the Executive all benefits to which other executives of the Company are entitled, as commensurate with the Executive’s position, subject to the eligibility requirements and other provisions of such benefits and other perquisites as determined from time to time by the CEO or the Board. Such benefits and perquisites may include bonus, long term incentives, group term life insurance, comprehensive health and major medical insurance, dental and life insurance, disability, automobile allowance and club memberships. The Executive’s participation in any such benefit plans and perquisites shall be subject to the applicable terms, conditions and eligibility requirements thereof, as they may be amended by the Company from time to time. All such compensation and benefits shall be subject to all appropriate federal and state withholding taxes and payable in accordance with the normal payroll practices of the Company.

Article 3. Employment Termination and Severance

3.1. (a) Without Cause. During the employment period, other than during a Potential Change in Control Protection Period or within the period ending twenty-four (24) calendar months immediately following a Change in Control as specified in Article 5 below, the Company may terminate the Executive’s employment for reasons other than Cause, by notifying the Executive in writing of the Company’s intent to terminate with the effective date of termination specified by the Company in the written notice. Upon the effective date of termination under this Article 3.1(a), if the Executive timely signs a General Release and does not revoke or violate such General Release, the Company shall be obligated to pay to the Executive (subject to all appropriate federal and state withholding taxes):

(i) A cash amount equal to the Executive’s Base Salary at the rate in effect immediately prior to the termination;

(ii) A cash amount equal to the Executive’s actual bonus for the last complete fiscal year prior to the effective date of termination, if any;

(iii) Base Salary and all other benefits due the Executive through the effective date of termination;

(iv) The unpaid bonus, if any, with respect to the last complete fiscal year preceding the effective date of termination (such bonus, if any, to be determined in the manner it would have been determined and payable at the time it would have been payable hereunder had there been no termination of the employment period);

(v) To the extent that the Executive is eligible for and elects to receive medical and/or dental benefits pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for himself and/or any qualifying beneficiaries, the Company shall pay on the Executive’s behalf, or reimburse the Executive for, the amount of the applicable COBRA premium that exceeds the amount of premium from time to time payable by the Executive for the same level of coverage immediately prior to the effective date of termination. Any such COBRA premium payment by the Company that constitutes taxable income to the Executive shall be grossed up by the Company, assuming an applicable income tax rate of forty percent (40%). Payments under this paragraph shall be made monthly and shall cease at the earlier of (i) the end of the first month in which the Executive (or qualified beneficiary) is no longer eligible for COBRA for any reason (except to the extent that COBRA coverage continues for any qualified beneficiary), or (ii) eighteen (18) months after the Executive’s date of termination. The Executive shall notify the Company as soon as practicable after he ceases to be eligible for COBRA coverage due to coverage under the group health plan of another employer; and

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(vi) All other rights and benefits that the Executive has vested in prior to or as a result of his termination of employment pursuant to other plans and programs of the Company.

(b) Death or Disability. If the Executive’s employment is terminated by reason of death or Disability (as defined as in the Company’s long-term disability plan), the Company shall be obligated to pay the Executive or, if applicable, the Executive’s estate: The amounts and benefits described in Article 3.1(a) (iii), (iv), (v) and (vi), and an additional lump-sum cash payment equal to the Executive’s Base Salary for a period of six (6) months; provided, however, that such lump sum payment shall be offset by any payments under the Company’s short-term disability policy or under any long-term disability plan or insurance program maintained by the Company.

(c) Voluntary Termination. The Executive may terminate this Agreement at any time by giving the Company written notice of intent to terminate. The Executive will receive the amounts and benefits described in Article 3.1(a) (iii), (iv) and (vi), but shall not be paid any bonus with respect to the fiscal year in which voluntary termination occurs.

3.2. General Release. As a condition precedent to receiving any of the payments and benefits set forth in Article 3.1(a)(i), (ii), (iv) or (v) above (the “Severance Benefits”), the Executive (or his estate as the case may be) agrees to execute and return to the Company, and not revoke or attempt to revoke, a general release (a “General Release”) in a form acceptable to the Company, which the Company shall provide to the Executive within five (5) business days following his termination from employment. The Employee shall sign and return the General Release within the reasonable time period designated by the Company, which shall not be less than twenty-one (21) days nor more than forty-five (45) days. The General Release shall (i) release the Company and its affiliates, directors, officers, employees and agents from any and all claims that the Executive may have in connection with his employment or termination thereof, to the extent permitted by applicable laws, and (ii) except in the case of the Executive’s death, require the Executive to affirmatively agree not to violate the provisions of Article 4. Any Severance Benefits that would otherwise be provided during the period for review and revocation of the General Release (the “Revocation Period”) will be provided within five (5) business days after the Revocation Period ends, but if such period crosses calendar years, such Severance Benefits shall be provided in the later calendar year. 

3.3. Termination for Cause. The Company may terminate Executive’s employment at any time for Cause. “Cause” for termination means:

(a) The Executive’s conviction of, entry of a plea of guilty or nolo contendere or no contest to a charge of, or admission of a felony or a crime involving moral turpitude; or

(b) The Executive’s commission of an act constituting fraud, deceit, or material misrepresentation with respect to the Company; or

(c) The Executive’s commission of any negligent or willful act or omission that causes material damage (by reason, without limitation, of financial exposure or loss, damage to reputation or goodwill, or exposure to civil or criminal penalties or to other prosecutorial action by any governmental authority) to the Company or any parent or subsidiary corporation thereof; or

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(d) The Executive’s willful or material violation of any provision of the Company’s Code of Ethics, Conduct and Responsibility; or

(e) Willful and material misstatement knowingly made or caused to be made by the Executive in any filing with the Securities and Exchange Commission or other governmental authority; or

(f) The Executive’s willful or material violation of any of the covenants contained in Article 4, as applicable.

For purposes of this Article 3.3, no act or omission by the Executive shall be considered “willful” unless it is done or omitted in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act or failure to act based upon and consistent with: (i) authority given pursuant to a resolution duly adopted by the Board; or (ii) written advice of counsel for the Company with written notice given by such counsel to the Board prior to such act or failure to act, shall be conclusively presumed to be done or omitted to be done by the Executive in good faith and in the best interests of the Company.

The effective date of Executive’s termination shall be the date specified by the Company in written notice of termination to the Executive. If this Agreement is terminated by the Company for Cause, the Company shall be obligated to pay or provide (A) the Executive’s Base Salary through the effective date of termination, and (B) any other rights and benefits that the Executive has vested in prior to or as a result of his termination of employment under the express terms of an employee benefit plan of the Company, except to the extent that such rights or benefits may be forfeited upon termination for Cause; and the Executive shall immediately thereafter forfeit all other rights and benefits under this Agreement or as a current or former employee of the Company.

3.4. Severance Payment Schedule. Severance Benefits payable in the form of cash to the Executive or the Executive’s estate, pursuant to termination events described in this Article 3, shall be paid in two (2) semi-annual installments, as follows: (a) fifty percent (50%) of the total of the amounts set forth in Articles 3.1(a)(i) and (ii) (the foregoing amounts are hereinafter referred to as a “Severance Installment Payment”), and all amounts set forth in Article 3.1(a)(iii) and (iv), shall be paid within five (5) business days after the expiration of the Revocation Period (the “First Installment”); and (b) the remaining Severance Installment Payment shall be paid on the six (6) month anniversary of the Executive’s termination date . The Company’s obligation to pay Severance Benefits due to the Executive pursuant to this Article 3, to the extent not already paid, shall cease immediately, and such payments will be forfeited, in the event of Executive’s willful or material violation of any of the covenants contained in Article 3 or 4, as applicable.

3.5. Section 409A Compliance. The parties intend and agree that any payments contemplated by this Agreement constituting “deferred compensation” for purposes of Internal Revenue Code (“Code”) Section 409A shall comply with the requirements of such section.

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(a) No deferred compensation payable hereunder shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Code Section 409A. In no event shall the Company have any liability or obligation with respect to taxes for which Executive may become liable as a result of the application of Code Section 409A.

(b) Whether the Executive has incurred a termination of employment for purposes of receiving any deferred compensation payment will be determined in accordance with Code Section 409A and Treasury Regulation Section 1.409A-1(h) (or any successor provisions).

(c) Payments in respect of the Executive’s termination of employment under Article 3 or Article 5 are designated as separate payments for Code Section 409A purposes.

(d) To the extent that this Agreement provides for the reimbursement of expenses incurred by the Executive, such reimbursement shall not be made later than the last day of the calendar year following the year in which the expense was incurred. The amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive in any taxable year of the Executive shall not affect the amount of expenses to be reimbursed or in-kind benefits to be provided in any other year.

Article 4. Noncompetition, Confidentiality, Nonsolicitation, and Ownership

4.1. Noncompetition; Nonsolicitation of Consultants, Clients, Customers, etc. The Executive acknowledges and agrees that by virtue of his employment with the Company, he has or will have access to valuable proprietary information not known to the public that the Company possesses, including but not limited to, methods of operation, business strategies and plans, financial information, marketing materials, ideas, trade secrets, customer contacts and other customer information (“Proprietary Information”). The Executive further acknowledges and agrees that the Company has legitimate business interests in assuring that his unique knowledge of the Company, including but not limited to that knowledge regarding and relating to the foregoing information, is not disclosed or converted to the use of entities or individuals in competition with the Company. The Executive therefore agrees that during the employment period and for a period of one (1) year after the date of termination of the Executive’s employment by the Company without Cause as set forth in Article 3.1(a) above, he will not, directly or indirectly, compete with the Company or its subsidiaries or affiliates by providing services or by being an officer, director, employee, consultant, agent, advisor, shareholder or owner to or of any other person, partnership, association, corporation, or other entity that is a “Competing Business,” except that he may have an ownership interest of up to two percent (2%) of a Competing Business which is a public company. As used herein, a “Competing Business” is any business whose activities relate to the products or services of the same or similar type as the products or services which are sold (or, pursuant to an existing business plan, will be sold) to paying customers of the Company or its subsidiaries or affiliates, and for which the Executive has the responsibility to plan, develop, manage, market, or oversee, or had any such responsibility within the Executive’s most recent twenty-four (24) months of employment with the Company immediately prior to termination of employment with the Company. Following termination of employment, the Executive may request in writing an exception to the foregoing provision from the Company for prospective employment, which exception will be granted if the Company, in its sole discretion, determines that such prospective employment will not unduly or materially compete with or otherwise interfere with the business of the Company. The restrictions on competition and solicitation as set forth in this paragraph shall not apply in the event that the Executive terminates employment pursuant to Article 3.1(c) of this Agreement.

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In addition to the foregoing, the Executive agrees that, for a period of one (1) year after the date of termination or cessation of the Executive’s employment with the Company for any reason whatsoever, he will not, directly or indirectly, intentionally entice, induce or solicit, or attempt to entice, induce or solicit, any individual or entity having a current or prospective business relationship with the Company, whether as a consultant, client, customer or otherwise, to terminate or cease such relationship with the Company, or to fail to enter into or renew such relationship with the Company.

The parties agree that the above restrictions on competition and solicitation are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for whatever reason. The parties further agree that any invalidity or unenforceability of any one or more of such restrictions on competition shall not render invalid or unenforceable any remaining restrictions on competition. Additionally, should a court of competent jurisdiction determine that the scope of any provision of this Article 4.1 is too broad to be enforced as written, the parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable. The Executive acknowledges and agrees that the non-competition and non-solicitation provisions herein are expressly assignable to any successor of the Company as set forth in Article 6(b).

4.2. Nonsolicitation of Employees. During the employment period and for a period of one (1) year after the termination or cessation of his employment with the Company for any reason whatsoever, the Executive shall not, on his own behalf or on behalf of any other person, partnership, association, corporation, or entity: (a) directly, indirectly, or through a third party hire or cause to be hired; (b) directly, indirectly, or through a third party solicit; or (c) in any manner attempt to influence or induce any employee of the Company or its subsidiaries or affiliates to leave the employment of the Company or its subsidiaries or affiliates, nor shall he use or disclose to any person, partnership, association, corporation, or other entity any information obtained concerning the names and addresses the Company’s employees. The Executive further agrees and acknowledges that the Company has confidentiality and non-competition agreements with certain of its employees, and he agrees that he will not interfere with any such agreements. The parties agree that the above restrictions on hiring and solicitation are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for whatever reason. The parties further agree that any invalidity or unenforceability of any one or more of such restrictions on hiring and solicitation shall not render invalid or unenforceable any remaining restrictions on hiring and solicitation. Additionally, should a court of competent jurisdiction determine that the scope of any provision of this Article 4.2 is too broad to be enforced as written, the parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable.

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4.3. Nondisclosure of Proprietary Information. During the term of this Agreement and for a period of two (2) years thereafter, the Executive agrees: (a) to treat all Proprietary Information in a secret and confidential manner, take all reasonable steps to maintain such secrecy, and comply with all applicable procedures established by the Company with respect to maintaining the secrecy and confidentiality of Proprietary Information; (b) to use Proprietary Information only as necessary and proper in the performance of the Executive’s duties as an employee of the Company; and (c) except as necessary and proper in the performance of the Executive’s duties as an employee of the Company, to not directly or indirectly, without the written consent of the Company, reproduce, copy, disseminate, publish, disclose, provide or otherwise make available to any person, firm, corporation, agency or other entity, any Proprietary Information except as necessary and proper in the performance of the Executive’s duties as an employee of the Company. Under no circumstances shall the Executive use, directly or indirectly, any such Proprietary Information for his personal gain or profit.

4.4. Nondisparagement. During the employment period and at all times thereafter, the Executive agrees to not disparage the Company or otherwise make comments harmful to the Company’s reputation.

4.5. Ownership. The Executive agrees that all inventions, copyrightable material, business and/or technical information, marketing plans, customer lists, and trade secrets that arise out of the performance of this Agreement are the property of the Company.

Article 5. Change in Control

5.1. Change in Control. This Article 5 shall not become effective, and the Company shall have no obligation hereunder, unless the employment of the Executive with the Company shall terminate for any of the reasons provided in this Article 5 during a Potential Change in Control Protection Period or within the period beginning on the date of a Change in Control and ending on the second anniversary of that date.

5.2. Definition of Change in Control. A “Change in Control” means the occurrence of any of the following events:

(a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), other than the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, directly or indirectly of thirty percent (30%) or more of either (1) the then outstanding shares of common stock of the Company or (2) the combined voting power of the then outstanding capital stock of the Company, which voting power may be manifested through the entitlement to vote generally in the election of directors, by contract through the right to convert non-voting securities into voting securities or otherwise;

(b) such time as when individuals who on the Effective Date constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors of the Company or whose nomination for election by the shareholders of the Company was approved by a majority vote of the directors of the Company) cease for any reason to constitute a majority of the Board of Directors of the Company then in office;

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(c) the adoption of a plan relating to the liquidation or dissolution of the Company; and

(d) the merger or consolidation of the Company with or into any other entity or the merger of any other entity with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another person or entity other than (A) a transaction in which the survivor or transferee is an entity controlled by the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Trust or (B) a transaction following which (i) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the voting power of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Person surviving such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before the transaction and (ii) in the case of a sale of assets transaction, each transferee assumes substantially all of the obligations of the Company and becomes an affiliate of the Company.

5.3. Potential Change in Control Definitions.

(a) For purposes of this Agreement, the term “Potential Change in Control” means the occurrence of the first to occur of any of the following: (i) The Company enters into an agreement which, or the consummation of which, or the approval of which by the Board or shareholders of the Company, would constitute a Change in Control; or (ii) any other event occurs which is deemed to be a Potential Change in Control by the Board and the Board adopts a resolution to the effect that a Potential Change in Control has occurred.

(b) Subject to Article 5.3(c) below, the term “Potential Change in Control Protection Period” means the period beginning on the date on which a Potential Change in Control occurs and ending (i) with respect to a Potential Change in Control described in Article 5.3(a)(i) above, upon the abandonment or termination of the applicable agreement; or (ii) with respect to a Potential Change in Control described in Article 5.3(a)(ii) above, upon the one year anniversary of the occurrence of the Potential Change in Control or such earlier date as may be determined by the Board.

(c) If a Change in Control occurs within the Potential Change in Control Protection Period, the Potential Change in Control Protection Period shall automatically terminate on the date of the Change in Control and the Change in Control protections described herein shall simultaneously commence.

(d) In addition to the foregoing, any termination of the Executive at the request of a third party in contemplation of a Change in Control or Potential Change in Control shall be deemed to have occurred during a Potential Change in Control Protection Period.

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5.4. Change in Control Severance Benefits. If, at any time during the Potential Change in Control Protection Period or within the period beginning on the date of a Change in Control and ending on the second anniversary of that date, the Executive’s employment is terminated by the Company without Cause (as provided in Article 3.3 or by the Executive for Good Reason (as defined below), then, provided that the Executive timely signs a General Release and does not revoke or violate such General Release as provided in Article 3.2, the Severance Benefits shall be provided as set forth in Article 3.4. In addition to the Severance Benefits, the Company shall also be obligated to provide to the Executive outplacement services in an amount not to exceed twenty-five thousand dollars ($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 December 31 of the second calendar year following the calendar year in which the Executive’s termination of employment occurred.

5.5. Definition of Good Reason. “Good Reason” shall mean, without the Executive’s express prior written agreement, the occurrence of any one or more of the following events during the Potential Change in Control Protection Period or within two (2) years following a Change in Control:

(a) The assignment to the Executive by the Company of duties materially inconsistent with, or the material reduction of the powers and functions associated with, the Executive’s position, duties, responsibilities, and status with the Company;

(b) A reduction of five percent (5%) or more by the Company in the Executive’s Base Salary, or a material reduction in aggregate target bonus and other performance compensation opportunity, or the failure of the Company to pay any compensation to the Executive when due and payable;

(c) The Company requiring the Executive to be based at a location more than twenty (20) miles from the Company’s current principal executive offices or the location where the Executive is based, requiring the Executive to relocate or resulting in a materially longer commute to the Executive;

(d) Any material breach by the Company of any provision of this Agreement; or

(e) Any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company effected in accordance with the provisions of Article 6(b).

The Executive must provide the Company with written notice of intent to terminate and request for cure within ninety (90) days after the occurrence of the Good Reason event, which notice shall provide the Company with a reasonable opportunity (not less than thirty (30) days) to cure the event. If the Company cures the Good Reason event within the time provided, the Executive’s notice of intent to terminate shall automatically be withdrawn and of no effect.

9

Article 6. Miscellaneous

(a) Any notices required by this Agreement shall: (i) be delivered by messenger or made in writing and mailed by certified mail, return receipt requested, or by Federal Express or similar overnight delivery service, with adequate postage prepaid; (ii) be deemed given when so delivered or mailed; and (iii) in the case of the Company, be delivered or mailed to its office at 1750 Tysons Boulevard, Suite 1300, McLean, Virginia 22102-4213, Attn: Corporate Director of Human Resources, or in the case of the Executive, be mailed to the last home address that the Executive has given to the Company.

(b) The obligations and duties of the Executive under this Agreement are personal and not assignable by the Executive. This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes of the “Company” under the terms of this Agreement (other than for the purpose of determining whether a Change in Control has occurred or may potentially occur). If any term or provision of this Agreement is held to be illegal or invalid, such illegality or invalidity shall not affect the remaining terms or provisions hereof, and each such remaining term and provision of this Agreement shall be enforced to the fullest extent permitted by law.

(c) Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Any such arbitration proceeding shall take place in Fairfax County, Virginia. The arbitrator will have the authority to award the same remedies, damages, and costs that a court could award.

(d) This Agreement may be altered, amended or modified only by written agreement signed by both the Executive and the Company. No oral modification of this Agreement, or of any part of this Agreement including this paragraph, shall have any force or effect. No waiver by either of such parties of their rights under this Agreement shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

(e) This Agreement contains the entire understanding between the parties and supersedes any prior written or oral agreement(s) between the Company and the Executive relating to the Executive’s employment with the Company, with the exception of Long-Term Incentive Plan Award Agreements between the Company and the Executive, which shall be governed by their terms. This Agreement shall not be modified or waived except by written instrument signed by the parties. The Executive’s interests, if any, in the Company’s Employee Ownership, Savings and Investment Plan (the “ESOP”) shall be governed by the terms of the ESOP.

(f) To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Virginia without reference to conflict of laws.

(signature page follows)

10

IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the Effective Date.

EXECUTIVE:
By:	/s/ Thomas E. McCabe
	Thomas E. McCabe

ALION SCIENCE AND TECHNOLOGY CORPORATION:
By	/s/ Bahman Atefi
	Dr. Bahman Atefi

11

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Bahman Atefi, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2013, of Alion Science and Technology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013

/s/ Bahman Atefi

Name: Bahman Atefi

Title: Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Barry M. Broadus, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2013, of Alion Science and Technology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013

/s/ Barry M. Broadus

Name: Barry M. Broadus

Title: Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Alion Science and Technology Corporation (the “Corporation”) on Form 10-Q for the quarter ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bahman Atefi, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 8, 2013

/s/ Bahman Atefi

Name: Bahman Atefi

Title: Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Alion Science and Technology Corporation (the “Corporation”) on Form 10-Q for the quarter ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry M. Broadus, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 8, 2013

/s/ Barry M. Broadus

Name: Barry M. Broadus

Title: Chief Financial Officer

XML

Secured Note Common Stock Warrants

9 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Secured Note Common Stock Warrants

(12) Secured Note Common Stock Warrants

On March 22, 2010, Alion issued 310,000 Units consisting of $1,000 of Secured Note face value and a warrant to purchase 1.9439 shares of Alion common stock. The Secured Note warrants entitle holders to purchase a total of 602,614 shares of Alion common stock. Each Secured Note warrant has an exercise price of a penny per share; the Secured Note warrants are not redeemable for cash.

The Company registered the Secured Notes, but is not required to register the warrants. The Units separated into Secured Notes and warrants on June 22, 2010. Each warrant became exercisable on March 22, 2011 and expires on March 15, 2017.

The Secured Note warrants had an initial fair value of approximately $20.8 million based on Alion’s former share price of $34.50. Alion recognized the value of the warrants as part of the debt issue costs for the Secured Notes and recorded a corresponding credit to equity. The Company accounts for the Secured Note warrants as equity and reassesses this classification each reporting period. The Company identified no required changes in accounting treatment as of June 30, 2013.

XML

Long-Term Debt - Principal Repayments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Long Term Debt Maturities Repayments Of Principal [Line Items]
Long-term Debt, Maturities, Repayments of principal in rolling year one
Long-term Debt, Maturities, Repayments of principal in rolling year two
Long-term Debt, Maturities, Repayments of principal in rolling year three	579,788
Total	579,788
Secured Notes [Member]
Long Term Debt Maturities Repayments Of Principal [Line Items]
Long-term Debt, Maturities, Repayments of principal in rolling year one
Long-term Debt, Maturities, Repayments of principal in rolling year two
Long-term Debt, Maturities, Repayments of principal in rolling year three	339,788
Total	339,788
Unsecured Notes [Member]
Long Term Debt Maturities Repayments Of Principal [Line Items]
Long-term Debt, Maturities, Repayments of principal in rolling year one
Long-term Debt, Maturities, Repayments of principal in rolling year two
Long-term Debt, Maturities, Repayments of principal in rolling year three	240,000
Total	$ 240,000

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Statement [Abstract]
Contract revenue	$ 220,947	$ 211,514	$ 646,557	$ 598,517
Direct contract expense	174,314	165,042	509,911	461,817
Gross profit	46,633	46,472	136,646	136,700
Operating expenses	20,929	22,926	64,841	69,393
General and administrative	14,017	11,957	39,025	37,873
Operating income	11,687	11,589	32,780	29,434
Other income (expense):
Interest income	10	15	44	56
Interest expense	(18,982)	(18,793)	(56,814)	(56,130)
Other	(24)	67	16	(50)
Gain on debt extinguishment	1,966		1,966
Total other expense	(17,030)	(18,711)	(54,788)	(56,124)
Loss before taxes	(5,343)	(7,122)	(22,008)	(26,690)
Income tax expense	(1,744)	(1,744)	(5,231)	(5,231)
Net loss	(7,087)	(8,866)	(27,239)	(31,921)
Basic and diluted loss per share	$ (1.01)	$ (1.39)	$ (4.02)	$ (5.23)
Basic and weighted average common shares outstanding	6,989,107	6,373,626	6,769,854	6,108,874
Net loss	(7,087)	(8,866)	(27,239)	(31,921)
Other comprehensive income:
Postretirement actuarial gains
Comprehensive loss	$ (7,087)	$ (8,866)	$ (27,239)	$ (31,921)

XML

Redeemable Common Stock

9 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Redeemable Common Stock

(5) Redeemable Common Stock

The ESOP Trust owns all of Alion’s issued and outstanding common stock, for the benefit of current and former employee participants in the Alion KSOP. Participants and beneficiaries are entitled to a distribution of the fair value of their vested ESOP account balance upon death, disability, retirement or termination of employment. The Plan permits distributions to be paid over a five year period commencing the year after a participant’s retirement at age 65, death or disability. Alion can delay distributions to other terminating participants for six years before commencing payment over a subsequent five year period. The Company intends to pay distribution requests in annual installments and defer initial payments as permitted.

Terminating ESOP participants can hold or immediately sell their distributed shares to the Company. If a participant elects to hold distributed shares, the IRC and ERISA require Alion to offer a put option to allow the recipient to sell stock to Alion at the estimated fair value share price based on the most recent price at which the Company was able to sell shares to the ESOP Trust ($16.25 at March 31, 2013). The put right requires Alion to purchase distributed shares during two put option periods at then-current fair market value. Consistent with its duty of independence from Alion management and its fiduciary responsibilities, the ESOP Trustee retains an independent third party valuation firm to assist it in determining the fair market value (share price) at which the Trustee may acquire or dispose of investments in Alion common stock.

Alion management determines, and the Board of Directors’ Audit and Finance Committee reviews, the reasonableness of Alion’s recorded redeemable common stock liability. The Audit and Finance Committee considers various factors in its review, including in part, the ESOP valuation report and the share price selected by the ESOP Trustee. Management considers the share price selected by the ESOP Trustee along with other factors in estimating Alion’s aggregate liability for outstanding redeemable common stock. A limited number of participants who beneficially acquired shares of Alion common stock on December 20, 2002, can sell such shares distributed from their accounts at the greater of $10.00 or the current estimated fair value share price.

Although the Company and the ESOP retain the right to delay distributions consistent with the terms of the Plan, and to control the circumstances of future distributions, eventual redemption of shares of Alion common stock is deemed to be outside the Company’s control.

XML

Commitments and Contingencies

9 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

(19) Commitments and Contingencies

Legal Proceedings

We are involved in routine legal proceedings occurring in the ordinary course of business that we believe are not material to our financial condition, operating results, or cash flows. As a government contractor, from time to time we may be subject to DCAA audits and federal government inquiries. The federal government may suspend or debar for a period of time any federal contractor it finds has violated the False Claims Act, and any contractor indicted or convicted of violations of other federal laws. The federal government could also impose fines or penalties.

Alion depends on federal government contracts; suspension or debarment could have a material, adverse effect on our business, financial condition, operating results, cash flows and our ability to meet our financial obligations. We are not aware of any such pending federal government claims or investigations.

Government Audits

Federal government cost-reimbursement contract revenues and expenses in the unaudited condensed consolidated financial statements are subject to DCAA audit and possible adjustment. Alion is a major contractor and DCAA maintains an office on site to perform various audits throughout the year. The Company has settled indirect rates through 2005 based on completed DCAA audits. All subsequent years are open. Alion has recorded federal government contract revenue based on amounts it expects to realize upon final settlement.

XML

Guarantor/Non-Guarantor Unaudited Condensed Consolidated Financial Information - Condensed Consolidating Statement of Cash Flows (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	$ 1,200	$ (7,179)
Cash flows from investing activities:
Capital expenditures	(952)	(2,339)
Net cash used in investing activities	(952)	(2,339)
Cash flows from financing activities:
Repurchase Unsecured Notes	(3,005)
Revolver borrowings	3,201	26,000
Revolver payments	(3,201)	(26,000)
Loan to ESOP Trust	(1,907)	(477)
ESOP loan repayment	1,907	477
Redeemable common stock purchased from ESOP Trust	(6,660)	(4,836)
Redeemable common stock sold to ESOP Trust	2,166	1,302
Net cash used in financing activities	(7,499)	(3,534)
Net (decrease) increase in cash and cash equivalents	(7,251)	(13,052)
Cash and cash equivalents at beginning of period	27,227	20,818
Cash and cash equivalents at end of period	19,976	7,766
Parent [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	1,130	(7,139)
Cash flows from investing activities:
Capital expenditures	(952)	(2,341)
Net cash used in investing activities	(952)	(2,341)
Cash flows from financing activities:
Repurchase Unsecured Notes	(3,005)
Revolver borrowings	3,201	26,000
Revolver payments	(3,201)	(26,000)
Loan to ESOP Trust	(1,907)	(477)
ESOP loan repayment	1,907	477
Redeemable common stock purchased from ESOP Trust	(6,660)	(4,836)
Redeemable common stock sold to ESOP Trust	2,166	1,302
Net cash used in financing activities	(7,499)	(3,534)
Net (decrease) increase in cash and cash equivalents	(7,321)	(13,014)
Cash and cash equivalents at beginning of period	27,271	20,845
Cash and cash equivalents at end of period	19,950	7,831
Guarantor Companies [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	40	(41)
Cash flows from investing activities:
Capital expenditures		2
Net cash used in investing activities		2
Cash flows from financing activities:
Net (decrease) increase in cash and cash equivalents	40	(39)
Cash and cash equivalents at beginning of period	(44)	(27)
Cash and cash equivalents at end of period	(4)	(66)
Non-Guarantor Companies [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	30	1
Cash flows from financing activities:
Net (decrease) increase in cash and cash equivalents	30	1
Cash and cash equivalents at end of period	$ 30	$ 1

XML

Secured Note Common Stock Warrants - Additional Information (Detail) (USD $)		1 Months Ended	9 Months Ended
	Mar. 22, 2010	Mar. 22, 2010 Capital Units [Member] Unit	Jun. 30, 2013 Warrant [Member]
Class of Warrant or Right [Line Items]
Number of Units issued		310,000
Each Secured Note face value	$ 1,000
Conversion ratio of warrants	1.9439
Common stock purchased	602,614
Exercise price of warrants	0.01
Expiry date	Mar. 15, 2017		Mar. 15, 2017
Warrant exercisable date			Mar. 22, 2011
Initial fair value of the Secured Note warrants			$ 20,800,000
Estimated fair value share price			$ 34.50

XML

Leases

9 Months Ended

Jun. 30, 2013

Leases [Abstract]

Leases

(13) Leases

Future minimum lease payments under non-cancelable operating leases for buildings, equipment and automobiles at June 30, 2013 are set out below. Alion has subleased some excess capacity to subtenants under non-cancelable operating leases. 

Lease Payments for Fiscal Years Ending	(In thousands)
2013 (for the remainder of fiscal year)	$	6,992
2014		25,445
2015		24,789
2016		20,999
2017		17,803
2018		14,931
And thereafter		19,109
Gross lease payments	$	130,068
Less: non-cancelable subtenant receipts		(1,854	)
Net lease payments	$	128,214

Composition of Total Rent Expense
	Nine Months Ended
	June 30,
	2013			2012
	(In thousands)
Minimum rentals	$	16,179		$	15,722
Less: Sublease rental income		(452	)		(110	)
Total rent expense, net	$	15,727		$	15,612

XML

Intangible Assets - Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Intangible Assets, Gross	$ 114,817	$ 114,817
Intangible Assets, Accumulated Amortization	(112,461)	(109,575)
Intangible Assets, Net	2,356	5,242
Purchased Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible Assets, Gross	111,635	111,635
Intangible Assets, Accumulated Amortization	(109,564)	(106,935)
Intangible Assets, Net	2,071	4,700
Internal Use Software and Engineering Designs [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible Assets, Gross	3,182	3,182
Intangible Assets, Accumulated Amortization	(2,897)	(2,640)
Intangible Assets, Net	$ 285	$ 542

XML

Leases - Future Minimum Lease Payments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Leases [Abstract]
2013 (for the remainder of fiscal year)	$ 6,992
2014	25,445
2015	24,789
2016	20,999
2017	17,803
2018	14,931
And thereafter	19,109
Gross lease payments	130,068
Less: non-cancelable subtenant receipts	(1,854)
Net lease payments	$ 128,214

XML

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	9 Months Ended
	Jun. 30, 2013 Segment Reporting_Unit Contract	Sep. 30, 2012
Property, Plant and Equipment [Line Items]
Number of contracts	3
Percentage of income tax benefit	50.00%
Maturity period of cash and cash equivalents	3 months
Number of segments	1
Number of reporting units	2
Intangible assets, net	$ 2,356,000	$ 5,242,000
Intangible assets, amortization period	13 years
Accumulated deficit	11,900,000
Redeemable common stock	$ 111,017,000	$ 110,740,000
Percentage of receivables due from commercial customers	14.00%
Software [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, estimated useful lives	3 years
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, estimated useful lives	5 years

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Alion Science and Technology Corporation (a Delaware corporation), and its wholly-owned subsidiaries and have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), have been omitted pursuant to those rules and regulations. However, the Company believes that the disclosures made are adequate to make the information presented not misleading. The statements are prepared on the accrual basis of accounting and include the accounts of Alion and its wholly-owned subsidiaries from their date of acquisition or formation. All inter-company accounts have been eliminated in consolidation. There have been no changes to Alion’s subsidiaries in the current fiscal year.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments and reclassifications that are necessary for fair presentation of the periods presented. The results for the three and nine months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K for the year ended September 30, 2012.

Fiscal, Quarter and Interim Periods

Fiscal, Quarter and Interim Periods

Alion’s fiscal year ends on September 30. The Company operates based on a three-month quarter, four-quarter fiscal year with quarters ending December 31, March 31, June 30, and September 30.

Use of Estimates

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported for assets and liabilities, disclosures of contingent assets and liabilities as of financial statement dates, and amounts reported for operating results for each period presented. Actual results are likely to differ from those estimates, but management does not believe such differences will materially affect Alion’s financial position, results of operations, or cash flows.

Reclassifications

Reclassifications

Certain items in the unaudited condensed consolidated financial statements have been reclassified to conform to the current presentation. Alion formerly presented operating expenses in the aggregate. Beginning fiscal year 2013, the Company reports general and administrative expense separately from other operating expenses on the face of the unaudited condensed consolidated statement of comprehensive loss.

Revenue Recognition

Revenue Recognition

Alion derives its revenue from delivering technology services under three types of contracts. Some contracts provide for reimbursement of costs plus fees; others are fixed-price or time-and-material type contracts. We recognize revenue when a contract has been executed, the contract price is fixed or determinable, delivery of services or products has occurred, and our ability to collect the contract price is considered reasonably assured. Alion applies the percentage-of-completion method in Accounting Standards Codification (ASC) 605 – Revenue Recognition to recognize revenue.

Alion recognizes revenue on cost-reimbursement contracts as it incurs costs and includes estimated fees earned. The Company recognizes time-and-material contract revenue at negotiated, fixed, contractually billable rates as it delivers labor hours and incurs other direct expenses. We use various performance measures under the percentage-of-completion method to recognize revenue for fixed-price contracts. Estimating contract costs at completion and recognizing revenue appropriately involve significant management estimates. Actual costs may differ from estimated costs and affect estimated profitability and revenue recognition timing. From time to time, facts develop that require us to revise estimated total costs or expected revenue. We record the cumulative effect of revised estimates in the period when the facts requiring revised estimates become known. We recognize the full amount of anticipated losses on any contract in the period a loss becomes known. For each of the periods presented, the cumulative effects of revised estimates were immaterial to the Company’s financial performance.

U.S. federal government contracts are subject to periodic funding by our contracting agency customers. A customer may fund a contract at inception or incrementally throughout the period of performance as services are provided. If we determine contract funding is not probable, we defer revenue recognition until realization is probable. The federal government can audit Alion’s contract costs and adjust amounts through negotiation. The federal government considers Alion a major contractor and maintains an office on site. The Defense Contract Audit Agency (DCAA) is currently auditing our 2007 claimed indirect costs. We are negotiating our 2006 indirect rates and have settled our rates through 2005. We timely submitted our indirect cost proposals for all open fiscal years. We have recorded revenue on federal government contracts in amounts we expect to realize.

We recognize revenue on unpriced change orders as we incur expenses and only to the extent it is probable we will recover such costs. The Company recognizes revenue in excess of costs on unpriced change orders only when management can also estimate beyond a reasonable doubt the amount of excess and experience provides a sufficient basis for recognition. Alion recognizes revenue on claims as expenses are incurred and only to the extent it is probable we will recover such costs and can reliably estimate the amount we will recover.

Income Taxes

Income Taxes

Alion accounts for income taxes by applying the provisions in currently enacted tax laws. We determine deferred income taxes based on the estimated future tax effects of differences between the financial statement and tax bases of our assets and liabilities. Deferred income tax provisions and benefits change as assets or liabilities change from year to year. In providing for deferred taxes, Alion considers the tax regulations of the jurisdictions where we operate; estimated future taxable income; and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies change, the carrying value of deferred tax assets and liabilities may require adjustment.

Alion has a history of operating losses for both tax and financial statement purposes. The Company has recorded valuation allowances equal to deferred tax assets based on the likelihood that we may not be able to realize the value of these assets. Alion recognizes the benefit of a tax position only after determining that the relevant tax authority would “more likely than not” sustain our position following an audit. For tax positions meeting the “more likely than not” threshold, we recognize the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Going Concern Assumption

Going Concern Assumption

Each year management assesses Alion’s financial capabilities, its forecast cash flows and its liquidity to determine whether it is appropriate for the Company to report its financial position on a going concern basis. Management believes that in the current fiscal year Alion will generate sufficient revenue and cash flow to meet debt service requirements, fund operations and comply with the minimum Consolidated EBITDA covenant in Alion’s revolving credit agreement. Management’s going concern determination is based on current forecasts for which future results could differ materially due to general economic uncertainties, sequestration’s effect on government spending levels this fiscal year, and risks associated with future federal government procurement and contracting actions.

Based on management’s going concern determination, Alion’s unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability of assets or the amounts of liabilities that may result from resolving uncertainties about the Company’s ability to continue as a going concern.

Alion depends heavily on federal government prime contracts and subcontracts which account for nearly all the Company’s revenue. Interruptions in the government funding process, whether from federal budget delays, debt ceiling limitations, sequestration or Department of Defense spending cuts could materially adversely affect the Company’s revenue and cash flows for the balance of this fiscal year and beyond. This could cause Alion to be unable to fund operations, meet debt service requirements or comply with the revolving credit agreement Consolidated EBITDA covenant.

If Alion were unable to meet the revolving credit agreement Consolidated EBITDA covenant, the Company would be unable to borrow funds and could be required to immediately repay any amount then outstanding under the revolving credit agreement. The Company could seek a covenant waiver or an amendment to the revolving credit agreement in order to preserve its ability to borrow funds as and when needed. Management can provide no assurance that Alion would be able to obtain an amendment or waiver, or if one were available, that the terms would be favorable. If the Company were unable to obtain a requested waiver or amendment, it might be unable to pay its debts as they became due.

In each of the past three fiscal years, Alion generated sufficient cash flow from operations to fulfill its financial commitments. Nevertheless, management does not expect current operations to generate sufficient cash flow for Alion to be able to repay its outstanding debt when it becomes due in fiscal 2015. The Company will need to identify additional sources of cash to re-finance or retire its existing debt. Management can provide no assurance such additional financing will be available, and if available, that terms would be favorable.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers cash in banks, and deposits with financial institutions with maturities of three months or less at time of purchase which it can liquidate without prior notice or penalty, to be cash and cash equivalents.

Accounts Receivable and Billings in Excess of Revenue Earned

Accounts Receivable and Billings in Excess of Revenue Earned

Accounts receivable include billed accounts receivable and unbilled receivables. Unbilled receivables consist of costs and fees which are billable upon occurrence of a specific event, amounts billable after the balance sheet date and revenue in excess of billings on uncompleted contracts (accumulated project expenses and fees which were not billed or were not currently billable as of the date of the consolidated balance sheet). Unbilled accounts receivable include revenue recognized for customer-requested work Alion performed on new and existing contracts for which the Company had not received contracts or contract modifications. Accounts receivable are stated as estimated realized value. The allowance for doubtful accounts is Alion’s best estimate of the amount of probable losses in the Company’s existing billed and unbilled accounts receivable. The Company determines the allowance using specific identification and historical write-off experience based on receivable age. Billings in excess of revenue and advance collections from customers represent amounts received from or billed to customers in excess of project revenue recognized to date.

Property, Plant and Equipment

Property, Plant and Equipment

Leasehold improvements, software and equipment are recorded at cost. Maintenance and repairs that do not add significant value or significantly lengthen an asset’s useful life are charged to current operations. Software and equipment are depreciated on the straight-line method over their estimated useful lives (typically 3 years for software and 5 years for equipment). Leasehold improvements are amortized on the straight-line method over the shorter of the asset’s estimated useful life or the life of the lease. Upon sale or retirement of an asset, costs and related accumulated depreciation are deducted from the accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of operations.

Goodwill

Goodwill

Alion assigns the purchase price paid to acquire the stock or assets of a business to the net assets acquired based on the estimated fair value of assets acquired and liabilities assumed. Goodwill is the purchase price in excess of the estimated fair value of the tangible net assets and separately identified intangible assets acquired. There have been no changes to goodwill carrying value this year.

The Company accounts for goodwill and other intangible assets in accordance with the provisions of ASC 350 – Intangibles-Goodwill and Other. Alion operates in one segment and tests goodwill at the reporting unit level. There are two reporting units. We review goodwill for impairment in the fourth quarter each year, and whenever events or circumstances indicate goodwill might be impaired. We are required to recognize an impairment loss to the extent our goodwill carrying value at the reporting unit level exceeds fair value. Evaluating goodwill involves significant management estimates. To date, our annual reviews have resulted in no goodwill impairment adjustments. See Note 8 for a detailed discussion of the Company’s goodwill impairment testing process.

Intangible Assets

Intangible Assets

Alion amortizes intangible assets as it consumes economic benefits over estimated useful lives. As of June 30, 2013, the Company had approximately $2.4 million in net intangible assets, including contracts purchased in the JJMA acquisition and internally-developed software and engineering designs. The JJMA contract is amortized over a 13 year useful life.

Redeemable Common Stock

Redeemable Common Stock

There is no public market for Alion’s redeemable common stock and therefore no observable price for its equity, individually or in the aggregate. The Employee Stock Ownership Plan (ESOP) Trust holds all the Company’s outstanding common stock. Under certain circumstances, ESOP beneficiaries can require the ESOP Trust to distribute the value of their beneficial interests. The Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA) require the Company to offer ESOP participants who receive Alion common stock a liquidity put right. The put right requires the Company to purchase distributed shares at their then-current fair market value at any time during two put option periods. Common stock distributed by the ESOP Trust is subject to a right of first refusal. Prior to any subsequent transfer, shares must first be offered to the Company and then to the ESOP Trust. Eventual redemption of shares of Alion common stock as a result of distributions is outside the Company’s control. Therefore, Alion classifies its outstanding shares of redeemable common stock as other than permanent equity.

At each reporting date, Alion is required to increase or decrease the reported value of its outstanding common stock to reflect its estimated redemption value. Management estimates the value of Alion’s obligation to repurchase its outstanding shares of redeemable common stock by considering, in part, the most recent price at which the Company was able to sell shares to the ESOP Trust. The reported value of outstanding redeemable common stock equals the current share price multiplied by total shares issued and outstanding.

In its fiduciary capacity, the ESOP Trustee is independent of the Company and its management. Consistent with its fiduciary responsibilities, the ESOP Trustee retains an independent third party valuation firm to assist it in determining the fair market value (share price) at which the ESOP Trustee may acquire or dispose of investments in Alion common stock. The Audit and Finance Committee of Alion’s Board of Directors reviews the reasonableness of the amount management has determined Alion should recognize for the Company’s obligation to repurchase shares of its outstanding redeemable common stock. The Audit and Finance Committee considers various factors in its review, including, in part, the most recent valuation report prepared for, and the share price selected by the ESOP Trustee.

Alion records changes in the reported value of its outstanding common stock through an offsetting charge or credit to accumulated deficit. The Company recognizes changes in the fair value of its redeemable common stock on March 31 and September 30 each year. The accumulated deficit at June 30, 2013, included an $11.9 million cumulative benefit for changes in share price which reduced the Company’s aggregate share redemption obligation. Outstanding redeemable common stock had an aggregate fair value of approximately $111.0 million as of June 30, 2013.

Concentration of Credit Risk

Concentration of Credit Risk

Alion is subject to credit risk for its cash equivalents and accounts receivable. The Company believes the high credit quality of its cash equivalent investments limits its credit risk with respect to such investments. Alion believes its concentration of credit risk with respect to accounts receivable is limited as the receivables are principally due from the federal government. Approximately 14% of the Company’s receivables are due from commercial customers including other prime contractors.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Alion is required to disclose the fair value of its financial instruments but is not required to record its senior long-term debt at fair value. See Note 10 for a discussion of Alion’s long-term debt and Note 11 for the related fair value disclosures. The fair value of cash, cash equivalents, accounts payable and accounts receivable does not differ materially from carrying value because of the short maturity of those instruments.

Off-Balance Sheet Financing Arrangements

Off-Balance Sheet Financing Arrangements

Alion accounts for operating leases entered into in the routine course of business in accordance with ASC 840 – Leases. We have no off-balance sheet financing arrangements other than operating leases and letters of credit under our revolving credit facility. Alion has no relationship with any unconsolidated or special purpose entity and has not issued any associated guarantees.

Fair Value Measurement

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy and a framework which requires categorizing assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. Level 1inputs are unadjusted, quoted market prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. Level 3 inputs include unobservable inputs that are supported by little, infrequent, or no market activity and reflect management’s own assumptions about inputs used in pricing the asset or liability. The Company uses the following valuation techniques to measure fair value.

Level 1 primarily consists of financial instruments, such as overnight bank re-purchase agreements or money market mutual funds whose value is based on quoted market prices published by financial institutions, exchange funds, exchange-traded instruments and listed equities.

Level 2 assets include U.S. Government and agency securities whose valuations are based on market prices from a variety of industry-standard data providers or pricing that considers various assumptions, including time value, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments, and broker and dealer quotes. All are observable in the market or can be derived principally from or corroborated by observable market data for which the Company can obtain independent external valuation information.

Level 3 consists of unobservable inputs. Assets and liabilities are considered Level 3 when their fair value inputs are unobservable or not available, including situations involving limited market activity, where determination of fair value requires significant judgment or estimation.

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Subsequent Event

9 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Event

(21) Subsequent Event

On July 16, 2013, Alion used its revolving credit facility to repurchase $5.0 million worth of Unsecured Notes in an open market transaction at a discount to face value. Alion recognized approximately $1.9 million as a debt extinguishment gain from its July 2013 Unsecured Note repurchase.

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Goodwill - Additional Information (Detail) (USD $)	9 Months Ended	12 Months Ended
	Jun. 30, 2013 Segment Reporting_Unit	Sep. 30, 2012	Sep. 30, 2011
Goodwill [Line Items]
Goodwill	$ 398,921,000	$ 398,921,000
Changes to goodwill during period		0	0
Number of segments	1
Reduced number of reporting units	2
Goodwill impairment		0
Estimated discounted future cash flows declined		11.00%
Outstanding debt increase		Increased approximately seven percent
Estimated fair value of outstanding debt increased		7.00%
Percentage of outstanding common stock declined		21.00%
Hypothetical decrease in fair value of goodwill		10.00%
TEOSS [Member]
Goodwill [Line Items]
Goodwill	201,900,000	201,900,000
EISS [Member]
Goodwill [Line Items]
Goodwill	$ 197,000,000	$ 197,000,000

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Leases (Tables)

9 Months Ended

Jun. 30, 2013

Leases [Abstract]

Future Minimum Lease Payments

Alion has subleased some excess capacity to subtenants under non-cancelable operating leases.

Lease Payments for Fiscal Years Ending	(In thousands)
2013 (for the remainder of fiscal year)	$	6,992
2014		25,445
2015		24,789
2016		20,999
2017		17,803
2018		14,931
And thereafter		19,109
Gross lease payments	$	130,068
Less: non-cancelable subtenant receipts		(1,854	)
Net lease payments	$	128,214

Composition of Total Rent Expense

Composition of Total Rent Expense
	Nine Months Ended
	June 30,
	2013			2012
	(In thousands)
Minimum rentals	$	16,179		$	15,722
Less: Sublease rental income		(452	)		(110	)
Total rent expense, net	$	15,727		$	15,612

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Loss Per Share - Additional Information (Detail)	Mar. 22, 2010
Earnings Per Share [Abstract]
Common stock purchased	602,614
Exercise price of warrants	0.01
Expiry date	Mar. 15, 2017

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Intangible Assets - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Sep. 30, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
Weighted-average amortization period of intangible assets			20 months		20 months
Amortization expense	$ 316,000	$ 1,600,000	$ 2,900,000	$ 5,000,000

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Intangible Assets (Tables)

9 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

The table below shows intangible assets as of June 30, 2013 and September 30, 2012.  

	June 30, 2013							September 30, 2012
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(In thousands)
Purchased contracts	$	111,635	$	(109,564	)	$	2,071	$	111,635	$	(106,935	)	$	4,700
Internal use software and engineering designs		3,182		(2,897	)		285		3,182		(2,640	)		542
Total	$	114,817	$	(112,461	)	$	2,356	$	114,817	$	(109,575	)	$	5,242

Estimated Aggregate Amortization Expense

Estimated aggregate amortization expense for the next five years and thereafter is as follows.

	(In thousands)
2013 (for the remainder of the fiscal year)	$	316
2014		1,079
2015		736
2016		141
2017		51
2018		33
Thereafter		—
	$	2,356

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Segment Information - Additional Information (Detail)	9 Months Ended
	Jun. 30, 2013 Segment	Jun. 30, 2012
Segment Reporting [Abstract]
Number of segments	1
Percentage revenue from government prime contracts to total contract revenue	87.00%	85.00%

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Income Taxes - Net Deferred Tax Liability (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Income Tax Disclosure [Abstract]
Current deferred tax asset	$ 9,324	$ 11,207
Noncurrent deferred tax asset	83,021	67,207
Valuation allowance	(92,345)	(78,414)
Noncurrent deferred tax liability	(56,386)	(51,156)
Net deferred tax liability	$ (56,386)	$ (51,156)

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Accounts Receivable - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Jun. 30, 2013	Sep. 30, 2012
Receivables [Abstract]
Contract receivables	$ 149.4	$ 138.9
Percentage of contract receivables	79.00%	77.00%
Revenue in excess of billings on uncompleted contracts	81.9	85.4
Revenue from customer-requested work	18.6	19.0
Threshold of contractual operating cycles	1 year
Exception of invoice and collect unbilled receivables	$ 15.4

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Guarantor/Non-Guarantor Unaudited Condensed Consolidated Financial Information

9 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Guarantor/Non-Guarantor Unaudited Condensed Consolidated Financial Information

(20) Guarantor/Non-guarantor Unaudited Condensed Consolidated Financial Information

Certain of Alion’s wholly-owned domestic subsidiaries have jointly, severally, fully and unconditionally guaranteed both the Secured Notes and the Unsecured Notes which are general obligations of the Company. In March 2010, the Unsecured Note Indenture was amended to include as Unsecured Note guarantors all subsidiaries serving as Secured Note guarantors.

The following information presents unaudited condensed consolidating balance sheets as of June 30, 2013 and September 30, 2012; unaudited condensed consolidating statements of operations and comprehensive loss for the three and nine month periods ended June 30, 2013 and 2012; and unaudited condensed consolidating statements of cash flows for the nine months ended June 30, 2013 and 2012 of Alion, its guarantor subsidiaries and its non-guarantor subsidiaries. Investments include Alion’s investments in its subsidiaries presented using the equity method of accounting.

Condensed Consolidating Balance Sheet as of June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$	19,950		$	(4	)	$	30		$	—		$	19,976
Accounts receivable, net		181,900			2,930			367			—			185,197
Receivable due from ESOP Trust		—			—			—			—			—
Prepaid expenses and other current assets		6,242			151			(102	)		—			6,291
Total current assets		208,092			3,077			295			—			211,464
Property, plant and equipment, net		9,166			468			6			—			9,640
Intangible assets, net		2,356			—			—			—			2,356
Goodwill		398,921			—			—			—			398,921
Investment in subsidiaries		28,267			—			—			(28,267	)		—
Intercompany receivables		1,865			27,759			—			(29,624	)		—
Other assets		10,479			—			5			—			10,484
Total assets	$	659,146		$	31,304		$	306		$	(57,891	)	$	632,865
Current liabilities:
Interest payable	$	15,749		$	—		$	—		$	—		$	15,749
Trade accounts payable		66,478			121			—			—			66,599
Accrued liabilities		42,889			130			39			—			43,058
Accrued payroll and related liabilities		36,946			594			56			—			37,596
Billings in excess of revenue earned		4,174			74			3			—			4,251
Total current liabilities		166,236			919			98			—			167,253
Intercompany payables		27,759			100			1,765			(29,624	)		—
Secured notes		318,315			—			—			—			318,315
Unsecured notes		238,597			—			—			—			238,597
Accrued compensation and benefits, excluding current portion		6,090			—			—			—			6,090
Non-current portion of lease obligations		12,484			462			—			—			12,946
Deferred income taxes		56,386			—			—			—			56,386
Commitments and contingencies
Redeemable common stock		111,017			—			—			—			111,017
Common stock warrants		20,785			—			—			—			20,785
Common stock of subsidiaries		—			4,084			—			(4,084	)		—
Accumulated other comprehensive loss		(149	)		—			—			—			(149	)
Accumulated deficit		(298,374	)		25,739			(1,557	)		(24,183	)		(298,375	)
Total liabilities, redeemable common stock and accumulated deficit	$	659,146		$	31,304		$	306		$	(57,891	)	$	632,865

Condensed Consolidating Balance Sheet as of September 30, 2012 (unaudited)

	Parent			Guarantor			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$	27,271		$	(44	)	$	—		$	—		$	27,227
Accounts receivable, net		172,365			2,783			145			—			175,293
Receivable due from ESOP Trust		1,129			—			—			—			1,129
Prepaid expenses and other current assets		5,378			70			—			—			5,448
Total current assets		206,143			2,809			145			—			209,097
Property, plant and equipment, net		10,064			529			12			—			10,605
Intangible assets, net		5,242			—			—			—			5,242
Goodwill		398,921			—			—			—			398,921
Investment in subsidiaries		27,994			—			—			(27,994	)		—
Intercompany receivables		1,438			27,475			—			(28,913	)		—
Other assets		11,427			—			4			—			11,431
Total assets	$	661,229		$	30,813		$	161		$	(56,907	)	$	635,296
Current liabilities:
Interest payable	$	17,658		$	—		$	—		$	—		$	17,658
Trade accounts payable		44,582			201			10			—			44,793
Accrued liabilities		52,265			190			5			—			52,460
Accrued payroll and related liabilities		39,305			589			32			—			39,926
Billings in excess of costs revenue earned		2,656			6			4			—			2,666
Total current liabilities		156,466			986			51			—			157,503
Intercompany payables		27,476			—			1,437			(28,913	)		—
Secured Notes		306,502			—			—			—			306,502
Unsecured Notes		242,923			—			—			—			242,923
Accrued compensation and benefits, excluding current portion		5,905			—			—			—			5,905
Non-current portion of lease obligations		11,858			506			—			—			12,364
Deferred income taxes		51,156			—			—			—			51,156
Redeemable common stock		110,740			—			—			—			110,740
Common stock of subsidiaries		—			4,084			—			(4,084	)		—
Commitments and contingencies
Common stock warrants		20,785			—			—			—			20,785
Accumulated other comprehensive loss		(149	)		—			—			—			(149	)
Accumulated surplus (deficit)		(272,433	)		25,237			(1,327	)		(23,910	)		(272,433	)
Total liabilities, redeemable common stock and accumulated deficit	$	661,229		$	30,813		$	161		$	(56,907	)	$	635,296

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations		Consolidated
	(In thousands)
Contract revenue	$	218,344			2,414			189			—	$	220,947
Direct contract expense		172,741			1,476			97			—		174,314
Gross profit		45,603			938			92			—		46,633
Operating expenses		20,365			460			104					20,929
General and administrative		13,370			632			15			—		14,017
Operating income (loss)		11,868			(154	)		(27	)		—		11,687
Other income (expense):
Interest income		10			—			—			—		10
Interest expense		(18,982	)		—			—			—		(18,982	)
Other		(59	)		35			—			—		(24	)
Gain on debt extinguishment		1,966			—			—			—		1,966
Equity in net income (loss) of subsidiaries		(146	)					—			146		—
Total other expenses		(17,211	)		35			—			146		(17,030	)
(Loss) income before taxes		(5,343	)		(119	)		(27	)		146		(5,343	)
Income tax expense		(1,744	)		—			—			—		(1,744	)
Net loss	$	(7,087	)	$	(119	)	$	(27	)	$	146	$	(7,087	)
Other comprehensive income
Postretirement actuarial gains		—			—			—			—		—
Comprehensive income (loss)	$	(7,087	)	$	(119	)	$	(27	)	$	146	$	(7,087	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	207,952		$	3,492		$	70		$	—		$	211,514
Direct contract expense		162,939			2,077			26			—			165,042
Gross profit		45,013			1,415			44			—			46,472
Operating expenses		22,099			740			87			—			22,926
General and administrative		12,000			(67	)		24			—			11,957
Operating income (loss)		10,914			742			(67	)		—			11,589
Other income (expense):
Interest income		15			—			—			—			15
Interest expense		(18,793	)		—			—			—			(18,793	)
Other		71			(4	)		—			—			67
Equity in net income of subsidiaries		671			—			—			(671	)		—
Total other (expense) income		(18,036	)		(4	)		—			(671	)		(18,711	)
(Loss) income before taxes		(7,122	)		738			(67	)		(671	)		(7,122	)
Income tax expense		(1,744	)		—			—			—			(1,744	)
Net income (loss)	$	(8,866	)	$	738		$	(67	)	$	(671	)	$	(8,866	)
Other comprehensive income:
Postretirement actuarial gains		—			—			—			—			—
Comprehensive income (loss)	$	(8,866	)	$	738		$	(67	)	$	(671	)	$	(8,866	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	639,186		$	6,969	$	402		$	—		$	646,557
Direct contract expense		505,326			4,241		344			—			509,911
Gross profit		133,860			2,728		58			—			136,646
Operating expenses		63,034			1,578		229			—			64,841
General and administrative		38,283			683		59			—			39,025
Operating income (loss)		32,543			467		(230	)		—			32,780
Other income (expense):
Interest income		44			—		—			—			44
Interest expense		(56,814	)		—		—			—			(56,814	)
Other		(19	)		35		—			—			16
Gain on debt extinguishment		1,966			—		—			—			1,966
Equity in net income of subsidiaries		272			—		—			(272	)		—
Total other (expense) income		(54,551	)		35		—			(272	)		(54,788	)
(Loss) income before taxes		(22,008	)		502		(230	)		(272	)		(22,008	)
Income tax expense		(5,231	)		—		—			—			(5,231	)
Net income (loss)	$	(27,239	)	$	502	$	(230	)	$	(272	)	$	(27,239	)
Other comprehensive income:		—
Postretirement actuarial gains		—			—		—			—			—
Comprehensive income (loss)	$	(27,239	)	$	502	$	(230	)	$	(272	)	$	(27,239	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	587,043			11,038		436			—		$	598,517
Direct contract expense		455,469			6,105		243			—			461,817
Gross profit		131,574			4,933		193			—			136,700
Operating expenses		67,118			2,106		169						69,393
General and administrative		37,658			75		140			—			37,873
Operating income (loss)		26,798			2,752		(116	)		—			29,434
Other income (expense):
Interest income		56			—		—			—			56
Interest expense		(56,130	)		—		—			—			(56,130	)
Other		(60	)		10		—			—			(50	)
Equity in net income (loss) of subsidiaries		2,646					—			(2,646	)		—
Total other expenses		(53,488	)		10		—			(2,646	)		(56,124	)
(Loss) income before taxes		(26,690	)		2,762		(116	)		(2,646	)		(26,690	)
Income tax expense		(5,231	)		—		—			—			(5,231	)
Net loss	$	(31,921	)	$	2,762	$	(116	)	$	(2,646	)	$	(31,921	)
Other comprehensive income
Postretirement actuarial gains		—			—		—			—			—
Comprehensive income (loss)	$	(31,921	)	$	2,762	$	(116	)	$	(2,646	)	$	(31,921	)

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies		Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	1,130		$	40		$	30	$	1,200
Cash flows from investing activities:
Capital expenditures		(952	)		—			—		(952	)
Net cash used in investing activities		(952	)		—			—		(952	)
Cash flows from financing activities:
Repurchase Unsecured Notes		(3,005	)		—			—		(3,005	)
Revolver borrowings		3,201			—			—		3,201
Revolver payments		(3,201	)		—			—		(3,201	)
Loan to ESOP Trust		(1,907	)		—			—		(1,907	)
ESOP loan repayment		1,907			—			—		1,907
Redeemable common stock purchased from ESOP Trust		(6,660	)		—			—		(6,660	)
Redeemable common stock sold to ESOP Trust		2,166			—			—		2,166
Net cash used in financing activities		(7,499	)		—			—		(7,499	)
Net (decrease) increase in cash and cash equivalents		(7,321	)		40			30		(7,251	)
Cash and cash equivalents at beginning of period		27,271			(44	)		—		27,227
Cash and cash equivalents at end of period	$	19,950		$	(4	)	$	30	$	19,976

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies		Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	(7,139	)	$	(41	)	$	1	$	(7,179	)
Cash flows from investing activities:
Capital expenditures		(2,341	)		2			—		(2,339	)
Net cash used in investing activities		(2,341	)		2			—		(2,339	)
Cash flows from financing activities:
Revolver borrowings		26,000			—			—		26,000
Revolver payments		(26,000	)		—			—		(26,000	)
Loan to ESOP Trust		(477	)		—			—		(477	)
ESOP loan repayment		477			—			—		477
Redeemable common stock purchased from ESOP Trust		(4,836	)		—			—		(4,836	)
Redeemable common stock sold to ESOP Trust		1,302			—			—		1,302
Net cash provided by financing activities		(3,534	)		—			—		(3,534	)
Net increase (decrease) in cash and cash equivalents		(13,014	)		(39	)		1		(13,052	)
Cash and cash equivalents at beginning of period		20,845			(27	)		—		20,818
Cash and cash equivalents at end of period	$	7,831		$	(66	)	$	1	$	7,766

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Description and Formation of the Business

9 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Description and Formation of the Business

(1) Description and Formation of the Business

Alion Science and Technology Corporation and its subsidiaries (collectively, the Company, Alion or we) provide advanced engineering, information technology, naval architecture and operational solutions to strengthen national security and drive business results. For customers in defense, civilian government, foreign governments and commercial industries worldwide, Alion’s engineered solutions support smarter decision-making and enhanced readiness in rapidly-changing environments.

Alion was formed as a for-profit S-Corporation in October 2001, to purchase substantially all of the assets and certain liabilities of IIT Research Institute (IITRI), a not-for-profit corporation controlled by the Illinois Institute of Technology (IIT). In December 2002, Alion acquired substantially all of IITRI’s assets and liabilities except its Life Sciences Operation, for $127.3 million. Prior to that, the Company’s activities were organizational in nature. In 2010, the Company became a C corporation when it ceased to qualify as an S corporation.

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Employee Stock Ownership Plan (ESOP) and ESOP Trust

9 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Employee Stock Ownership Plan (ESOP) and ESOP Trust

(3) Employee Stock Ownership Plan (ESOP) and ESOP Trust

In December 2001, the Company adopted the Alion Science and Technology Corporation Employee Ownership, Savings and Investment Plan (the Plan, the KSOP) and established the ESOP Trust. The Plan, a tax qualified retirement plan, includes an ESOP and a 401(k) component. In April 2010, the Internal Revenue Service (IRS) issued a determination letter that the ESOP Trust and the Plan, as amended and restated as of October 1, 2006, including Plan amendments executed in June 2009 and May 2010 qualify under IRC Sections 401(a) and 501(a).

In August 2008, Alion amended the Trust Agreement between the Company and the ESOP Trust. In June 2011, the Company amended the Plan to eliminate the one year service requirement for employer 401(k) matching contributions; to automatically enroll new hires in the Plan’s 401(k) component; and to designate profit sharing contributions exclusively in Alion common stock. The Company believes the Plan and the ESOP Trust have been designed and are being operated in compliance with applicable IRC requirements.

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Accounts Receivable

9 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Accounts Receivable

(6) Accounts Receivable

Accounts receivable at June 30, 2013 and September 30, 2012 consisted of the following:

	June 30,			September 30,
	2013			2012
	(In thousands)
Billed receivables and amounts billable as of the balance sheet date	$	107,006		$	94,028
Unbilled receivables:
Amounts billable after the balance sheet date		45,080			48,730
Revenues recorded in excess of milestone billings on fixed price contracts		2,836			2,666
Revenues recorded in excess of estimated contract value or funding		18,634			18,998
Retainages and other amounts billable upon contract completion		15,391			15,016
Allowance for doubtful accounts		(3,750	)		(4,145	)
Total Accounts Receivable	$	185,197		$	175,293

Billed accounts receivable include invoices issued to customers for services performed as of the balance sheet date. Unbilled accounts receivable represent revenue recognized as of the balance sheet date for which Alion has yet to issue invoices to customers. Amounts that are currently billable are expected to be invoiced to customers within the next twelve months. Fixed-price contract revenue in excess of milestone billings is not yet contractually billable. Revenue in excess of contract value or funding is billable when Alion receives contract amendments or modifications. Approximately $149.4 million (79%) and $138.9 million (77%) of contract receivables at June 30, 2013 and September 30, 2012 were from federal government prime contracts.

Alion recognized $81.9 million in revenue in excess of billings on uncompleted contracts as of June 30, 2013, including approximately $18.6 million for customer-requested work for which the Company had not received contracts or contract modifications. At September 30, 2012, Alion had recognized $85.4 million in revenue in excess of billings on uncompleted contracts including approximately $19.0 million for customer-requested work for which the Company had not received contracts or contract modifications.

Retainages and other unbilled amounts are billable upon contract completion or completion of DCAA audits. In keeping with industry practice, Alion classifies all contract-related accounts receivable as current assets based on contractual operating cycles which frequently exceed one year. Except for $15.4 million at June 30, 2013, the Company expects to invoice and collect unbilled receivables within the next twelve months.

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Loss Per Share

9 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Loss Per Share

(4) Loss Per Share

Basic and diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding excluding the impact of warrants. The warrants are anti-dilutive for all periods presented even after including required adjustments to the earnings per share numerator.

The Company issued warrants to purchase 602,614 shares of Alion common stock in connection with issuing its Secured Notes. The Secured Note warrants have a penny per share exercise price, are currently exercisable and expire March 15, 2017. Secured Note warrants are not redeemable or puttable; they are classified as permanent equity.

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Redeemable Common Stock - Additional Information (Detail) (USD $)	9 Months Ended
	Jun. 30, 2013 Age	Mar. 31, 2013 ESOP [Member]
Common Equity [Line Items]
Distribution period of the fair value of vested ESOP	5 years
Age of participant's retirement	65
Period of delay in ESOP plan balance distribution	6 years
Estimated fair value share price		$ 16.25
Sale price of common stock	$ 10.00

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Accounts Receivable (Tables)

9 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Accounts Receivable

Accounts receivable at June 30, 2013 and September 30, 2012 consisted of the following:

	June 30,			September 30,
	2013			2012
	(In thousands)
Billed receivables and amounts billable as of the balance sheet date	$	107,006		$	94,028
Unbilled receivables:
Amounts billable after the balance sheet date		45,080			48,730
Revenues recorded in excess of milestone billings on fixed price contracts		2,836			2,666
Revenues recorded in excess of estimated contract value or funding		18,634			18,998
Retainages and other amounts billable upon contract completion		15,391			15,016
Allowance for doubtful accounts		(3,750	)		(4,145	)
Total Accounts Receivable	$	185,197		$	175,293

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Long-Term Debt (Tables)

9 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Interest Payable

As of June 30, 2013, and September 30, 2012 interest payable consisted of the following amounts.

	June 30		September 30,
	2013		2012
	(In thousands)
Unsecured Notes	$	10,252	$	4,188
Secured Notes		5,497		13,470
Total	$	15,749	$	17,658

Principal Repayments

As of June 30, 2013, Alion must make the following principal repayments (at face amount before debt discount) for its outstanding debt.  

Fiscal Year:	2013		2014		2015		Total
Secured Notes and PIK Interest(1)	$	—	$	—	$	339,788	$	339,788
Unsecured Notes(2)		—		—		240,000		240,000
Total Principal Payments	$	—	$	—	$	579,788	$	579,788

1. The Secured Notes due November 2014 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 June 30, 2013, the $318.3 million carrying value on the face of the balance sheet included $310 million in principal, $19.8 million in PIK notes issued; $1.1 million in accrued PIK interest and is net of $12.6 million in aggregate unamortized debt issue costs. Initial debt issue costs consist of $7.7 million in original issue discount, $13.5 million in third-party costs and $20.8 million for the Secured Note warrants’ initial fair value.

2. As of June 30, 2013, the Unsecured Notes due February 2015 include $240 million in principal and $1.4 million in unamortized debt issue costs (initially $7.1 million). The Company repurchased $5 million in face value of Unsecured Notes in July 2013.

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Description and Formation of the Business - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013
Business Combinations [Abstract]
Acquisition cost	$ 127.3

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Fair Value Measurement - Face Value, Net Carrying Value and Fair Value of Secured and Unsecured Notes (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Fair Value Of Other Financial Instrument [Line Items]
Face value of outstanding notes	$ 310,000
Carrying value secured notes	318,315	306,502
Carrying value unsecured notes	238,597	242,923
Unsecured Notes [Member]
Fair Value Of Other Financial Instrument [Line Items]
Face value of outstanding notes	240,000	245,000
Face value of notes outstanding and notes to be issued	240,000	245,000
Less: unamortized debt issue costs	(1,403)	(2,077)
Carrying value unsecured notes	238,597	242,923
Unsecured Notes [Member] | Original Notes [Member]
Fair Value Of Other Financial Instrument [Line Items]
Face value of outstanding notes	240,000	245,000
Secured Notes [Member]
Fair Value Of Other Financial Instrument [Line Items]
Face value of outstanding notes	329,788	323,293
Face value of notes outstanding and notes to be issued	330,887	325,985
Less: unamortized debt issue costs	(12,572)	(19,483)
Carrying value secured notes	318,315	306,502
Secured Notes [Member] | Original Notes [Member]
Fair Value Of Other Financial Instrument [Line Items]
Face value of outstanding notes	310,000	310,000
Secured Notes [Member] | PIK Interest Notes Issued [Member]
Fair Value Of Other Financial Instrument [Line Items]
Face value of outstanding notes	19,788	13,293
PIK interest notes to be issued	1,099	2,692
Fair Value, Inputs, Level 2 [Member] | Unsecured Notes [Member]
Fair Value Of Other Financial Instrument [Line Items]
Fair value of outstanding notes	140,575	141,605
Fair Value, Inputs, Level 2 [Member] | Secured Notes [Member]
Fair Value Of Other Financial Instrument [Line Items]
Fair value of outstanding notes	$ 332,700	$ 303,598

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Intangible Assets - Estimated Aggregate Amortization Expense (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
2013 (for the remainder of the fiscal year)	$ 316
2014	1,079
2015	736
2016	141
2017	51
2018	33
Thereafter
Intangible Assets, Net	$ 2,356	$ 5,242

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Property, Plant and Equipment - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Property Plant And Equipment [Abstract]
Depreciation for fixed assets and leasehold amortization expense	$ 778	$ 1,000	$ 2,400	$ 2,900

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Sep. 30, 2012
Statement Of Financial Position [Abstract]
Redeemable common stock, par value	$ 0.01	$ 0.01
Redeemable common stock, shares authorized	20,000,000	8,000,000
Redeemable common stock, shares issued	6,831,791	6,731,889
Redeemable common stock, shares outstanding	6,831,791	6,731,889

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Intangible Assets

9 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

(9) Intangible Assets

Intangible assets consist primarily of contracts acquired through the Anteon and JJMA transactions. The table below shows intangible assets as of June 30, 2013 and September 30, 2012.

	June 30, 2013							September 30, 2012
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(In thousands)
Purchased contracts	$	111,635	$	(109,564	)	$	2,071	$	111,635	$	(106,935	)	$	4,700
Internal use software and engineering designs		3,182		(2,897	)		285		3,182		(2,640	)		542
Total	$	114,817	$	(112,461	)	$	2,356	$	114,817	$	(109,575	)	$	5,242

The weighted-average remaining amortization period of intangible assets was approximately 20 months at June 30, 2013 and September 30, 2012. Amortization expense was approximately $316 thousand and $1.6 million for the quarters ended June 30, 2013 and 2012 and approximately $2.9 million and $5.0 million for the nine months ended June 30, 2013 and 2012. Estimated aggregate amortization expense for the next five years and thereafter is as follows.

	(In thousands)
2013 (for the remainder of the fiscal year)	$	316
2014		1,079
2015		736
2016		141
2017		51
2018		33
Thereafter		—
	$	2,356

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net loss	$ (27,239)	$ (31,921)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,937	8,620
Bad debt expense	367	302
Paid-in-kind interest	4,902	4,806
Amortization of debt issuance costs	7,920	7,808
Incentive and stock-based compensation	1,556	628
Gain on debt extinguishment	(1,966)
Deferred income taxes	5,231	5,231
Other gains	(153)	(95)
Changes in assets and liabilities:
Accounts receivable	(10,270)	(15,772)
Other assets	(849)	1,954
Trade accounts payable	21,806	7,367
Accrued liabilities	(5,877)	6,515
Interest payable	(1,909)	(1,538)
Other liabilities	1,744	(1,084)
Net cash used in operating activities	1,200	(7,179)
Cash flows from investing activities:
Capital expenditures	(952)	(2,339)
Net cash used in investing activities	(952)	(2,339)
Cash flows from financing activities:
Repurchase Unsecured Notes	(3,005)
Revolver borrowings	3,201	26,000
Revolver repayments	(3,201)	(26,000)
Loan to ESOP Trust	(1,907)	(477)
ESOP loan repayment	1,907	477
Redeemable common stock purchased from ESOP Trust	(6,660)	(4,836)
Redeemable common stock sold to ESOP Trust	2,166	1,302
Net cash used in financing activities	(7,499)	(3,534)
Net decrease in cash and cash equivalents	(7,251)	(13,052)
Cash and cash equivalents at beginning of period	27,227	20,818
Cash and cash equivalents at end of period	19,976	7,766
Supplemental disclosure of cash flow information:
Cash paid for interest	45,845	44,999
Cash paid for taxes
Non-cash investing and financing activities:
Common stock issued to ESOP Trust in satisfaction of employer contribution liability	7,198	7,114
Landlord-funded tenant improvements	493	1,810
Paid-in-kind notes issued	$ 6,500	$ 6,373

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Leases - Composition of Total Rent Expense (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Leases [Abstract]
Minimum rentals	$ 16,179	$ 15,722
Less: Sublease rental income	(452)	(110)
Total rent expense, net	$ 15,727	$ 15,612

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011
Current assets:
Cash and cash equivalents	$ 19,976	$ 27,227	$ 7,766	$ 20,818
Accounts receivable, net	185,197	175,293
Receivable due from ESOP Trust		1,129
Prepaid expenses and other current assets	6,291	5,448
Total current assets	211,464	209,097
Property, plant and equipment, net	9,640	10,605
Intangible assets, net	2,356	5,242
Goodwill	398,921	398,921
Other assets	10,484	11,431
Total assets	632,865	635,296
Current liabilities:
Interest payable	15,749	17,658
Trade accounts payable	66,599	44,793
Accrued liabilities	43,058	52,460
Accrued payroll and related liabilities	37,596	39,926
Billings in excess of revenue earned	4,251	2,666
Total current liabilities	167,253	157,503
Secured Notes	318,315	306,502
Unsecured Notes	238,597	242,923
Accrued compensation and benefits, excluding current portion	6,090	5,905
Non-current portion of lease obligations	12,946	12,364
Deferred income taxes	56,386	51,156
Commitments and contingencies
Redeemable common stock, $0.01 par value, 20,000,000 shares authorized, 6,831,791 shares issued and outstanding at June 30, 2013; 8,000,000 shares authorized and 6,731,889 shares issued and outstanding at September 30, 2012	111,017	110,740
Common stock warrants	20,785	20,785
Accumulated other comprehensive loss	(149)	(149)
Accumulated deficit	(298,375)	(272,433)
Total liabilities, redeemable common stock and accumulated deficit	$ 632,865	$ 635,296

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Long-Term Debt - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended							3 Months Ended	1 Months Ended	9 Months Ended			9 Months Ended		9 Months Ended		1 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	1 Months Ended			9 Months Ended	12 Months Ended		9 Months Ended	1 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2010	Mar. 22, 2010	Jun. 30, 2013 Letters of Credit [Member]	Jun. 30, 2013 Period One [Member]	Jun. 30, 2013 Period Two [Member]	Jun. 30, 2013 Eurodollar Base Rate [Member] Letters of Credit [Member]	Mar. 31, 2010 Revolving Credit Facility [Member]	Jun. 30, 2013 Revolving Credit Facility [Member]	Mar. 31, 2011 Revolving Credit Facility [Member]	Jun. 30, 2013 Revolving Credit Facility [Member] Short-Term Swing Line Loans [Member]	Jun. 30, 2013 Revolving Credit Facility [Member] Minimum [Member]	Jun. 30, 2013 Revolving Credit Facility [Member] Letters of Credit [Member]	Jun. 30, 2013 Revolving Credit Facility [Member] Eurodollar Interest Rate [Member]	Jun. 30, 2013 Revolving Credit Facility [Member] Alternate Base Rate [Member]	Mar. 31, 2010 Secured Notes [Member] Unit	Jun. 30, 2013 Secured Notes [Member]	Sep. 30, 2012 Secured Notes [Member]	Jun. 30, 2013 Secured Notes [Member] Maximum [Member]	Jun. 30, 2013 Unsecured Notes [Member]	Jun. 30, 2011 Unsecured Notes [Member]	Nov. 30, 2010 Unsecured Notes [Member]	Jun. 30, 2013 Unsecured Notes [Member]	Sep. 30, 2012 Unsecured Notes [Member]	Feb. 28, 2007 Unsecured Notes [Member]	Jun. 30, 2013 Unsecured Notes [Member] Maximum [Member]	Jul. 31, 2013 Unsecured Notes [Member] Subsequent Event [Member]	Jun. 30, 2013 PIK Interest Notes Issued [Member]
Debt Instrument [Line Items]
Revolving credit facility outstanding											$ 25,000,000	$ 35,000,000	$ 35,000,000
Face value of outstanding notes	310,000,000		310,000,000																	329,788,000	323,293,000		240,000,000			240,000,000	245,000,000				19,800,000
Debt instrument, maturity date											Aug. 31, 2014									Nov. 01, 2014						Feb. 01, 2015
Credit limit, maximum capacity														5,000,000		35,000,000
Revolving credit facility							4,000,000
Interest rate										6.00%					8.50%		2.50%	3.50%
Interest rate spread basis points																	6.00%	5.00%
Interest rate description												The minimum Eurodollar interest rate is 2.5% plus 600 basis points
Line of credit facility alternate base rate description												The minimum alternate base rate is 3.5% plus 500 basis points
Commitment fee, basis points	1.75%									0.25%
Commitment fee, amount	139,000	130,000	411,000	422,000
Line of credit facility restrictive covenants EBITDA amount								63,000,000	65,500,000
Percentage of loan by syndicate lenders												50.00%
Capital expenditures covenants												8,000,000
Incurrence of a civil or criminal liability	5,000,000		5,000,000
Net proceeds from an underwritten public offering												35,000,000
Ownership percentage for control												51.00%
Outstanding equity interests												37.50%
Long-term debt, private units value					310,000,000																							250,000,000
Long-term debt, private units number																			310,000
Debt instrument interest rate stated percentage																			12.00%	12.00%			10.25%			10.25%
Warrants conversion ratio						1.9439													1.9439
Each note face value						1,000													1,000
Debt instrument cash interest rate percentage																				10.00%
Debt instrument paid-in-kind interest rate percentage																				2.00%
Interest on overdue principal			13.00%																							11.25%
Ratio of trailing twelve month Adjusted EBITDA to trailing twelve month consolidated interest expense, requirement																				Greater than 2.0 to 1.0						Greater than 2.0 to 1.0
Ratio of trailing twelve month Adjusted EBITDA to trailing twelve month consolidated interest expense, actual																				0.96 to 1.0	0.93 to 1.0					0.96 to 1.0	0.93 to 1.0
Adjusted EBITDA																				72,300,000	69,300,000					72,300,000	69,300,000
Consolidated Interest Expense																				75,600,000	74,900,000
Debt covenant amount debt pursuant to certain agreements																				25,000,000			360,000,000			360,000,000
Debt covenants amount for capital expenditures																				25,000,000			25,000,000			25,000,000
Debt covenants amount for capital expenditures as percentage of assets																				2.50%						2.50%
Debt covenant amount permitted subordinated debt																							35,000,000			35,000,000
Other debt covenants amount																				20,000,000			35,000,000			35,000,000
Debt covenant exemption																				If Adjusted EBITDA is at least two times Consolidated Interest Expense						If Adjusted EBITDA is at least two times Consolidated Interest Expense
Debt covenant above required threshold exemption																				Even if Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0						Even if Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0, we may make or pay
Long-term incentive plan payments annual cap																				3,000,000
Acquisition or retirement for value debt covenants amount																													10,000,000
Other payments covenant amount																						10,000,000				30,000,000
Debt default acceleration limit for other debt																				30,000,000			30,000,000			30,000,000
Judgment for payment against company or any material subsidiary																				30,000,000						30,000,000
Period of judgment for payment against company or any material subsidiary																				60 days						60 days
Unsecured debt redemption price as percentage of principal in case of change in control																				101.00%			101.00%			101.00%
Debt instrument redemption occasion																				From April 1, 2013 through September 30, 2013
Debt instrument redemption price percentage																				105.00%
Debt instrument redemption price percentage																				103.00%
Debt instrument repurchase amount																							10,000,000			10,000,000
Debt instrument repurchase amount																							5,000,000	3,000,000	2,000,000					5,000,000
Consolidated Interest Expense	18,982,000	18,793,000	56,814,000	56,130,000																						75,600,000	74,900,000
Debt covenant amount permitted transactions with ESOP																										25,000,000
Minimum voting power required for change in control purpose																							35.00%			35.00%
Senior notes refinancing cost			$ 600,000,000

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Property, Plant and Equipment (Tables)

9 Months Ended

Jun. 30, 2013

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

Property, Plant and Equipment

	June 30,			September 30,
	2013			2012
	(In thousands)
Leasehold improvements	$	12,897		$	12,168
Equipment and software		34,968			35,562
Total cost		47,865			47,730
Less: accumulated depreciation and amortization		(38,225	)		(37,125	)
Net Property, Plant and Equipment	$	9,640		$	10,605

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Segment Information

9 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Information

(18) Segment Information

Alion operates as a single segment, providing advanced engineering, information technology and operational solutions to strengthen national security and drive business results under contracts with the U.S. government, state and local governments, and commercial customers.

U.S. government customers typically exercise independent contracting authority. U.S. government agencies, department offices or divisions may use Alion’s services as a separate customer directly, or through a prime contractor, if they have independent decision-making and contracting authority within their organization. U.S. government prime contracts accounted for approximately 87% and 85% of total contract revenue for the nine months ended June 30, 2013, and 2012.

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Property, Plant and Equipment - Property, Plant and Equipment (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Property Plant And Equipment [Abstract]
Leasehold improvements	$ 12,897	$ 12,168
Equipment and software	34,968	35,562
Total cost	47,865	47,730
Less: accumulated depreciation and amortization	(38,225)	(37,125)
Net Property, Plant and Equipment	$ 9,640	$ 10,605

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Long-Term Debt - Principal Repayments (Parenthetical) (Detail) (USD $)			1 Months Ended	9 Months Ended		1 Months Ended			9 Months Ended		1 Months Ended
	Jun. 30, 2013	Sep. 30, 2012	Mar. 31, 2010 Secured Notes [Member]	Jun. 30, 2013 Secured Notes [Member]	Sep. 30, 2012 Secured Notes [Member]	Jun. 30, 2013 Unsecured Notes [Member]	Jun. 30, 2011 Unsecured Notes [Member]	Nov. 30, 2010 Unsecured Notes [Member]	Jun. 30, 2013 Unsecured Notes [Member]	Sep. 30, 2012 Unsecured Notes [Member]	Jul. 31, 2013 Unsecured Notes [Member] Subsequent Event [Member]	Jun. 30, 2013 Original Notes [Member]	Jun. 30, 2013 PIK Notes [Member]	Jun. 30, 2013 PIK Interest [Member]
Long Term Debt Maturities Repayments Of Principal [Line Items]
Amount originally issued			$ 310,000,000
Increases in Secured Note principal (PIK Interest)			29,800,000
PIK notes issued and PIK Interest accrued	318,315,000	306,502,000		318,315,000	306,502,000								19,800,000	1,100,000
Face value of outstanding notes	310,000,000			329,788,000	323,293,000	240,000,000			240,000,000	245,000,000		310,000,000
Less: unamortized debt issue costs				12,572,000	19,483,000	1,403,000			1,403,000	2,077,000
Debt issue costs				7,700,000					7,100,000
Debt issuance third-party costs				13,500,000
Warrants not settleable in cash fair value disclosure				20,800,000
Debt instrument repurchase amount						$ 5,000,000	$ 3,000,000	$ 2,000,000			$ 5,000,000

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Guarantor/Non-Guarantor Unaudited Condensed Consolidated Financial Information - Condensed Consolidating Balance Sheet (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011
Current assets:
Cash and cash equivalents	$ 19,976	$ 27,227	$ 7,766	$ 20,818
Accounts receivable, net	185,197	175,293
Receivable due from ESOP Trust		1,129
Prepaid expenses and other current assets	6,291	5,448
Total current assets	211,464	209,097
Property, plant and equipment, net	9,640	10,605
Intangible assets, net	2,356	5,242
Goodwill	398,921	398,921
Other assets	10,484	11,431
Total assets	632,865	635,296
Current liabilities:
Interest payable	15,749	17,658
Trade accounts payable	66,599	44,793
Accrued liabilities	43,058	52,460
Accrued payroll and related liabilities	37,596	39,926
Billings in excess of revenue earned	4,251	2,666
Total current liabilities	167,253	157,503
Secured Notes	318,315	306,502
Unsecured Notes	238,597	242,923
Accrued compensation and benefits, excluding current portion	6,090	5,905
Non-current portion of lease obligations	12,946	12,364
Deferred income taxes	56,386	51,156
Commitments and contingencies
Redeemable common stock	111,017	110,740
Common stock warrants	20,785	20,785
Accumulated other comprehensive loss	(149)	(149)
Accumulated deficit	(298,375)	(272,433)
Total liabilities, redeemable common stock and accumulated deficit	632,865	635,296
Parent [Member]
Current assets:
Cash and cash equivalents	19,950	27,271	7,831	20,845
Accounts receivable, net	181,900	172,365
Receivable due from ESOP Trust		1,129
Prepaid expenses and other current assets	6,242	5,378
Total current assets	208,092	206,143
Property, plant and equipment, net	9,166	10,064
Intangible assets, net	2,356	5,242
Goodwill	398,921	398,921
Investment in subsidiaries	28,267	27,994
Intercompany receivables	1,865	1,438
Other assets	10,479	11,427
Total assets	659,146	661,229
Current liabilities:
Interest payable	15,749	17,658
Trade accounts payable	66,478	44,582
Accrued liabilities	42,889	52,265
Accrued payroll and related liabilities	36,946	39,305
Billings in excess of revenue earned	4,174	2,656
Total current liabilities	166,236	156,466
Intercompany payables	27,759	27,476
Secured Notes	318,315	306,502
Unsecured Notes	238,597	242,923
Accrued compensation and benefits, excluding current portion	6,090	5,905
Non-current portion of lease obligations	12,484	11,858
Deferred income taxes	56,386	51,156
Commitments and contingencies
Redeemable common stock	111,017	110,740
Common stock warrants	20,785	20,785
Accumulated other comprehensive loss	(149)	(149)
Accumulated deficit	(298,374)	(272,433)
Total liabilities, redeemable common stock and accumulated deficit	659,146	661,229
Guarantor Companies [Member]
Current assets:
Cash and cash equivalents	(4)	(44)	(66)	(27)
Accounts receivable, net	2,930	2,783
Prepaid expenses and other current assets	151	70
Total current assets	3,077	2,809
Property, plant and equipment, net	468	529
Intercompany receivables	27,759	27,475
Total assets	31,304	30,813
Current liabilities:
Trade accounts payable	121	201
Accrued liabilities	130	190
Accrued payroll and related liabilities	594	589
Billings in excess of revenue earned	74	6
Total current liabilities	919	986
Intercompany payables	100
Non-current portion of lease obligations	462	506
Commitments and contingencies
Common stock of subsidiaries	4,084	4,084
Accumulated deficit	25,739	25,237
Total liabilities, redeemable common stock and accumulated deficit	31,304	30,813
Non-Guarantor Companies [Member]
Current assets:
Cash and cash equivalents	30		1
Accounts receivable, net	367	145
Prepaid expenses and other current assets	(102)
Total current assets	295	145
Property, plant and equipment, net	6	12
Other assets	5	4
Total assets	306	161
Current liabilities:
Trade accounts payable		10
Accrued liabilities	39	5
Accrued payroll and related liabilities	56	32
Billings in excess of revenue earned	3	4
Total current liabilities	98	51
Intercompany payables	1,765	1,437
Commitments and contingencies
Accumulated deficit	(1,557)	(1,327)
Total liabilities, redeemable common stock and accumulated deficit	306	161
Eliminations [Member]
Current assets:
Investment in subsidiaries	(28,267)	(27,994)
Intercompany receivables	(29,624)	(28,913)
Total assets	(57,891)	(56,907)
Current liabilities:
Intercompany payables	(29,624)	(28,913)
Commitments and contingencies
Common stock of subsidiaries	(4,084)	(4,084)
Accumulated deficit	(24,183)	(23,910)
Total liabilities, redeemable common stock and accumulated deficit	$ (57,891)	$ (56,907)

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Employee Stock Ownership Plan (ESOP) and ESOP Trust - Additional Information (Detail)	9 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Employee stock ownership plan period of service requirement	1 year
Employee stock ownership plan amendment description	The Company amended the Plan to eliminate the one year service requirement for employer 401(k) matching contributions; to automatically enroll new hires in the Plan's 401(k) component; and to designate profit sharing contributions exclusively in Alion common stock.

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Income Taxes (Tables)

9 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Net Deferred Tax Liability

The Company’s effective tax rate for the nine months ended June 30, 2013 was -23.8% and –19.6% for the nine months ended June 30, 2012. As of June 30, 2013 and September 30, 2012 the net deferred tax liability was: 

	June 30, 2013			September 30, 2012
	(In thousands)
Current deferred tax asset	$	9,324		$	11,207
Noncurrent deferred tax asset		83,021			67,207
Valuation allowance		(92,345	)		(78,414	)
Noncurrent deferred tax liability		(56,386	)		(51,156	)
Net deferred tax liability	$	(56,386	)	$	(51,156	)

 

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Guarantor/Non-Guarantor Unaudited Condensed Consolidated Financial Information (Tables)

9 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet as of June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$	19,950		$	(4	)	$	30		$	—		$	19,976
Accounts receivable, net		181,900			2,930			367			—			185,197
Receivable due from ESOP Trust		—			—			—			—			—
Prepaid expenses and other current assets		6,242			151			(102	)		—			6,291
Total current assets		208,092			3,077			295			—			211,464
Property, plant and equipment, net		9,166			468			6			—			9,640
Intangible assets, net		2,356			—			—			—			2,356
Goodwill		398,921			—			—			—			398,921
Investment in subsidiaries		28,267			—			—			(28,267	)		—
Intercompany receivables		1,865			27,759			—			(29,624	)		—
Other assets		10,479			—			5			—			10,484
Total assets	$	659,146		$	31,304		$	306		$	(57,891	)	$	632,865
Current liabilities:
Interest payable	$	15,749		$	—		$	—		$	—		$	15,749
Trade accounts payable		66,478			121			—			—			66,599
Accrued liabilities		42,889			130			39			—			43,058
Accrued payroll and related liabilities		36,946			594			56			—			37,596
Billings in excess of revenue earned		4,174			74			3			—			4,251
Total current liabilities		166,236			919			98			—			167,253
Intercompany payables		27,759			100			1,765			(29,624	)		—
Secured notes		318,315			—			—			—			318,315
Unsecured notes		238,597			—			—			—			238,597
Accrued compensation and benefits, excluding current portion		6,090			—			—			—			6,090
Non-current portion of lease obligations		12,484			462			—			—			12,946
Deferred income taxes		56,386			—			—			—			56,386
Commitments and contingencies
Redeemable common stock		111,017			—			—			—			111,017
Common stock warrants		20,785			—			—			—			20,785
Common stock of subsidiaries		—			4,084			—			(4,084	)		—
Accumulated other comprehensive loss		(149	)		—			—			—			(149	)
Accumulated deficit		(298,374	)		25,739			(1,557	)		(24,183	)		(298,375	)
Total liabilities, redeemable common stock and accumulated deficit	$	659,146		$	31,304		$	306		$	(57,891	)	$	632,865

Condensed Consolidating Balance Sheet as of September 30, 2012 (unaudited)

	Parent			Guarantor			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$	27,271		$	(44	)	$	—		$	—		$	27,227
Accounts receivable, net		172,365			2,783			145			—			175,293
Receivable due from ESOP Trust		1,129			—			—			—			1,129
Prepaid expenses and other current assets		5,378			70			—			—			5,448
Total current assets		206,143			2,809			145			—			209,097
Property, plant and equipment, net		10,064			529			12			—			10,605
Intangible assets, net		5,242			—			—			—			5,242
Goodwill		398,921			—			—			—			398,921
Investment in subsidiaries		27,994			—			—			(27,994	)		—
Intercompany receivables		1,438			27,475			—			(28,913	)		—
Other assets		11,427			—			4			—			11,431
Total assets	$	661,229		$	30,813		$	161		$	(56,907	)	$	635,296
Current liabilities:
Interest payable	$	17,658		$	—		$	—		$	—		$	17,658
Trade accounts payable		44,582			201			10			—			44,793
Accrued liabilities		52,265			190			5			—			52,460
Accrued payroll and related liabilities		39,305			589			32			—			39,926
Billings in excess of costs revenue earned		2,656			6			4			—			2,666
Total current liabilities		156,466			986			51			—			157,503
Intercompany payables		27,476			—			1,437			(28,913	)		—
Secured Notes		306,502			—			—			—			306,502
Unsecured Notes		242,923			—			—			—			242,923
Accrued compensation and benefits, excluding current portion		5,905			—			—			—			5,905
Non-current portion of lease obligations		11,858			506			—			—			12,364
Deferred income taxes		51,156			—			—			—			51,156
Redeemable common stock		110,740			—			—			—			110,740
Common stock of subsidiaries		—			4,084			—			(4,084	)		—
Commitments and contingencies
Common stock warrants		20,785			—			—			—			20,785
Accumulated other comprehensive loss		(149	)		—			—			—			(149	)
Accumulated surplus (deficit)		(272,433	)		25,237			(1,327	)		(23,910	)		(272,433	)
Total liabilities, redeemable common stock and accumulated deficit	$	661,229		$	30,813		$	161		$	(56,907	)	$	635,296

Condensed Consolidating Statement of Operations and Comprehensive Loss

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations		Consolidated
	(In thousands)
Contract revenue	$	218,344			2,414			189			—	$	220,947
Direct contract expense		172,741			1,476			97			—		174,314
Gross profit		45,603			938			92			—		46,633
Operating expenses		20,365			460			104					20,929
General and administrative		13,370			632			15			—		14,017
Operating income (loss)		11,868			(154	)		(27	)		—		11,687
Other income (expense):
Interest income		10			—			—			—		10
Interest expense		(18,982	)		—			—			—		(18,982	)
Other		(59	)		35			—			—		(24	)
Gain on debt extinguishment		1,966			—			—			—		1,966
Equity in net income (loss) of subsidiaries		(146	)					—			146		—
Total other expenses		(17,211	)		35			—			146		(17,030	)
(Loss) income before taxes		(5,343	)		(119	)		(27	)		146		(5,343	)
Income tax expense		(1,744	)		—			—			—		(1,744	)
Net loss	$	(7,087	)	$	(119	)	$	(27	)	$	146	$	(7,087	)
Other comprehensive income
Postretirement actuarial gains		—			—			—			—		—
Comprehensive income (loss)	$	(7,087	)	$	(119	)	$	(27	)	$	146	$	(7,087	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	207,952		$	3,492		$	70		$	—		$	211,514
Direct contract expense		162,939			2,077			26			—			165,042
Gross profit		45,013			1,415			44			—			46,472
Operating expenses		22,099			740			87			—			22,926
General and administrative		12,000			(67	)		24			—			11,957
Operating income (loss)		10,914			742			(67	)		—			11,589
Other income (expense):
Interest income		15			—			—			—			15
Interest expense		(18,793	)		—			—			—			(18,793	)
Other		71			(4	)		—			—			67
Equity in net income of subsidiaries		671			—			—			(671	)		—
Total other (expense) income		(18,036	)		(4	)		—			(671	)		(18,711	)
(Loss) income before taxes		(7,122	)		738			(67	)		(671	)		(7,122	)
Income tax expense		(1,744	)		—			—			—			(1,744	)
Net income (loss)	$	(8,866	)	$	738		$	(67	)	$	(671	)	$	(8,866	)
Other comprehensive income:
Postretirement actuarial gains		—			—			—			—			—
Comprehensive income (loss)	$	(8,866	)	$	738		$	(67	)	$	(671	)	$	(8,866	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	639,186		$	6,969	$	402		$	—		$	646,557
Direct contract expense		505,326			4,241		344			—			509,911
Gross profit		133,860			2,728		58			—			136,646
Operating expenses		63,034			1,578		229			—			64,841
General and administrative		38,283			683		59			—			39,025
Operating income (loss)		32,543			467		(230	)		—			32,780
Other income (expense):
Interest income		44			—		—			—			44
Interest expense		(56,814	)		—		—			—			(56,814	)
Other		(19	)		35		—			—			16
Gain on debt extinguishment		1,966			—		—			—			1,966
Equity in net income of subsidiaries		272			—		—			(272	)		—
Total other (expense) income		(54,551	)		35		—			(272	)		(54,788	)
(Loss) income before taxes		(22,008	)		502		(230	)		(272	)		(22,008	)
Income tax expense		(5,231	)		—		—			—			(5,231	)
Net income (loss)	$	(27,239	)	$	502	$	(230	)	$	(272	)	$	(27,239	)
Other comprehensive income:		—
Postretirement actuarial gains		—			—		—			—			—
Comprehensive income (loss)	$	(27,239	)	$	502	$	(230	)	$	(272	)	$	(27,239	)

Condensed Consolidating Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
	(In thousands)
Contract revenue	$	587,043			11,038		436			—		$	598,517
Direct contract expense		455,469			6,105		243			—			461,817
Gross profit		131,574			4,933		193			—			136,700
Operating expenses		67,118			2,106		169						69,393
General and administrative		37,658			75		140			—			37,873
Operating income (loss)		26,798			2,752		(116	)		—			29,434
Other income (expense):
Interest income		56			—		—			—			56
Interest expense		(56,130	)		—		—			—			(56,130	)
Other		(60	)		10		—			—			(50	)
Equity in net income (loss) of subsidiaries		2,646					—			(2,646	)		—
Total other expenses		(53,488	)		10		—			(2,646	)		(56,124	)
(Loss) income before taxes		(26,690	)		2,762		(116	)		(2,646	)		(26,690	)
Income tax expense		(5,231	)		—		—			—			(5,231	)
Net loss	$	(31,921	)	$	2,762	$	(116	)	$	(2,646	)	$	(31,921	)
Other comprehensive income
Postretirement actuarial gains		—			—		—			—			—
Comprehensive income (loss)	$	(31,921	)	$	2,762	$	(116	)	$	(2,646	)	$	(31,921	)

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2013 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies		Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	1,130		$	40		$	30	$	1,200
Cash flows from investing activities:
Capital expenditures		(952	)		—			—		(952	)
Net cash used in investing activities		(952	)		—			—		(952	)
Cash flows from financing activities:
Repurchase Unsecured Notes		(3,005	)		—			—		(3,005	)
Revolver borrowings		3,201			—			—		3,201
Revolver payments		(3,201	)		—			—		(3,201	)
Loan to ESOP Trust		(1,907	)		—			—		(1,907	)
ESOP loan repayment		1,907			—			—		1,907
Redeemable common stock purchased from ESOP Trust		(6,660	)		—			—		(6,660	)
Redeemable common stock sold to ESOP Trust		2,166			—			—		2,166
Net cash used in financing activities		(7,499	)		—			—		(7,499	)
Net (decrease) increase in cash and cash equivalents		(7,321	)		40			30		(7,251	)
Cash and cash equivalents at beginning of period		27,271			(44	)		—		27,227
Cash and cash equivalents at end of period	$	19,950		$	(4	)	$	30	$	19,976

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2012 (unaudited)

	Parent			Guarantor Companies			Non-Guarantor Companies		Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	(7,139	)	$	(41	)	$	1	$	(7,179	)
Cash flows from investing activities:
Capital expenditures		(2,341	)		2			—		(2,339	)
Net cash used in investing activities		(2,341	)		2			—		(2,339	)
Cash flows from financing activities:
Revolver borrowings		26,000			—			—		26,000
Revolver payments		(26,000	)		—			—		(26,000	)
Loan to ESOP Trust		(477	)		—			—		(477	)
ESOP loan repayment		477			—			—		477
Redeemable common stock purchased from ESOP Trust		(4,836	)		—			—		(4,836	)
Redeemable common stock sold to ESOP Trust		1,302			—			—		1,302
Net cash provided by financing activities		(3,534	)		—			—		(3,534	)
Net increase (decrease) in cash and cash equivalents		(13,014	)		(39	)		1		(13,052	)
Cash and cash equivalents at beginning of period		20,845			(27	)		—		20,818
Cash and cash equivalents at end of period	$	7,831		$	(66	)	$	1	$	7,766

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Goodwill

9 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill

(8) Goodwill

The Company accounts for goodwill and other intangible assets according to ASC – 350 Intangibles – Goodwill and Other (ASC 350) which requires that Alion review goodwill at least annually for impairment or more frequently if events or circumstances indicate goodwill might be impaired. The Company performs this review at the end of each fiscal year. As of September 30, 2012, Alion had approximately $398.9 million in goodwill. There were no changes to the goodwill carrying amount for the years ended September 30, 2012 and 2011, nor were there any significant events this quarter that indicated a potential impairment to goodwill as of June 30, 2013.

Alion operates in one segment and tests goodwill at the reporting unit level. Each of Alion’s two reporting units delivers a similar set of professional engineering, scientific and technical services to a wide array of federal government customers, principally within the Department of Defense. Each reporting unit provides the full range of services Alion offers to customers overall.

Alion’s management has organized reporting units based on managerial responsibility and administrative structure, contract portfolios, and the availability of discrete financial information. Management evaluates reporting unit financial performance based on contract revenue and non-GAAP operating income. Alion does not maintain reporting unit balance sheets and does not track cash flows by reporting unit.

Management identifies reporting units as “sectors” which in turn include lower level business units identified as “groups” consisting of still lower level “operations.” For each business combination, management assigned the goodwill arising from acquisitions to the reporting unit or units expected to benefit from the synergies of each business combination. Coincident with its goodwill determination and purchase price allocation, management assigned assets acquired to reporting units based on the unit or units anticipated to utilize such assets. Management did not allocate to reporting units the liabilities arising from business combinations. Alion’s reporting units are the Engineering and Integration Solutions Sector (EISS) and the Technology, Engineering and Operational Solutions Sector (TEOSS). Management assigned $197.0 million in goodwill to EISS and $201.9 million in goodwill to TEOSS. Management determined that, on an enterprise value basis, Alion’s reporting units have positive carrying value.

Alion completed its most recent goodwill impairment analysis in the fourth quarter of fiscal year 2012 and concluded no goodwill impairment existed as of September 30, 2012. Management determined the totality of events and circumstances would not have supported a decision to roll forward its prior year goodwill impairment analysis and avoid performing a step one goodwill impairment analysis. Management chose to perform a step one analysis which supported a lower enterprise value for Alion as of September 2012 compared to September 2011. September 2012 estimated discounted future cash flows declined 11% compared to September 2011. The estimated fair value of Alion’s outstanding debt increased approximately seven percent from September 2011 to September 2012. As a result of changes in Alion’s estimated enterprise fair value, the estimated fair value of Alion’s outstanding redeemable common stock declined approximately 21% from September 2011 to September 2012.

As of September 30, 2012, the estimated fair value of each reporting unit exceeded its carrying value. Consistent with prior years’ disclosures, the decline in discounted cash flows for 2012 compared to 2011 did not result in a goodwill impairment. The results of Alion’s step one impairment testing make it unlikely that a reasonably probable change in assumptions would have triggered an impairment. A hypothetical 10% decrease in fair value would not have resulted in impairment to goodwill for either reporting unit or triggered the need to perform additional step two analyses for either reporting unit.

The table below sets out for each reporting unit as of September 30, 2012: the goodwill assigned to each reporting unit; reporting unit carrying value; reporting unit estimated fair value; and the excess of estimated fair value over carrying value for each reporting unit. Management used the reporting unit estimated fair values presented below in testing goodwill for impairment in the fourth quarter of fiscal year 2012. 

	Goodwill		Carrying Value		Estimated Fair Value		Excess of Estimated Fair Value over Carrying Value
	at September 30, 2012
Sector	(In millions, except percentages)
TEOSS	$	201.9	$	197.7	$	258.4	$	60.7	31	%
EISS		197.0		193.2		227.6		34.4	18	%
Total	$	398.9	$	390.9	$	486.0	$	95.1	24	%

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Deferred tax expense	$ 1.7	$ 5.2
Effective tax rate		(23.80%)	(19.60%)
Deferred tax assets benefit percentage		50.00%

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Goodwill (Tables)

9 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Estimated Fair Values of Goodwill

Management used the reporting unit estimated fair values presented below in testing goodwill for impairment in the fourth quarter of fiscal year 2012. 

	Goodwill		Carrying Value		Estimated Fair Value		Excess of Estimated Fair Value over Carrying Value
	at September 30, 2012
Sector	(In millions, except percentages)
TEOSS	$	201.9	$	197.7	$	258.4	$	60.7	31	%
EISS		197.0		193.2		227.6		34.4	18	%
Total	$	398.9	$	390.9	$	486.0	$	95.1	24	%

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Accounts Receivable - Accounts Receivable (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Receivables [Abstract]
Billed receivables and amounts billable as of the balance sheet date	$ 107,006	$ 94,028
Unbilled receivables:
Amounts billable after the balance sheet date	45,080	48,730
Revenues recorded in excess of milestone billings on fixed price contracts	2,836	2,666
Revenues recorded in excess of estimated contract value or funding	18,634	18,998
Retainages and other amounts billable upon contract completion	15,391	15,016
Allowance for doubtful accounts	(3,750)	(4,145)
Total Accounts Receivable	$ 185,197	$ 175,293

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Fair Value Measurement

9 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurement

(11) Fair Value Measurement

Alion applies ASC 820 – Fair Value Measurements and Disclosures in determining the fair value to be disclosed for financial and nonfinancial assets and liabilities. The Company has no assets or liabilities, other than its redeemable common stock, which it is required to report at fair value. Valuation techniques utilized in the fair value measurement of assets and liabilities for each period presented were unchanged from prior practice.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy and a framework which requires categorizing assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. Level 1inputs are unadjusted, quoted market prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. Level 3 inputs include unobservable inputs that are supported by little, infrequent, or no market activity and reflect management’s own assumptions about inputs used in pricing the asset or liability. The Company uses the following valuation techniques to measure fair value.

Level 1 primarily consists of financial instruments, such as overnight bank re-purchase agreements or money market mutual funds whose value is based on quoted market prices published by financial institutions, exchange funds, exchange-traded instruments and listed equities.

Level 2 assets include U.S. Government and agency securities whose valuations are based on market prices from a variety of industry-standard data providers or pricing that considers various assumptions, including time value, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments, and broker and dealer quotes. All are observable in the market or can be derived principally from or corroborated by observable market data for which the Company can obtain independent external valuation information.

Level 3 consists of unobservable inputs. Assets and liabilities are considered Level 3 when their fair value inputs are unobservable or not available, including situations involving limited market activity, where determination of fair value requires significant judgment or estimation.

The table below sets out the face value, net carrying value and fair value of Alion’s Secured and Unsecured Notes. The fair values disclosed below are based on quoted market prices for Alion’s outstanding notes. This is a Level 2 measurement.

	June 30, 2013						September 30, 2012
	(In thousands)
	Secured Notes			Unsecured Notes			Secured Notes			Unsecured Notes
Face value of original notes outstanding	$	310,000		$	240,000		$	310,000		$	245,000
PIK interest notes issued		19,788			—			13,293			—
Face value of outstanding notes	$	329,788		$	240,000		$	323,293		$	245,000
PIK interest notes to be issued		1,099			—			2,692			—
Face value of notes outstanding and notes to be issued	$	330,887		$	240,000		$	325,985		$	245,000
Less: unamortized debt issue costs		(12,572	)		(1,403	)		(19,483	)		(2,077	)
Carrying value	$	318,315		$	238,597		$	306,502		$	242,923
Fair value of outstanding notes	$	332,700		$	140,575		$	303,598		$	141,605

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Property, Plant and Equipment

9 Months Ended

Jun. 30, 2013

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

(7) Property, Plant and Equipment

	June 30,			September 30,
	2013			2012
	(In thousands)
Leasehold improvements	$	12,897		$	12,168
Equipment and software		34,968			35,562
Total cost		47,865			47,730
Less: accumulated depreciation and amortization		(38,225	)		(37,125	)
Net Property, Plant and Equipment	$	9,640		$	10,605

Depreciation for fixed assets and leasehold amortization expense was approximately $778 thousand and $1.0 million for the quarters ended June 30, 2013 and 2012; it was $2.4 million and $2.9 million for the nine months ended June 30, 2013 and 2012.

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Summary of Significant Accounting Policies

9 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Alion Science and Technology Corporation (a Delaware corporation), and its wholly-owned subsidiaries and have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with generally accepted accounting principles in the United States of America (GAAP), have been omitted pursuant to those rules and regulations. However, the Company believes that the disclosures made are adequate to make the information presented not misleading. The statements are prepared on the accrual basis of accounting and include the accounts of Alion and its wholly-owned subsidiaries from their date of acquisition or formation. All inter-company accounts have been eliminated in consolidation. There have been no changes to Alion’s subsidiaries in the current fiscal year.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments and reclassifications that are necessary for fair presentation of the periods presented. The results for the three and nine months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K for the year ended September 30, 2012.

Fiscal, Quarter and Interim Periods

Alion’s fiscal year ends on September 30. The Company operates based on a three-month quarter, four-quarter fiscal year with quarters ending December 31, March 31, June 30, and September 30.

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported for assets and liabilities, disclosures of contingent assets and liabilities as of financial statement dates, and amounts reported for operating results for each period presented. Actual results are likely to differ from those estimates, but management does not believe such differences will materially affect Alion’s financial position, results of operations, or cash flows.

Reclassifications

Certain items in the unaudited condensed consolidated financial statements have been reclassified to conform to the current presentation. Alion formerly presented operating expenses in the aggregate. Beginning fiscal year 2013, the Company reports general and administrative expense separately from other operating expenses on the face of the unaudited condensed consolidated statement of comprehensive loss.

Revenue Recognition

Alion derives its revenue from delivering technology services under three types of contracts. Some contracts provide for reimbursement of costs plus fees; others are fixed-price or time-and-material type contracts. We recognize revenue when a contract has been executed, the contract price is fixed or determinable, delivery of services or products has occurred, and our ability to collect the contract price is considered reasonably assured. Alion applies the percentage-of-completion method in Accounting Standards Codification (ASC) 605 – Revenue Recognition to recognize revenue.

Alion recognizes revenue on cost-reimbursement contracts as it incurs costs and includes estimated fees earned. The Company recognizes time-and-material contract revenue at negotiated, fixed, contractually billable rates as it delivers labor hours and incurs other direct expenses. We use various performance measures under the percentage-of-completion method to recognize revenue for fixed-price contracts. Estimating contract costs at completion and recognizing revenue appropriately involve significant management estimates. Actual costs may differ from estimated costs and affect estimated profitability and revenue recognition timing. From time to time, facts develop that require us to revise estimated total costs or expected revenue. We record the cumulative effect of revised estimates in the period when the facts requiring revised estimates become known. We recognize the full amount of anticipated losses on any contract in the period a loss becomes known. For each of the periods presented, the cumulative effects of revised estimates were immaterial to the Company’s financial performance.

U.S. federal government contracts are subject to periodic funding by our contracting agency customers. A customer may fund a contract at inception or incrementally throughout the period of performance as services are provided. If we determine contract funding is not probable, we defer revenue recognition until realization is probable. The federal government can audit Alion’s contract costs and adjust amounts through negotiation. The federal government considers Alion a major contractor and maintains an office on site. The Defense Contract Audit Agency (DCAA) is currently auditing our 2007 claimed indirect costs. We are negotiating our 2006 indirect rates and have settled our rates through 2005. We timely submitted our indirect cost proposals for all open fiscal years. We have recorded revenue on federal government contracts in amounts we expect to realize.

We recognize revenue on unpriced change orders as we incur expenses and only to the extent it is probable we will recover such costs. The Company recognizes revenue in excess of costs on unpriced change orders only when management can also estimate beyond a reasonable doubt the amount of excess and experience provides a sufficient basis for recognition. Alion recognizes revenue on claims as expenses are incurred and only to the extent it is probable we will recover such costs and can reliably estimate the amount we will recover.

Income Taxes

Alion accounts for income taxes by applying the provisions in currently enacted tax laws. We determine deferred income taxes based on the estimated future tax effects of differences between the financial statement and tax bases of our assets and liabilities. Deferred income tax provisions and benefits change as assets or liabilities change from year to year. In providing for deferred taxes, Alion considers the tax regulations of the jurisdictions where we operate; estimated future taxable income; and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies change, the carrying value of deferred tax assets and liabilities may require adjustment.

Alion has a history of operating losses for both tax and financial statement purposes. The Company has recorded valuation allowances equal to deferred tax assets based on the likelihood that we may not be able to realize the value of these assets. Alion recognizes the benefit of a tax position only after determining that the relevant tax authority would “more likely than not” sustain our position following an audit. For tax positions meeting the “more likely than not” threshold, we recognize the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Going Concern Assumption

Each year management assesses Alion’s financial capabilities, its forecast cash flows and its liquidity to determine whether it is appropriate for the Company to report its financial position on a going concern basis. Management believes that in the current fiscal year Alion will generate sufficient revenue and cash flow to meet debt service requirements, fund operations and comply with the minimum Consolidated EBITDA covenant in Alion’s revolving credit agreement. Management’s going concern determination is based on current forecasts for which future results could differ materially due to general economic uncertainties, sequestration’s effect on government spending levels this fiscal year, and risks associated with future federal government procurement and contracting actions.

Based on management’s going concern determination, Alion’s unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability of assets or the amounts of liabilities that may result from resolving uncertainties about the Company’s ability to continue as a going concern.

Alion depends heavily on federal government prime contracts and subcontracts which account for nearly all the Company’s revenue. Interruptions in the government funding process, whether from federal budget delays, debt ceiling limitations, sequestration or Department of Defense spending cuts could materially adversely affect the Company’s revenue and cash flows for the balance of this fiscal year and beyond. This could cause Alion to be unable to fund operations, meet debt service requirements or comply with the revolving credit agreement Consolidated EBITDA covenant.

If Alion were unable to meet the revolving credit agreement Consolidated EBITDA covenant, the Company would be unable to borrow funds and could be required to immediately repay any amount then outstanding under the revolving credit agreement. The Company could seek a covenant waiver or an amendment to the revolving credit agreement in order to preserve its ability to borrow funds as and when needed. Management can provide no assurance that Alion would be able to obtain an amendment or waiver, or if one were available, that the terms would be favorable. If the Company were unable to obtain a requested waiver or amendment, it might be unable to pay its debts as they became due.

In each of the past three fiscal years, Alion generated sufficient cash flow from operations to fulfill its financial commitments. Nevertheless, management does not expect current operations to generate sufficient cash flow for Alion to be able to repay its outstanding debt when it becomes due in fiscal 2015. The Company will need to identify additional sources of cash to re-finance or retire its existing debt. Management can provide no assurance such additional financing will be available, and if available, that terms would be favorable.

Cash and Cash Equivalents

The Company considers cash in banks, and deposits with financial institutions with maturities of three months or less at time of purchase which it can liquidate without prior notice or penalty, to be cash and cash equivalents.

Accounts Receivable and Billings in Excess of Revenue Earned

Accounts receivable include billed accounts receivable and unbilled receivables. Unbilled receivables consist of costs and fees which are billable upon occurrence of a specific event, amounts billable after the balance sheet date and revenue in excess of billings on uncompleted contracts (accumulated project expenses and fees which were not billed or were not currently billable as of the date of the consolidated balance sheet). Unbilled accounts receivable include revenue recognized for customer-requested work Alion performed on new and existing contracts for which the Company had not received contracts or contract modifications. Accounts receivable are stated as estimated realized value. The allowance for doubtful accounts is Alion’s best estimate of the amount of probable losses in the Company’s existing billed and unbilled accounts receivable. The Company determines the allowance using specific identification and historical write-off experience based on receivable age. Billings in excess of revenue and advance collections from customers represent amounts received from or billed to customers in excess of project revenue recognized to date.

Property, Plant and Equipment

Leasehold improvements, software and equipment are recorded at cost. Maintenance and repairs that do not add significant value or significantly lengthen an asset’s useful life are charged to current operations. Software and equipment are depreciated on the straight-line method over their estimated useful lives (typically 3 years for software and 5 years for equipment). Leasehold improvements are amortized on the straight-line method over the shorter of the asset’s estimated useful life or the life of the lease. Upon sale or retirement of an asset, costs and related accumulated depreciation are deducted from the accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of operations.

Goodwill

Alion assigns the purchase price paid to acquire the stock or assets of a business to the net assets acquired based on the estimated fair value of assets acquired and liabilities assumed. Goodwill is the purchase price in excess of the estimated fair value of the tangible net assets and separately identified intangible assets acquired. There have been no changes to goodwill carrying value this year.

The Company accounts for goodwill and other intangible assets in accordance with the provisions of ASC 350 – Intangibles-Goodwill and Other. Alion operates in one segment and tests goodwill at the reporting unit level. There are two reporting units. We review goodwill for impairment in the fourth quarter each year, and whenever events or circumstances indicate goodwill might be impaired. We are required to recognize an impairment loss to the extent our goodwill carrying value at the reporting unit level exceeds fair value. Evaluating goodwill involves significant management estimates. To date, our annual reviews have resulted in no goodwill impairment adjustments. See Note 8 for a detailed discussion of the Company’s goodwill impairment testing process.

Intangible Assets

Alion amortizes intangible assets as it consumes economic benefits over estimated useful lives. As of June 30, 2013, the Company had approximately $2.4 million in net intangible assets, including contracts purchased in the JJMA acquisition and internally-developed software and engineering designs. The JJMA contract is amortized over a 13 year useful life.

Redeemable Common Stock

There is no public market for Alion’s redeemable common stock and therefore no observable price for its equity, individually or in the aggregate. The Employee Stock Ownership Plan (ESOP) Trust holds all the Company’s outstanding common stock. Under certain circumstances, ESOP beneficiaries can require the ESOP Trust to distribute the value of their beneficial interests. The Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA) require the Company to offer ESOP participants who receive Alion common stock a liquidity put right. The put right requires the Company to purchase distributed shares at their then-current fair market value at any time during two put option periods. Common stock distributed by the ESOP Trust is subject to a right of first refusal. Prior to any subsequent transfer, shares must first be offered to the Company and then to the ESOP Trust. Eventual redemption of shares of Alion common stock as a result of distributions is outside the Company’s control. Therefore, Alion classifies its outstanding shares of redeemable common stock as other than permanent equity.

At each reporting date, Alion is required to increase or decrease the reported value of its outstanding common stock to reflect its estimated redemption value. Management estimates the value of Alion’s obligation to repurchase its outstanding shares of redeemable common stock by considering, in part, the most recent price at which the Company was able to sell shares to the ESOP Trust. The reported value of outstanding redeemable common stock equals the current share price multiplied by total shares issued and outstanding.

In its fiduciary capacity, the ESOP Trustee is independent of the Company and its management. Consistent with its fiduciary responsibilities, the ESOP Trustee retains an independent third party valuation firm to assist it in determining the fair market value (share price) at which the ESOP Trustee may acquire or dispose of investments in Alion common stock. The Audit and Finance Committee of Alion’s Board of Directors reviews the reasonableness of the amount management has determined Alion should recognize for the Company’s obligation to repurchase shares of its outstanding redeemable common stock. The Audit and Finance Committee considers various factors in its review, including, in part, the most recent valuation report prepared for, and the share price selected by the ESOP Trustee.

Alion records changes in the reported value of its outstanding common stock through an offsetting charge or credit to accumulated deficit. The Company recognizes changes in the fair value of its redeemable common stock on March 31 and September 30 each year. The accumulated deficit at June 30, 2013, included an $11.9 million cumulative benefit for changes in share price which reduced the Company’s aggregate share redemption obligation. Outstanding redeemable common stock had an aggregate fair value of approximately $111.0 million as of June 30, 2013.

Concentration of Credit Risk

Alion is subject to credit risk for its cash equivalents and accounts receivable. The Company believes the high credit quality of its cash equivalent investments limits its credit risk with respect to such investments. Alion believes its concentration of credit risk with respect to accounts receivable is limited as the receivables are principally due from the federal government. Approximately 14% of the Company’s receivables are due from commercial customers including other prime contractors.

Fair Value of Financial Instruments

Alion is required to disclose the fair value of its financial instruments but is not required to record its senior long-term debt at fair value. See Note 10 for a discussion of Alion’s long-term debt and Note 11 for the related fair value disclosures. The fair value of cash, cash equivalents, accounts payable and accounts receivable does not differ materially from carrying value because of the short maturity of those instruments.

Off-Balance Sheet Financing Arrangements

Alion accounts for operating leases entered into in the routine course of business in accordance with ASC 840 – Leases. We have no off-balance sheet financing arrangements other than operating leases and letters of credit under our revolving credit facility. Alion has no relationship with any unconsolidated or special purpose entity and has not issued any associated guarantees.

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Long-Term Debt - Interest Payable (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Interest Expense [Line Items]
Interest payable	$ 15,749	$ 17,658
Unsecured Notes [Member]
Interest Expense [Line Items]
Interest payable	10,252	4,188
Secured Notes [Member]
Interest Expense [Line Items]
Interest payable	$ 5,497	$ 13,470

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Goodwill - Estimated Fair Values of Goodwill (Detail) (USD $)	Jun. 30, 2013	Sep. 30, 2012
Goodwill [Line Items]
Goodwill	$ 398,921,000	$ 398,921,000
Carrying Value		390,900,000
Estimated Fair Value		486,000,000
Excess of Estimated Fair Value over Carrying Value		95,100,000
Percentage of Excess of Estimated Fair Value over Carrying Value		24.00%
TEOSS [Member]
Goodwill [Line Items]
Goodwill	201,900,000	201,900,000
Carrying Value		197,700,000
Estimated Fair Value		258,400,000
Excess of Estimated Fair Value over Carrying Value		60,700,000
Percentage of Excess of Estimated Fair Value over Carrying Value		31.00%
EISS [Member]
Goodwill [Line Items]
Goodwill	197,000,000	197,000,000
Carrying Value		193,200,000
Estimated Fair Value		227,600,000
Excess of Estimated Fair Value over Carrying Value		$ 34,400,000
Percentage of Excess of Estimated Fair Value over Carrying Value		18.00%

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Fair Value Measurement (Tables)

9 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Face Value, Net Carrying Value and Fair Value of Secured and Unsecured Notes

The table below sets out the face value, net carrying value and fair value of Alion’s Secured and Unsecured Notes. The fair values disclosed below are based on quoted market prices for Alion’s outstanding notes. This is a Level 2 measurement.

	June 30, 2013						September 30, 2012
	(In thousands)
	Secured Notes			Unsecured Notes			Secured Notes			Unsecured Notes
Face value of original notes outstanding	$	310,000		$	240,000		$	310,000		$	245,000
PIK interest notes issued		19,788			—			13,293			—
Face value of outstanding notes	$	329,788		$	240,000		$	323,293		$	245,000
PIK interest notes to be issued		1,099			—			2,692			—
Face value of notes outstanding and notes to be issued	$	330,887		$	240,000		$	325,985		$	245,000
Less: unamortized debt issue costs		(12,572	)		(1,403	)		(19,483	)		(2,077	)
Carrying value	$	318,315		$	238,597		$	306,502		$	242,923
Fair value of outstanding notes	$	332,700		$	140,575		$	303,598		$	141,605

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Guarantor/Non-Guarantor Unaudited Condensed Consolidated Financial Information - Condensed Consolidating Statement of Operations and Comprehensive Loss (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Schedule Of Condensed Consolidating Statement Of Operations [Line Items]
Contract revenue	$ 220,947	$ 211,514	$ 646,557	$ 598,517
Direct contract expense	174,314	165,042	509,911	461,817
Gross profit	46,633	46,472	136,646	136,700
Operating expenses	20,929	22,926	64,841	69,393
General and administrative	14,017	11,957	39,025	37,873
Operating income (loss)	11,687	11,589	32,780	29,434
Other income (expense):
Interest income	10	15	44	56
Interest expense	(18,982)	(18,793)	(56,814)	(56,130)
Other	(24)	67	16	(50)
Gain on debt extinguishment	1,966		1,966
Total other expense	(17,030)	(18,711)	(54,788)	(56,124)
(Loss) income before taxes	(5,343)	(7,122)	(22,008)	(26,690)
Income tax expense	(1,744)	(1,744)	(5,231)	(5,231)
Net income (loss)	(7,087)	(8,866)	(27,239)	(31,921)
Other comprehensive income
Postretirement actuarial gains
Comprehensive income (loss)	(7,087)	(8,866)	(27,239)	(31,921)
Parent [Member]
Schedule Of Condensed Consolidating Statement Of Operations [Line Items]
Contract revenue	218,344	207,952	639,186	587,043
Direct contract expense	172,741	162,939	505,326	455,469
Gross profit	45,603	45,013	133,860	131,574
Operating expenses	20,365	22,099	63,034	67,118
General and administrative	13,370	12,000	38,283	37,658
Operating income (loss)	11,868	10,914	32,543	26,798
Other income (expense):
Interest income	10	15	44	56
Interest expense	(18,982)	(18,793)	(56,814)	(56,130)
Other	(59)	71	(19)	(60)
Gain on debt extinguishment	1,966		1,966
Equity in net income (loss) of subsidiaries	(146)	671	272	2,646
Total other expense	(17,211)	(18,036)	(54,551)	(53,488)
(Loss) income before taxes	(5,343)	(7,122)	(22,008)	(26,690)
Income tax expense	(1,744)	(1,744)	(5,231)	(5,231)
Net income (loss)	(7,087)	(8,866)	(27,239)	(31,921)
Other comprehensive income
Postretirement actuarial gains
Comprehensive income (loss)	(7,087)	(8,866)	(27,239)	(31,921)
Guarantor Companies [Member]
Schedule Of Condensed Consolidating Statement Of Operations [Line Items]
Contract revenue	2,414	3,492	6,969	11,038
Direct contract expense	1,476	2,077	4,241	6,105
Gross profit	938	1,415	2,728	4,933
Operating expenses	460	740	1,578	2,106
General and administrative	632	(67)	683	75
Operating income (loss)	(154)	742	467	2,752
Other income (expense):
Other	35	(4)	35	10
Total other expense	35	(4)	35	10
(Loss) income before taxes	(119)	738	502	2,762
Net income (loss)	(119)	738	502	2,762
Other comprehensive income
Postretirement actuarial gains
Comprehensive income (loss)	(119)	738	502	2,762
Non-Guarantor Companies [Member]
Schedule Of Condensed Consolidating Statement Of Operations [Line Items]
Contract revenue	189	70	402	436
Direct contract expense	97	26	344	243
Gross profit	92	44	58	193
Operating expenses	104	87	229	169
General and administrative	15	24	59	140
Operating income (loss)	(27)	(67)	(230)	(116)
Other income (expense):
(Loss) income before taxes	(27)	(67)	(230)	(116)
Net income (loss)	(27)	(67)	(230)	(116)
Other comprehensive income
Postretirement actuarial gains
Comprehensive income (loss)	(27)	(67)	(230)	(116)
Eliminations [Member]
Other income (expense):
Equity in net income (loss) of subsidiaries	146	(671)	(272)	(2,646)
Total other expense	146	(671)	(272)	(2,646)
(Loss) income before taxes	146	(671)	(272)	(2,646)
Net income (loss)	146	(671)	(272)	(2,646)
Other comprehensive income
Postretirement actuarial gains
Comprehensive income (loss)	$ 146	$ (671)	$ (272)	$ (2,646)

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ESOP Expense - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Equity [Abstract]
ESOP plan scheme			The Company matches the first 3% and one-half of the next 2% of eligible employee salary deferrals by contributing shares of Alion common stock to the ESOP Trust on March 31 and September 30 each year.
Percentage of employer contribution as a percentage of employee contribution deferral			3.00%
Percentage of salary			2.00%
Recognized ESOP expense	$ 3.3	$ 3.4	$ 10.5	$ 10.5

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ESOP Expense

9 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

ESOP Expense

(14) ESOP Expense

Alion makes 401(k) matching contributions in shares of its common stock. The Company matches the first 3% and one-half of the next 2% of eligible employee salary deferrals by contributing shares of Alion common stock to the ESOP Trust on March 31 and September 30 each year. The Company also makes profit sharing contributions of Alion common stock to the ESOP Trust on the same dates.

Based on the value of common stock contributed and to be contributed to the Plan, Alion recognized $3.3 million and $10.5 million in Plan expense for the three and nine months ended June 30, 2013 and $3.4 million and $10.5 million in Plan expense for the three and nine months ended June 30, 2012.

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Long-Term Debt

9 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Long-Term Debt

(10) Long-Term Debt

Alion’s current debt structure includes a $35 million revolving credit facility, $329.8 million in Secured Notes ($310 million in initial face value plus $19.8 million in paid in kind (PIK) interest notes issued) and $240 million of Unsecured Notes. The Company is in compliance with each of the affirmative, negative and financial covenants in its existing debt agreements as of June 30, 2013.

Credit Agreement

In March 2010, Alion entered into an agreement for a $25.0 million senior revolving credit facility that matures August 2014 (Credit Agreement). In March 2011, Alion and its lenders amended the Credit Agreement increasing the credit limit to $35 million. In August 2011, Alion and its lenders amended the Credit Agreement to revise the definition of Consolidated EBITDA and increase the Minimum Consolidated EBITDA covenant. In December 2012, Alion and its lenders amended the Credit Agreement to increase the maximum fees the Company is permitted to pay outside directors and to retroactively waive non-compliance with the former limitation in the Credit Agreement.

The Company can use its credit facility for working capital, permitted acquisitions and general corporate purposes. This includes up to $35.0 million in letters of credit and up to $5.0 million in short-term swing line loans. As of June 30, 2013, the Company had $4.0 million in outstanding letters of credit and no balance actually drawn.

Security. The Credit Agreement is secured by a first priority security interest in all current and future tangible and intangible property of Alion and its guarantor subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation. In March 2010, Alion and the subsidiary guarantors entered into an Intercreditor Agreement with Wilmington Trust Company and Credit Suisse AG, Cayman Islands Branch to grant Credit Agreement lenders a super priority right of payment with respect to the underlying collateral compared to Secured Note holders’ rights.

Guarantees. Alion’s Credit Agreement obligations are guaranteed by its subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation. These subsidiaries also guarantee all the Company’s Secured Note and Unsecured Note obligations (described below).

Interest and Fees. Alion can choose whether the Credit Agreement loans bear interest at one of two floating rates using either a Eurodollar rate or an alternative base rate. The minimum interest rate is 8.5%. The minimum Eurodollar interest rate is 2.5% plus 600 basis points. The minimum alternate base rate is 3.5% plus 500 basis points.

Other Fees and Expenses. Each quarter, Alion pays a commitment fee of 175 basis points per year on the prior quarter’s daily unused Credit Agreement balance. The Company paid approximately $139 thousand and $130 thousand in commitment fees for the quarters ended June 30, 2013 and 2012. The Company paid approximately $411 thousand and $422 thousand in fees for the nine months ended June 30, 2013 and 2012.

Alion pays letter-of-credit issuance and administrative fees, and up to a 25 basis point fronting fee and interest in arrears each quarter on all outstanding letters of credit. The interest rate is based on the Eurodollar loan rate which was 6.0% as of June 30, 2013. The Company also pays an annual agent’s fee.

Covenants. The Credit Agreement requires Alion to achieve minimum trailing twelve month Consolidated EBITDA levels which increase over the remaining life of the agreement. The required minimum is $63.0 million through September 30, 2013 and $65.5 million through August 22, 2014.

The Credit Agreement defines Consolidated EBITDA as net income or loss in accordance with GAAP, plus employee compensation expense payments invested in Alion common stock, plus the following items, without duplication, to the extent deducted from or included in net income or loss:

• consolidated interest expense;

• provision for income taxes;

• depreciation and amortization;

• cash contributed to the ESOP in respect of Alion’s repurchase liability;

• non-cash stock-based and incentive compensation expense;

• non-cash ESOP contributions;

• any extraordinary losses; and

• nonrecurring charges and adjustments included in ESOP valuation reports as prepared by an independent third party.

To the extent included in net income or loss, the following items, without duplication, are deducted in determining Consolidated EBITDA:

• all cash payments on account of reserves, restructuring charges or other cash and non-cash charges added to net income pursuant to the list above in a previous period;

• any extraordinary gains; and

• all non-cash items of income.

The Credit Agreement restricts us from doing any of the following without the prior consent of syndicate lenders that have extended more than 50 percent of the aggregate amount of all Credit Agreement loans then outstanding:

• incur additional debt other than permitted additional debt;

• grant certain liens and security interests;

• enter into sale and leaseback transactions;

• make certain loans and investments including acquisitions of businesses, other than permitted acquisitions;

• consolidate, merge or sell all or substantially all our assets;

• pay dividends or distributions other than distributions required by the ESOP Plan or by certain legal requirements;

• make certain payments for subordinated indebtedness;

• enter into certain transactions with our shareholders and affiliates;

• enter into agreements which restrict our ability to incur liens or which restrict the ability of our subsidiaries to pay dividends;

• change lines of business;

• repay subordinated debt before it is due;

• redeem or repurchase certain equity;

• enter into certain transactions not permitted under ERISA;

• change the terms of our other indebtedness or our KSOP in a way materially disadvantageous to us;

• make more than $8 million in capital expenditures in any fiscal year;

• pay certain earn-outs in connection with permitted acquisitions; or

• change our fiscal year.

The Credit Agreement contains customary events of default including, without limitation:

• breach of representations and warranties;

• payment default;

• uncured covenant breaches;

• default under certain other debt exceeding an agreed amount;

• bankruptcy and certain insolvency events;

• incurrence of a civil or criminal liability in excess of $5 million of Alion or any subsidiary arising from a government investigation;

• unstayed judgments in excess of an agreed amount;

• failure of any Credit Agreement guarantee to be in effect;

• failure of the security interests to be valid, perfected, first priority security interests in the collateral;

• notice of debarment, suspension or termination under a material government contract;

• actual termination of a material contract due to alleged fraud, willful misconduct, negligence, default or any other wrongdoing;

• certain uncured defaults under our material contracts;

• certain ERISA violations;

• imposition on the ESOP Trust of certain taxes in excess of an agreed amount;

• final determination the ESOP is not a qualified plan;

• so long as any Secured Notes remain outstanding, the Intercreditor Agreement shall fail to be effective;

• a borrowing which would cause us to exceed a certain cash balance limit;

• failure to provide within 90 days of fiscal year-end, consolidated, comparative financial statements audited by an independent public accountant of recognized national standing with an opinion of such accountant that shall not include a “going concern” explanatory note or similar limitation, and

• a change of control (as defined below).

Under the Credit Agreement, a change of control generally occurs when, before Alion lists its common stock to trade on a national securities exchange and obtains at least $35 million in net proceeds from an underwritten public offering, the ESOP Trust fails to own at least 51 percent of Alion’s outstanding equity interests, or, after such a qualified public offering, any person or group other than the ESOP Trust owns more than 37.5 percent of Alion’s outstanding equity interests. A change of control may also occur if a majority of the seats (other than vacant seats) on Alion’s Board of Directors shall at any time be occupied by persons who were neither nominated by the board nor were appointed by directors so nominated. A change of control may also occur if a change of control occurs under any of Alion’s material debt including the Secured and Unsecured Note Indentures.

Alion depends heavily on federal government contracts. Delays in the federal budget process; reduced federal spending, whether from budget cuts or sequestration; and fiscal and political uncertainties could adversely affect Alion’s revenue for the balance of the current fiscal year and beyond. Despite uncertainties in the government contracting professional services marketplace, particularly the effects of sequestration and/or Department of Defense programmatic and budgetary cuts, management believes Alion will be able to generate sufficient revenue and EBITDA in the coming twelve months and the Company will be able to comply with financial and non-financial covenants in the Credit Agreement.

If Alion were unable to meet a Credit Agreement covenant because of a revenue shortfall or for any other reason, the Company could seek a covenant waiver or seek to negotiate a Credit Agreement amendment. Management can provide no assurance that Alion would be able to obtain a requested covenant waiver or amend the Credit Agreement on favorable terms, if at all.

Secured Notes

In March 2010, Alion issued and sold $310 million of its private units (Units) to Credit Suisse, which informed the Company it had resold most of the Units to qualified institutional buyers. Each of the 310,000 Units consisted of $1,000 in face value of Alion’s private 12% senior secured notes (Secured Notes) and a warrant to purchase 1.9439 shares of Alion common stock. On September 2, 2010, Alion exchanged the private Secured Notes for publicly tradable Secured Notes with the same terms.

Security. The Secured Notes are secured by a first priority security interest in all current and future tangible and intangible property of Alion and its guarantor subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation. The Secured Notes are senior obligations of Alion and rank pari passu in right of payment with existing and future senior debt, including the Credit Agreement, except to the extent that the Intercreditor Agreement provides Credit Agreement lenders with a super priority right of payment with respect to the underlying collateral.

Guarantees. The Company’s obligations under the Secured Notes are guaranteed by the Company’s subsidiaries, IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation.

Interest and Fees. The Secured Notes bear interest at 12% per year; 10% is payable in cash and 2% increases the Secured Note principal (PIK Interest). Interest is payable semi-annually in arrears on May 1 and November 1. Alion pays interest to holders of record as of the immediately preceding April 15 and October 15. The Company must pay interest on overdue principal or interest at 13% per annum to the extent lawful. The Secured Notes mature November 1, 2014.

Covenants. As of June 30, 2013, Alion was in compliance with the covenants set forth in the Indenture governing its 12% Secured Notes (Secured Note Indenture). The Secured Note Indenture does not contain any financial covenants.

A Secured Note Indenture covenant restricts our ability to incur additional debt. Defined terms in the Secured Note Indenture include: Net Available Cash, Total Assets, Restricted Subsidiaries, Indebtedness, Adjusted EBITDA and Consolidated Interest Expense. Alion and its Restricted Subsidiaries may not issue, incur, assume, guarantee, or otherwise become liable for any debt unless our Adjusted EBITDA to Consolidated Interest Expense ratio is greater than 2.0 to 1.0. Adjusted EBITDA under the Secured Note Indenture differs from Consolidated EBITDA as defined in our Credit Agreement. Adjusted EBITDA is less than Consolidated EBITDA because it does not include employee investments in Alion common stock. Our Adjusted EBITDA to Consolidated Interest Expense ratio was 0.96 to 1.0 as of June 30, 2013 ($72.3 million in Adjusted EBITDA to $75.6 million in Consolidated Interest Expense). Our ratio was 0.93 to 1.0 as of September 30, 2012 ($69.3 million in Adjusted EBITDA to $74.9 million in Consolidated Interest Expense). Even if Adjusted EBITDA is not at least two times Consolidated Interest Expense, we may incur other permitted debt including:

• debt pursuant to certain agreements up to $25 million;

• permitted inter-company debt;

• the Secured Notes and any public notes exchanged for those notes;

• debt pre-dating the Secured Notes;

• permitted debt of acquired subsidiaries;

• permitted refinancing debt;

• hedging agreement debt;

• performance, bid, appeal and surety bonds and completion guarantees;

• ordinary course insufficient funds coverage;

• permitted refinancing debt guarantees;

• working capital debt of non-U.S. subsidiaries;

• debt for capital expenditures, and capital and synthetic leases up to $25 million in the aggregate and 2.5% of Alion’s Total Assets;

• permitted subordinated debt of Alion or any Restricted Subsidiary to finance a permitted acquisition, certain permitted ESOP transactions and refinancing debt of acquired non-U.S. subsidiaries up to $35 million in the aggregate;

• letter of credit reimbursement obligations;

• certain agreements in connection with a business disposition provided liabilities incurred in connection therewith do not exceed the cash and non-cash proceeds received and are not reflected on the Company’s balance sheet;

• certain deferred compensation agreements; and

• certain other debt up to $20 million.

The Secured Note Indenture has a covenant that restricts our ability to declare and pay any cash dividend or other distribution related to any equity interest in Alion, repurchase or redeem any equity interest of Alion, repurchase or redeem the Unsecured Notes or other subordinated debt, or make certain investments. However, within certain limits, we may make such payments in limited amounts if Adjusted EBITDA is at least two times Consolidated Interest Expense. Even if Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0, we may make or pay:

• such payments out of substantially concurrent contributions of equity and substantially concurrent incurrences of permitted debt;

• certain limited and permitted dividends;

• certain repurchases of the Company’s equity securities deemed to occur upon exercise of stock options or warrants;

• 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 Secured Note premium payable on a change of control;

• certain permitted inter-company subordinated obligations;

• certain repurchases and redemptions of subordination obligations of the Company or a Subsidiary Guarantor from Net Available Cash (as defined in the Secured Note Indenture);

• repurchases of subordinated obligations in connection with an asset sale to the extent required by the Secured Note Indenture;

• certain permitted ESOP transactions;

• long-term incentive plan payments to our directors, officers and employees, subject to a $3 million annual cap that may increase annually;

• any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of the Unsecured Notes, up to an aggregate amount of $10 million; and

• certain other payments not exceeding $10 million in the aggregate.

The Secured Note Indenture restricts our ability to engage in other transactions including restricting our subsidiaries from making distributions and paying dividends to parents, merging or selling all or substantially all our assets, issuing certain subsidiary equity securities, engaging in certain transactions with affiliates, incurring liens, entering into sale lease-back transactions and engaging in business unrelated to our business when we issued the Secured Notes.

Events of Default. The Secured Note Indenture contains customary events of default, including:

• payment default on interest obligations when due;

• payment default on principal at maturity;

• uncured covenant breaches;

• default under an acceleration of certain other debt exceeding $30 million;

• bankruptcy and certain insolvency events;

• judgment for payment in excess of $30 million entered against the Company or any material subsidiary that remains outstanding for a period of 60 days and is not discharged, waived or stayed;

• failure of any Secured Note guarantee to be in effect or any subsidiary guarantor’s denial or disaffirmation of its guaranty obligations; and

• failure of any Secured Note security interest to constitute a valid and perfected lien with its applicable priority after a permitted cure period.

Change of Control. Upon a change in control, each Secured Note holder has the right to require Alion repurchase its notes in cash for 101% of principal plus accrued and unpaid interest. Any of the following events constitutes a change in control:

• subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power or voting stock of Alion;

• individuals who constituted Alion’s board of directors on March 22, 2010, (or individuals who were elected or nominated by them, or directors subsequently nominated or elected by them) cease for any reason to constitute a majority of the Company’s board of directors;

• the adoption of a plan relating to Alion’s liquidation or dissolution; and

• subject to certain exceptions, the merger or consolidation of the Company with or into another person or the merger of another person with or into the Company, or the sale of all or substantially all the assets of Alion to another person.

Optional Redemption. From April 1, 2013 through September 30, 2013, the Company may redeem all or a portion of the Secured Notes at 105% of principal, plus accrued and unpaid interest to the redemption date. From October 1, 2013 through March 31, 2014 the redemption price is 103% of principal, plus accrued and unpaid interest to the redemption date. After March 31, 2014, the Company is not required to pay a redemption premium.

Unsecured Notes

In February 2007, Alion issued and sold $250.0 million of its private 10.25% senior unsecured notes due February 1, 2015 (Unsecured Notes) to Credit Suisse, which informed the Company it had resold most of the notes to qualified institutional buyers. In June 2007, Alion exchanged the private Unsecured Notes for publicly tradable Unsecured Notes with the same terms. IPS, CATI, METI, JJMA, BMH, WCI, WCGS, MA&D and Alion International Corporation guarantee the Unsecured Notes. From time to time, Alion has repurchased some of its outstanding Unsecured Notes in open market transactions. As of June 30, 2013, the Company had repurchased $10 million worth of Unsecured Notes: $2 million in November 2010; $3 million in June 2011 and $5 million in June 2013. In July 2013, the Company repurchased an additional $5 million worth of Unsecured Notes. (See Note 21 – Subsequent Event).

Interest and Fees. The Unsecured Notes bear interest at 10.25% per year, payable semi-annually in arrears on February 1 and August 1. Alion pays interest to holders of record as of the immediately preceding January 15 and July 15. The Company must pay interest on overdue principal or interest at 11.25% per annum to the extent lawful.

Covenants. There are no financial covenants in the Unsecured Note Indenture. As of June 30, 2013, we were in compliance with the Unsecured Note Indenture non-financial covenants.

A covenant in the Unsecured Note Indenture restricts our ability to incur additional debt. Defined terms in the Unsecured Note Indenture include: Net Available Cash, Total Assets, Restricted Subsidiaries, Indebtedness, Adjusted EBITDA and Consolidated Interest Expense. Alion and its Restricted Subsidiaries may not issue, incur, assume, guarantee, or otherwise become liable for any indebtedness unless our Adjusted EBITDA to Consolidated Interest Expense ratio is greater than 2.0 to 1.0. Adjusted EBITDA under the Unsecured Note Indenture differs from Consolidated EBITDA as defined in our Credit Agreement. Adjusted EBITDA is less than Consolidated EBITDA because it does not include employee investments in Alion common stock. Our Adjusted EBITDA to Consolidated Interest Expense ratio was 0.96 to 1.0 as of June 30, 2013 ($72.3 million in Adjusted EBITDA to $75.6 million in Consolidated Interest Expense). Our ratio was 0.93 to 1.0 as of September 30, 2012 ($69.3 million in Adjusted EBITDA to $74.9 million in Consolidated Interest Expense). Even if Adjusted EBITDA is not at least two times Consolidated Interest Expense, we may incur other permitted debt including:

• debt pursuant to our now terminated Term B Credit Facility and certain other contracts up to $360 million less principal repayments made under that indebtedness;

• permitted inter-company debt;

• the Unsecured Notes and any public notes exchanged for those notes;

• debt pre-dating the Unsecured Notes;

• permitted debt of acquired subsidiaries;

• permitted refinancing debt;

• hedging agreement debt;

• performance, bid, appeal and surety bonds and completion guarantees;

• ordinary course insufficient funds coverage;

• permitted refinancing debt guarantees;

• working capital debt of non-U.S. subsidiaries;

• debt for capital expenditures, capital and synthetic leases up to $25 million in the aggregate and 2.5% of Alion’s Total Assets;

• permitted subordinated debt of Alion or any Restricted Subsidiary to finance a permitted acquisition, certain permitted ESOP transactions and refinancing debt of acquired non-U.S. subsidiaries up to $35 million in the aggregate;

• letters of credit reimbursement obligations;

• certain agreements in connection with the disposition of a business provided liabilities incurred in connection therewith do not exceed the cash and non-cash proceeds received and are not reflected on the Company’s balance sheet;

• certain deferred compensation agreements; and

• certain other debt up to $35 million.

The Unsecured Note Indenture has a covenant that restricts our ability to declare and pay any cash dividend or other distribution with regard to any equity interest in the Company, make any repurchase or redemption of any equity interest in Alion, repurchase or redeem subordinated debt, and make certain investments. However, within certain limits we may make such payments in limited amounts if Adjusted EBITDA is at least two times Consolidated Interest Expense. Even if Adjusted EBITDA to Consolidated Interest Expense is not greater than 2.0 to 1.0, we may make or pay:

• such payments out of substantially concurrent contributions of equity and substantially concurrent incurrences of permitted debt;

• certain limited and permitted dividends;

• certain repurchases of the Company’s equity securities deemed to occur upon exercise of stock options or warrants;

• cash payments in lieu of the issuance of fractional shares for the exercise of warrants, options or other securities convertible into or exchangeable for our equity securities;

• the required Unsecured Note premium payable on a change of control;

• certain permitted inter-company subordinated obligations;

• certain repurchases and redemptions of subordination obligations of the Company or a Subsidiary Guarantor from Net Available Cash;

• repurchases of subordinated obligations in connection with an asset sale to the extent required by the Indenture;

• repurchase of common stock from former Alion Joint Spectrum Center employees;

• certain permitted transactions with the ESOP not exceeding $25 million in the aggregate; and

• certain other payments not exceeding $30 million in the aggregate.

The Unsecured Note Indenture restricts the Company’s ability to engage in other transactions including restricting our subsidiaries from making distributions and paying dividends to parents, merging or selling all or substantially all our assets, issuing certain subsidiary equity securities, engaging in certain transactions with affiliates, incurring liens, entering into sale lease-back transactions and engaging in business unrelated to our business when we issued the Unsecured Notes.

Events of Default. The Unsecured Note Indenture contains customary events of default, including:

• payment default on interest obligations when due;

• payment default on principal at maturity;

• uncured covenant breaches;

• default under an acceleration of certain other debt exceeding $30 million;

• certain bankruptcy and insolvency events;

• judgment for payment in excess of $30 million entered against the Company or any material subsidiary that remains outstanding for a period of 60 days and is not discharged, waived or stayed; and

• failure of any Unsecured Note guarantee or any subsidiary guarantor’s denial or disaffirmation of its guaranty obligations.

Change of Control. Upon a change in control, each Unsecured Note holder has the right to require Alion repurchase its notes in cash for 101% of principal plus accrued and unpaid interest. Any of the following events constitutes a change in control:

• subject to certain exceptions, a person, other than the ESOP Trust, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power or voting stock of Alion;

• individuals who constituted Alion’s board of directors on February 8, 2007, (or individuals who were elected or nominated by them, or individuals who were elected or nominated by them) cease for any reason to constitute a majority of the Company’s board of directors;

• adoption of a plan relating to Alion’s liquidation or dissolution; and

• subject to certain exceptions, Alion’s merger or consolidation with or into another person or the merger of another person with or into Alion, or the sale of all or substantially all our assets to another person.

Optional Redemption. Beginning February 1, 2013, we may redeem all or a portion of the Unsecured Notes at par plus accrued and unpaid interest to the redemption date.

Alion will need to refinance some if not all its senior debt prior to maturity in November 2014 and February 2015 when the Company will have to payout more than $600 million over a three-month period. We are uncertain if Alion will be able to refinance these obligations or if refinancing terms will be favorable. The Company has retained Goldman Sachs and Wells Fargo to assist it in its refinancing efforts.

Interest Payable

As of June 30, 2013, and September 30, 2012 interest payable consisted of the following amounts.

	June 30		September 30,
	2013		2012
	(In thousands)
Unsecured Notes	$	10,252	$	4,188
Secured Notes		5,497		13,470
Total	$	15,749	$	17,658

As of June 30, 2013, Alion must make the following principal repayments (at face amount before debt discount) for its outstanding debt.

Fiscal Year:	2013		2014		2015		Total
Secured Notes and PIK Interest(1)	$	—	$	—	$	339,788	$	339,788
Unsecured Notes(2)		—		—		240,000		240,000
Total Principal Payments	$	—	$	—	$	579,788	$	579,788

1. The Secured Notes due November 2014 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 June 30, 2013, the $318.3 million carrying value on the face of the balance sheet included $310 million in principal, $19.8 million in PIK notes issued; $1.1 million in accrued PIK interest and is net of $12.6 million in aggregate unamortized debt issue costs. Initial debt issue costs consist of $7.7 million in original issue discount, $13.5 million in third-party costs and $20.8 million for the Secured Note warrants’ initial fair value.

2. As of June 30, 2013, the Unsecured Notes due February 2015 include $240 million in principal and $1.4 million in unamortized debt issue costs (initially $7.1 million). The Company repurchased $5 million in face value of Unsecured Notes in July 2013.

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Subsequent Event - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended	1 Months Ended			0 Months Ended	1 Months Ended	0 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2013 Unsecured Notes [Member]	Jun. 30, 2011 Unsecured Notes [Member]	Nov. 30, 2010 Unsecured Notes [Member]	Jul. 16, 2013 Subsequent Event [Member]	Jul. 31, 2013 Subsequent Event [Member] Unsecured Notes [Member]	Jul. 16, 2013 Subsequent Event [Member] Revolving Credit Facility [Member] Unsecured Notes [Member]
Subsequent Event [Line Items]
Debt instrument repurchase amount			$ 5,000,000	$ 3,000,000	$ 2,000,000		$ 5,000,000	$ 5,000,000
Gain on debt extinguishment	$ 1,966,000	$ 1,966,000				$ 1,900,000

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Income Taxes

9 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

(17) Income Taxes

Deferred Taxes

Alion is subject to income taxes in the U.S., various states, India and Canada. Tax statutes and regulations within each jurisdiction are subject to interpretation requiring management to apply significant judgment. Alion recorded $1.7 million in goodwill related deferred tax expense and liabilities this quarter and $5.2 million in goodwill related deferred tax expense and liabilities for the nine months ended June 30, 2013.

The Company expects to be able to use existing and anticipated net operating losses (NOL) to offset taxes that may become due in the future if Alion has future taxable income. Even though Alion recorded a full valuation allowance for all deferred tax assets, the Company does not expect to pay any income taxes for the foreseeable future. Alion’s ability to utilize NOL tax benefits will depend upon how much future taxable income it has and may be limited under certain circumstances. Alion does not have any NOL tax benefits it can carry back to prior years.

The Company’s effective tax rate for the nine months ended June 30, 2013 was -23.8% and –19.6% for the nine months ended June 30, 2012. As of June 30, 2013 and September 30, 2012 the net deferred tax liability was:

	June 30, 2013			September 30, 2012
	(In thousands)
Current deferred tax asset	$	9,324		$	11,207
Noncurrent deferred tax asset		83,021			67,207
Valuation allowance		(92,345	)		(78,414	)
Noncurrent deferred tax liability		(56,386	)		(51,156	)
Net deferred tax liability	$	(56,386	)	$	(51,156	)

Tax Uncertainties

Based on the latest available information, Alion periodically assesses its liabilities and contingencies for all periods open to examination by tax authorities. Where management believes there is more than a 50 percent chance the Company’s tax position will not be sustained, Alion records its best estimate of the resulting tax liability, including interest. Interest or penalties related to income taxes are reported separately from income tax expense. The Company has analyzed its tax positions and has not recorded any liabilities for tax uncertainties.

Alion may become subject to federal or state income tax examination for tax years ended September 2010 and forward. Alion’s former status as a pass-through entity owned by a tax-exempt trust makes an examination unlikely and the possibility of an adverse determination remote. The Company does not expect resolution of tax matters for any open years to materially affect its operating results, financial condition, cash flows or effective tax rate.

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Long Term Incentive Compensation Plan

9 Months Ended

Jun. 30, 2013

Compensation Related Costs [Abstract]

Long Term Incentive Compensation Plan

(15) Long Term Incentive Compensation Plan

Alion adopted a long-term cash incentive compensation plan for certain executives in December 2008. The Company amended its incentive compensation plan in January 2010 and amended and restated it in June 2013. The most recent amendment creates new change in control provisions that apply to future grants. Individual incentive compensation grants contain specific financial and performance goals and vest over varying periods. Some grants are for a fixed amount; others provide a range of values from a minimum of 50% to a maximum of 150% of initial grant value. The Company periodically evaluates the probability that individuals will achieve stated financial and performance goals.

Alion recognizes long term incentive compensation expense based on outstanding grants’ stated values, estimated probability of achieving stated goals and estimated probable future grant values. The Company recognized credits to incentive compensation expense of $7 thousand and $234 thousand for the three months ended June 30, 2013 and 2012 due to forfeitures. The Company recognized $1.5 million and $658 thousand in incentive compensation expense for the nine months ended June 30, 2013 and 2012.

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Document and Entity Information	9 Months Ended
	Jun. 30, 2013	Aug. 08, 2013
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Entity Registrant Name	ALION SCIENCE & TECHNOLOGY CORP
Entity Central Index Key	0001166568
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		6,831,791

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Stock Based Compensation

9 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Stock Based Compensation

(16) Stock Based Compensation

Alion initially adopted its Stock Appreciation Rights (SAR) Plan in 2004. The Company amended and restated the SAR Plan in January 2007; amended it in January 2010; and amended and restated the SAR Plan in June 2013. The SAR Plan expires in November 2016. The most recent SAR Plan amendment revises certain change in control provisions.

The chief executive officer may award SARs as he deems appropriate. Awards vest ratably over four years with payment following the grant date fifth anniversary. Grants with no intrinsic value expire on their year-five payment date. The SAR Plan provides for accelerated vesting in the event of death or disability and provides for accelerated vesting of existing grants on a change in control. Approximately 738 thousand SARs were outstanding at June 30, 2013, at a weighted average grant date fair value of $25.02 per share. No outstanding grant has any intrinsic value.

In June 2013, the Company amended and restated its Phantom Stock Plan and its Performance Shares and Retention Phantom Stock Plan. No grants are outstanding under either of these plans.

Alion recognized $21 thousand and $79 thousand in stock based compensation expense for the three and nine months ended June 30, 2013. The Company recognized $36 thousand in stock based compensation expense for the three months ended June 30, 2012. For the nine months ended June 30, 2012, the Company recognized a $30 thousand credit to stock based compensation expense.

The Company uses a Black-Scholes-Merton option pricing model based on the fair market value of a share of its common stock to recognize stock –based compensation expense. There is no established public trading market for Alion’s common stock. The ESOP Trust owns all outstanding common stock. Alion does not expect to pay any dividends on its common stock and intends to retain future earnings, if any, for operating its business.

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Stock Based Compensation - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense (credit)			$ 1,556,000	$ 628,000
Stock Based Compensation [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense (credit)	$ 21,000	$ 36,000	$ 79,000	$ 30,000
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested awards			Awards vest ratably over four years with payment following the grant date fifth anniversary
Awards vesting period			4 years
Expiration period of grants with no intrinsic value			5 years
Expiration of plan			2016-11
Outstanding stock appreciation rights	738,000		738,000
Weighted average grant date fair value	$ 25.02		$ 25.02
Phantom Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants outstanding	0		0
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants outstanding	0		0
Retention Phantom Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants outstanding	0		0

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Long Term Incentive Compensation Plan - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Incentive compensation expense			$ 1,556,000	$ 628,000
Long-Term Incentive Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant value, minimum			50.00%
Grant value, maximum	150.00%		150.00%
Incentive compensation expense	$ 7,000	$ 234,000	$ 1,500,000	$ 658,000