1166568--12/23/2008--ALION_SCIENCE_&_TECHNOLOGY

related topics

{regulation, government, change}

{customer, product, revenue}

{cost, contract, operation}

{debt, indebtedness, cash}

{personnel, key, retain}

{acquisition, growth, future}

{cost, operation, labor}

{competitive, industry, competition}

{tax, income, asset}

{product, market, service}

{condition, economic, financial}

{cost, regulation, environmental}

{system, service, information}

{loss, insurance, financial}

{control, financial, internal}

Our Term B Senior Credit Facility and the Senior Unsecured Note Indenture will restrict our operations. We may not be able to obtain financing in the future, and the terms of any future financings may limit our ability to manage our business. Difficulties in obtaining financing on favorable terms would have a negative effect on our ability to execute our business strategy. We may be required to amend the financial covenants of our Term B Senior Credit Facility which could materially impact our ability to finance our future operations, future acquisitions or capital needs. We expect to experience net losses in at least our next five years of operation. Our ability to meet our financial and other future obligations depends on our future operating results and we cannot be sure that we will be able to meet these obligations as they come due. We face intense competition from many competitors that have greater resources than we do, which could result in price reductions, reduced profitability, and loss of market share. Historically, a few contracts have provided most of our revenue. If we do not retain or replace these contracts our operations will suffer. If we are unable to manage our growth, our business could be adversely affected. Acquisitions could increase our costs or liabilities or be disruptive. Due to the inherent danger involved in some of the businesses that we conduct, there are risks of claims by clients and third parties that could have a substantial adverse economic impact upon us. We depend on key management and may not be able to retain those employees due to competition for their services. Our business could suffer if we fail to attract, train and retain skilled employees. If we do not, or the ESOP Trust does not, continue to be exempt from U.S. federal income tax and any unrelated business income tax, our cash flow available to meet our financial obligations and to reinvest in our operations may decrease. In order to succeed, we will have to keep up with rapid technological changes in a number of industries. Various factors could impact our ability to keep pace with these changes. An economic downturn could harm our business. Our employees may engage in misconduct or other improper activities, which could harm our business. The interests of the ESOP Trust may not be aligned with the interests of participants in the ESOP component of the KSOP. Environmental laws and regulations and our use of hazardous materials may subject us to significant liabilities. Risks Related to Our Industry We depend on U.S. government contracts for substantially all of our revenue. Changes in the contracting or fiscal policies of the U.S. government could adversely affect our business, financial condition or results of operations. Failure by Congress to timely approve budgets for the federal agencies we support could delay or reduce spending and cause us to lose revenue. We may not receive the full amount of our backlog, which could lower future revenue. Many of our U.S. government customers procure goods and services through ID/IQ, GWAC or GSA Schedule contracts under which we must compete for post-award orders. U.S. government contracts contain termination provisions that are unfavorable to us. If we do not accurately estimate the expenses, time and resources necessary to meet our contractual obligations, our profit will be lower than expected. Our operating margins and operating results may suffer if cost-reimbursement contracts increase in proportion to our total contract mix. If the volume of services we provide under fixed-price contracts decreases in total or as a proportion of our total business, or if profit rates on these contracts decline, our operating margins and operating results may suffer. Our subcontractors failure to perform contractual obligations could damage our reputation as a prime contractor and our ability to obtain future business. Because U.S. government contracts are subject to government audits, contract payments are subject to adjustment and repayment which may result in revenue attributed to a contract being lower than expected. If we fail to recover at- risk contract costs, it may result in reduced fees or in losses. Actual or perceived conflicts of interest may prevent us from being able to bid on or perform contracts. As a U.S. government contractor, we must comply with complex procurement laws and regulations and our failure to do so could have a negative impact upon our business.

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1166568--12/23/2008--ALION_SCIENCE_&_TECHNOLOGY_CORP