Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.11pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.33pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
+0.10pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
divestitures+4
shutdown+3
opposition+3
prolonged+2
slowed+2
Positive rising
satisfactory+1
Risk Factors (Item 1A)
23,733 words
Item 1A. Risk Factors
You should carefully consider the risks described below, together with all of the additional, following risks and other information contained in this Annual Report on Form 10-K, including Part II - Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations. The risks described below are not the only risks facing us. Any of the following risks could materially and adversely affect our financial condition, results of operations or cash flows, and the actual outcome of matters as to which forward-looking statements are made in this Annual Report.
Risk Factor Summary
This risk factor summary contains a high-level summary of risks associated with our business. It does not contain all of the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth following this summary. A summary of our risks includes, but is not limited to, the following:
Risks Related to Our Business and Industry
• We generate a significant portion of our revenues from contracts with the U.S. federal government. If the U.S. federal government significantly decreased or ceased doing business with us, our business, financial condition and results of operations would be materially and adversely affected.
• Our U.S. federal government contract work is regularly reviewed and audited by the U.S. federal government, U.S. federal government auditors and others, and these reviews can lead to withholding or of payments to us, non-receipt of award fees, legal actions, , and liabilities and other remedies us.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+3
divestiture+3
delays+2
losses+2
unfunded+1
Positive rising
gain+3
better+2
achieved+1
efficiency+1
beautiful+1
MD&A (Item 7)
6,030 words
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the other sections of this information statement, including our audited consolidated financial statements, and notes thereto, “Risk Factors,” and “Cautionary Note Regarding Forward-Looking Statements.” This discussion contains forward-looking statements that involve risks and uncertainties, all of which are based on our current expectations and could be materially affected by the uncertainties and other factors described throughout this information statement and particularly in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” You should review those sections for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
References to “Amentum”, the “Company”, “we”, “our” or “us” refer to Amentum Holdings, Inc. and its subsidiaries unless otherwise stated or indicated by context.
Overview
We are a global advanced engineering and technology solutions provider to a broad base of U.S. and allied government agencies, and customers in international and commercial markets, supporting programs of critical national importance across energy and environmental, intelligence, space, defense, civilian and commercial end-markets. We offer a broad reach of capabilities including energy, environmental remediation, intelligence and counter solutions, data fusion and analytics, engineering and integration, advanced test, training and readiness, and citizen solutions. As a provider of differentiated technology solutions, we have built a repertoire of deep customer knowledge, us to engage our customers across multiple capabilities and markets. Underpinned by a culture of ethics and safety, Amentum is committed to operational and execution.
• A delay in the completion of the federal government’s budget process, a prolonged continuing resolution or government shutdown, a decline in the federal government budget, changes in spending or budgetary priorities or delays in contract award may materially adversely affect our business, financial condition and results of operations.
• We engage in a highly competitive business. If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted.
• Our results of operations depend on the award of new contracts and the timing of the award of these contracts.
• Continuing elevated inflation, rising or continued high interest rates, and/or costs could reduce the demand for our services as well as decrease our profit on our existing contracts, in particular with respect to our fixed-price contracts.
• Many of our work sites are workplaces with inherent safety and environmental risks. The occurrence of an accident or safety incident involving employees, contractors or others can result in injuries, disabilities or even loss of life, which could expose us to significant financial losses and reputational harm, as well as civil and criminal liabilities.
• The nature of our contracts, particularly any fixed-price contracts, subjects us to risks of cost overruns.
• Our failure to meet performance requirements or contractual schedules could adversely affect our business, financial condition and results of operations.
• The contracts in our backlog may be adjusted, canceled or suspended by our customers and, therefore, our backlog is not necessarily indicative of our future revenues or earnings.
• The provision of our services may expose us to significant monetary damages or even criminalviolations in the event of liabilities resulting from our activities, including noncompliance with regulatory requirements, and our insurance policies may not provide adequate coverage, which could have a material adverse impact on our business, financial condition, and results of operations and damage our reputation.
• Employee, agent or partner misconduct, or our overall failure to comply with laws or regulations, could weaken our ability to win contracts, which could result in reduced revenues and profits.
• Cybersecurity or privacy breaches, or systems and information technology interruption or failure could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.
• If we do not have adequate indemnification for our nuclear services, or business is slowed by the extensive regulatory processes for approval and licensing for new and existing nuclear technologies or socio-political opposition to nuclear-related technology and activities, it could adversely affect our business, financial condition and results of operations.
• Uncertainty over global tariffs, or the financial impacts of tariffs, may negatively impact our results.
Risks Related to International Operations
• Our international operations are exposed to additional risks and uncertainties, including unfavorable political developments and weak foreign economies.
• Changes in domestic and foreign governmental laws, regulations and policies, changes in statutory tax rates and laws, and unanticipated outcomes with respect to tax audits could adversely affect our business, profitability and reputation.
• We work in international locations where there are high security risks, which could result in harm to our employees or unanticipated costs.
Risks Related to Acquisitions, Investments, Joint Ventures and Divestitures
• Our use of joint ventures, partnerships and strategic investments in entities exposes us to risks and uncertainties, many of which are outside of our control.
• An impairment charge on our goodwill or intangible assets could have a material adverse impact on our financial position and results of operations.
• Our business strategy relies in part on acquisitions and strategic investments to sustain our growth, as well as targeted divestitures. These transactions present certain risks and uncertainties.
Risks Related to Regulatory Compliance
• As a U.S. federal government contractor, we are subject to various procurement and other laws and regulations and could be adversely affected by a failure to comply with these laws and regulations or changes in such laws and regulations.
• The U.S. federal government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.
• Our business is subject to complex and evolving laws and regulations regarding data privacy and security which could subject us to investigations, claims or monetary penalties, require us to change our business practices or otherwise adversely affect our business, financial condition and results of operations.
Risks Related to Our Indebtedness and Credit Markets
• We have a significant amount of indebtedness (including associated covenants), which could adversely affect our financial condition or decrease our business flexibility.
• Restrictions imposed by our indebtedness could limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities.
• Our credit facility includes variable rates, which subject us to interest rate risk and could cause our debt service obligations to increase and net income and cash flows to correspondingly decrease.
Risks Related to the Transaction
• We may not realize the anticipated financial and other benefits, including growth opportunities, expected from the Transaction.
• If the distribution in connection with the Transaction does not qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code, including as a result of actions taken in connection with the separation and distribution or the merger or as a result of subsequent acquisitions of shares of Jacobs or Amentum, then Jacobs and/or Jacobs’ shareholders that received Amentum common stock in the distribution could be required to pay substantial U.S. federal income taxes, and, in certain circumstances, we could be obligated to indemnify Jacobs for any tax liability imposed on Jacobs arising from our actions or inactions.
• Under the terms of the Transaction, we are restricted from taking certain actions that could adversely affect the intended tax treatment of the transactions, and such restrictions could limit our ability to implement strategic initiatives that otherwise would be beneficial.
Risks Related to Our Common Stock
• Amentum Equityholder owns a significant percentage of our common stock.
• Our quarterly results may fluctuate significantly, which could have a material negative effect on the price of our common stock.
• A significant number of shares of our common stock may be sold or otherwise disposed of, which may cause our stock price to decline.
• Our stock price may be volatile.
Risks Related to Climate Change
• Climate change-related weather issues could have a material adverse impact on our, or our customers’, equipment and infrastructure which could negatively impact our business, financial condition and results of operations.
• We may be affected by market or regulatory responses to climate change.
Risks Related to our Business and Industry
We generate a significant portion of our revenues from contracts with the U.S. federal government. If the U.S. federal government significantly decreased or ceased doing business with us, our business, financial condition and results of operations would be materially and adversely affected.
The U.S. federal government is our primary customer, with revenues from U.S. federal government contracts, either as a prime contractor or a subcontractor, with agencies including the DOW, U.S. Intelligence Community, NASA and the DOE. The U.S. federal government represented 81% of our revenues for the year ended October 3, 2025 (“fiscal year 2025”). We expect that U.S. federal government contracts will continue to be the primary source of our revenues for the foreseeable future. These contracts, which are a significant source of our revenue and profit, are subject to additional risks compared to contracts with private sector customers:
• Most contracts with the U.S. federal government, and many contracts with other government entities, permit the government customer to terminate the contract at any time for the convenience of the government or for default by the contractor. Governmental agencies may modify, curtail or terminate our contracts with little or no notice at any time prior to their completion and, if we do not replace them, we may suffer a decline in revenue. In addition, for some assignments, the U.S. federal government may attempt to “insource” the services to government employees rather than outsource to a contractor.
• Most government contracts are awarded through a rigorous competitive process, which may emphasize price over other qualitative factors. The U.S. federal government has increasingly relied upon multiple-year contracts with multiple contractors that generally require those contractors to engage in an additional competitive procurement process for each task order issued under a contract. This process may result in us facing significant additional pricing pressure and uncertainty and incurring additional costs. See Risk Factor “—We engage in a highly competitive business. If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted.”
• Government contracts are subject to specific procurement regulations, which affect how we transact business with our customers and, in some instances, impose additional costs on our business operations. For example, for contracts with the U.S. federal government, we must comply with the FAR, the Truthful Cost or Pricing Data Act, the Cost Accounting Standards (“CAS”), and numerous regulations governing environmental and employment practices. Government contracts also contain terms that may expose us to heightened levels of risk and potential liability than non-government contracts.
• Many of our U.S. federal government contracts require our employees and facilities to have security clearances, which can be difficult and time consuming to obtain. If our employees or our facilities are unable to obtain or retain the necessary security clearances, our customers could terminate or not renew existing contracts or award us new contracts, which could have a material adverse impact on our business, financial condition and results of operations. Our government contracts may also involve classified information and security restrictions, which may limit our ability to provide information about these classified programs, their risks or any disputes or claims relating to such programs. As a result, investors may have less insight into our business with respect to these programs.
• We may not be awarded government contracts because of existing policies designed to protect small businesses and small businesses with certain socio-economic conditions. As a result, we would not be eligible to perform as a prime contractor on those programs and in general would be restricted to no more than 49% of the work as a subcontractor on those programs. An increase in the amount of procurements under the Small Business Administration set-aside programs may impact our ability to bid on new procurements as a prime contractor or restrict our ability to recompete on incumbent work that is placed in the set-aside programs.
Negative press reports or publicity, which could pertain to employee or subcontractor misconduct, conflicts of interest, termination of a contract or task order, poor contract performance, legal violations or investigations, deficiencies in services, reports or other deliverables, information security breaches or other aspects of our business, regardless of accuracy, could harm our reputation with the U.S. federal government. Due to the sensitive nature of our work and our confidentiality obligations to our customers, we may be unable or limited in our ability to respond to such negative publicity. In addition, the mishandling or the perception of mishandling sensitive information, such as our failure to maintain the confidentiality of the existence of our
business relationships with certain of our customers, including as a result of misconduct or other improper activities by our employees or subcontractors, or a failure to maintain adequate protection against security breaches, including those resulting from cyberattacks, could harm our relationship with U.S. federal government agencies. Our ability to hire or retain employees and our standing in professional communities, to which we contribute and receive expert knowledge, could be diminished. To the extent our performance under a contract does not meet a government agency’s expectations, the customer might seek to terminate the contract prior to its scheduled expiration date, provide a negative assessment of our performance to government-maintained contractor past-performance data repositories, fail to award us additional business under existing contracts or otherwise, and direct future business to our competitors. If we were suspended or debarred from contracting with the federal government or any significant agency including the DOW, U.S. Intelligence Community, NASA and the DOE, if our reputation or relationship with government agencies was impaired, or if the government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, financial condition and results of operations would be materially and adversely affected.
In addition, many of our U.S. federal government contracts contain organizational conflict of interest (“OCI”) clauses that may limit our ability to compete for or perform certain other contracts or other types of services for particular customers. An OCI arises when we engage in activities that may make us unable to render impartial assistance or advice to the U.S. federal government, impair our objectivity in performing contract work or provide us with an unfair competitive advantage. Existing OCIs, and any OCIs that may develop, could preclude our competition for or performance on a significant contract, which could limit our opportunities.
These various uncertainties, restrictions, and regulations including oversight audits by government authorities as well as profit and cost controls, could have a material adverse impact on our business, financial condition and results of operations.
Our U.S. federal government contract work is regularly reviewed and audited by the U.S. federal government, U.S. federal government auditors and others, and these reviews can lead to withholding or delay of payments to us, non-receipt of award fees, legal actions, fines, penalties and liabilities and other remedies against us.
U.S. federal government contracts are subject to specific laws and regulations such as the FAR, the Truthful Cost or Pricing Data Act, the CAS, the Service Contract Act and DOW security regulations. Failure to comply with any of these regulations, requirements or statutes may result in contract price adjustments, financial penalties or contract termination. Our U.S. federal government contracts are subject to audits, cost reviews and investigations by U.S. federal government contracting oversight agencies such as the Defense Contract Audit Agency (“DCAA”). The DCAA reviews the adequacy of, and our compliance with, our internal control systems and policies, including our labor, billing, accounting, purchasing, property, estimating, compensation and management information systems. The DCAA has the authority to conduct audits and reviews to determine if we are complying with the requirements under the FAR and CAS, pertaining to the allocation, period assignment and allowability of costs assigned to U.S. federal government contracts. The DCAA presents its report findings to the Defense Contract Management Agency (“DCMA”). Should the DCMA determine that we have not complied with the terms of our contract or applicable statutes and regulations, payments to us may be disallowed, which could result in retroactive adjustments to previously reported revenues and refunding of previously collected cash proceeds.
Given the demands of working for the U.S. federal government, we may have disagreements or experience performance issues. When performance issues arise under any of our U.S. federal government contracts, the U.S. federal government retains the right to pursue remedies, which could include termination under any affected contract. If any contract were so terminated, our ability to secure future contracts could be adversely affected. Other remedies that could be sought by our U.S. federal government customers for any improper activities or performance issues include sanctions such as forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the U.S. federal government. Further, the negative publicity that could arise from disagreements with our customers or sanctions as a result thereof could have an adverse effect on our reputation in the industry, reduce our ability to compete for new contracts and may also have a material adverse effect on our business, financial condition and operating results.
A delay in the completion of the federal government’s budget process, a prolonged continuing resolution or government shutdown, a decline in the federal government budget, changes in spending or budgetary priorities or delays in contract awards may materially adversely affect our business, financial condition and results of operations.
To the extent the U.S. Congress is unable to approve the annual federal budget or raise the debt ceiling on a timely basis, and enacts a continuing resolution, funding for new projects may not be available and funding on contracts we are already performing may be delayed. If Congressional efforts to approve such funding fail or if a government shutdown occurs, and Congress is unable to craft a long-term agreement on the U.S. federal government’s ability to incur indebtedness in excess of its current limits, the U.S. federal government may not be able to fulfill its current funding obligations and there could be significant disruption to all discretionary programs, which would have corresponding impacts on us and our industry. Any such delays would likely result in new business initiatives being delayed or canceled and a reduction in our backlog, and could have
a material adverse effect on our revenue, cash flow and operating results. The delay or cancellation of key programs or the delay of contract payments may have a material adverse effect on our revenue and operating results.
Additionally, levels of U.S. federal government spending are difficult to predict and subject to significant risk. Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the U.S. presidential administration and Congress and what challenges budget reductions will present for us and our industry generally. Pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities and defense spending levels, could adversely affect the funding for individual programs and delay purchasing or payment decisions by our customers. Current U.S. federal government spending levels for defense-related or other programs may not be sustained, and future spending and program authorizations may not increase or may decrease or shift to programs in areas where we do not provide services or are less likely to be awarded contracts. The U.S. federal government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift defense or other budgetary priorities, reduce overall U.S. federal government spending or delay contract or task order awards for defense-related or other programs from which we would otherwise expect to derive a significant portion of our future revenues. A significant decline in overall U.S. federal government spending, including the areas of national security, intelligence and homeland security, a significant shift in U.S. federal government spending priorities, the substantial reduction or elimination of particular defense-related programs or significant delays in contract or task order awards for large programs could adversely affect our business, financial condition and operating results.
Historically, we have benefited from both domestic and international government programs that provide funding for our services. While spending and stimulus bills may provide funding in many of the markets in which we operate, we may not be able to obtain the expected benefits from these bills or similar bills in the future. In addition, the timing of funding awards under these bills is uncertain. A reduction in the amount of governmental funding available could materially affect our results of operations.
We engage in a highly competitive business. If we are unable to compete effectively, we could lose market share and our business and results of operations could be negatively impacted.
We face intense competition to provide engineering and technology solutions to customers. The markets we serve are highly competitive, and we compete against a large number of regional, national and multinational companies, many of whom may have greater financial resources, name recognition and a larger pool of technical staff. The extent and type of our competition varies by industry, geographic area and project type.
Our projects are frequently awarded through a competitive procurement process, which involves risks and substantial costs, including the cost and managerial time to prepare bids and proposals for contracts that we may not be awarded or may be split among competitors, the risk of inaccurately estimating the resources required to fulfill a contract we are awarded, the difficulty of execution, cost overruns and loss of committed costs, and any opportunity cost of not bidding and winning other contracts we might have otherwise pursued. With respect to U.S. federal government customers, the procurement process may change. See Risk Factor “—The U.S. federal government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.”
Furthermore, even after being awarded a contract, we may encounter significant delay, expense, contract modifications or even contract loss as a result of bid protests from unsuccessful bidders. It can take many months for the relevant U.S. federal government agency to resolveprotests by one or more of our competitors of contract awards we receive. Bid protests may result in significant expense to us, contract modification, or loss of an awarded contract as a result of the award being overturned. Even where a bid protest does not result in a renewed competition, the resolution typically extends the time until the contract activity can begin.
We are constantly competing for project awards based on pricing, schedule and the breadth and technical sophistication of our services. Some of our competitors have made or could make acquisitions of businesses or establish agreements among themselves or third parties, which could allow them to offer more competitive and comprehensive solutions. As a result, our competitors may be able to accelerate the adoption of new technologies that better address customer needs, expand their offerings more quickly than we do, limit our access to certain suppliers or devote more significant resources than us. Competition can place downward pressure on our contract prices and profit margins, which increases the risk that, among other things, we may not realize profit margins at the same rates as we have seen in the past or may become responsible for costs or other liabilities we have not accepted in the past. If we are unable to compete effectively, we may experience a loss of market share or reduced profitability or both, which could have a material adverse impact on our business, financial condition and results of operations.
Our results of operations depend on the award of new contracts and the timing of the award of these contracts.
Our revenues depend on new contract awards. Delays in the timing of the awards or cancellations of such projects as a result of economic conditions, material and equipment pricing and availability or other factors could impact our long-term projected
results. It is particularly difficult to predict whether or when we will receive contracts for large-scale projects as these contracts frequently involve a lengthy and complex procurement and selection process, which is affected by a number of factors, such as market conditions or environmental and other governmental approvals. Since a significant portion of our revenues is generated from such projects, our results of operations and cash flows can fluctuate significantly from quarter to quarter depending on the timing of our contract awards and the commencement or progress of work under awarded contracts.
The uncertainty of our contract award timing can also present difficulties in matching workforce size with contract needs. In some cases, we maintain and bear the cost of a ready workforce that is larger than necessary under existing contracts in anticipation of future workforce needs for expected contract awards. When an expected contract award is delayed or not received, we incur additional costs resulting from reductions in staff or redundancy of facilities, which could have a material adverse effect on our business, financial condition and results of operations.
Continuing elevated inflation, rising or continued high interest rates, and/or costs could reduce the demand for our services as well as decrease our profit on our existing contracts, in particular with respect to our fixed-price contracts.
Rising inflation, interest rates, and/or costs could reduce the demand for our services. In addition, we bear all of the risk of high inflation with respect to those contracts that are fixed-price. Because a significant portion of our revenues are earned from cost-plus-fee type contracts (63% for fiscal year 2025), the effects of inflation on our financial condition and results of operations over the past few years have been generally minor. Additionally, we are typically able to price fixed-price and time-and-materials (“T&M”) contracts in a manner that accommodates inflation and cost increases over the period of performance. However, if we continue to experience inflationary pressures, inflation may have a larger impact on our results of operations in the future, particularly if we expand our business into markets and geographic areas where fixed-price and lump-sum work is more prevalent. Therefore, continued inflation, rising or continued high interest rates and/or construction costs could have a material adverse impact on our business, financial condition and results of operations.
Many of our work sites are workplaces with inherent safety and environmental risks. The occurrence of an accident or safety incident involving employees, contractors or others can result in injuries, disabilities or even loss of life, which could expose us to significant financial losses and reputational harm, as well as civil and criminal liabilities.
At work sites, our employees, contractors and others may be in close proximity with large pieces of mechanized equipment, moving vehicles, chemical and manufacturing processes and hazardous and highly regulated materials, such as nuclear and radioactive materials, in a challenging environment and often in geographically remote locations. We are responsible for safety on some of those project sites, and, accordingly, we have an obligation to comply with applicable laws, including to implement effective safety policies and procedures and to provide appropriate personal protective equipment. The failure by us or others working at such sites to comply with such laws, to implement effective safety procedures, to provide necessary equipment, to protect other contractors at work sites we manage or to conduct work in a safe manner, may result in injury, disability or loss of life, which may result in investigations, claims or litigation or result in delays in the completion or commencement of our projects. Unsafe work sites also have the potential to increase employee turnover, increase the cost of a project to our customers and raise our operating and insurance costs. In addition, releases of hazardous materials or nuclear wastes, or fires, explosions or other incidents, may result in environmental damages, or public safety concerns, and the related costs and liabilities could have a material adverse effect on our business or results of operations.
Our safety record is critical to our reputation. Many of our customers require that we meet certain safety criteria to be eligible to bid for contracts, and our contracts may provide for automatic termination or forfeiture of some or all of our contract fees or profit in the event we fail to meet certain measures.
For all of the foregoing reasons, if we fail to maintain adequate safety standards, we could sufferharm to our reputation, reduced profitability or the loss of projects or customers, which could have a material adverse impact on our business, financial condition and results of operations.
The nature of our contracts, particularly any fixed-price contracts, subjects us to risks of cost overruns.
We generate revenues under various types of contracts, which include cost-plus-fee, T&M and fixed-price contracts. Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract, the nature of services or solutions provided, as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined. Cost-plus-fee and T&M contracts generally have lower profitability than fixed-price contracts. To varying degrees, each of our contract types involves some risk that we could underestimate the costs and resources necessary to fulfill the contract. Our profitability is adversely affected when we incur costs on cost-plus-fee and T&M contracts that we cannot bill to our customers. While fixed-price contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenues derived from fixed-price contracts represented 24% of our revenues for fiscal year 2025. Though some fixed-price contracts may anticipate moderate increases in costs over the term of the contract, cost overruns can occur, leading to reduced profits or, in some cases, a loss for that contract for a variety of reasons, including if the estimates
prove inaccurate or if circumstances change due to, among other things, unanticipated technical problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather or other delays beyond our control, changes in the costs of equipment or raw materials, our vendors’ or subcontractors’ inability or failure to perform, or changes in general economic conditions and inflationary pressures. We may present change orders and claims to our customers, subcontractors and vendors for, among other things, additional costs exceeding the original contract price. If we fail to properly document the nature of our claims and change orders or are otherwise unsuccessful in negotiating reasonable settlements with our customers, subcontractors and vendors, we will likely incur cost overruns, reduced profits or, in some cases, result in a loss for a project. When making proposals on fixed-price contracts, we rely heavily on our estimates of costs and timing for completing the associated projects, as well as assumptions regarding technical issues. Both fixed-price and many cost-plus-fee contracts require us to estimate the total cost of the work in advance of our performance. Fixed-price contracts are established in part on information in customer solicitations, which may be partial or incomplete; cost and scheduling estimates that are based on a number of assumptions, including those about future economic conditions, commodity and other materials pricing; and cost and availability of labor (including the cost of any related benefits or entitlements), equipment and materials and other exigencies.
Our contracts that are fundamentally cost-plus-fee in nature may also present a risk to the extent the final cost on a contract exceeds the amount the customer expected or budgeted. In each case, our failure to accurately estimate costs or the resources and technology needed to perform our contracts or to effectively manage and control our costs during the performance of work could result, and in some instances has resulted, in reduced profits or in losses. These risks are exacerbated for projects with long-term durations because there is an increased risk that the circumstances on which we based our original estimates will change in a manner that increases costs. More generally, any increased or unexpected costs or unanticipateddelays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control (such as performance failures of our subcontractors, rising inflation, natural disasters or other force majeure events) could make our contracts less profitable than expected or unprofitable.
Our failure to meet performance requirements or contractual schedules could adversely affect our business, financial condition and results of operations.
Many of our contracts require us to satisfy specific progress or performance milestones in order to receive payment from the customer. As a result, we often incur significant costs for engineering, materials, components, equipment, labor or subcontractors prior to receipt of payment from a customer, which may impact our liquidity. In some circumstances, we may incur penalties if we do not achieve completion by a scheduled date. In some cases, the occurrence of delays may be due to factors outside of our control, such as due to supply chain shortages.
The contracts in our backlog may be adjusted, canceled or suspended by our customers and, therefore, our backlog is not necessarily indicative of our future revenues or earnings.
Backlog represents estimates of the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. As of October 3, 2025, backlog was $47.1 billion. The backlog may not be realized as revenues in the amounts reported or if realized will result in profits. In accordance with industry practice, substantially all of our contracts, including our U.S. federal government contracts, are subject to cancellation, termination, or suspension at the discretion of the customer, and may be subject to changes in the scope of services to be provided, as well as adjustments to the costs relating to the contracts, and may be subject to other contingencies such as congressional appropriations. The maximum contract value specified under a government contract or task order awarded to us is not necessarily indicative of the revenues that we will realize under that contract. For example, many government contracts are made with multiple providers, meaning that the government could turn to other companies to fulfill the contract. Action by the government to obtain support from other contractors or failure by the government to order the quantity of work anticipated could reduce revenues realized under a particular contract. Our unfunded backlog contains management’s estimate of amounts expected to be realized on unfunded contract work that may never be realized as revenues. In the event of a contract cancellation, we would generally have no contractual right to the revenue reflected in our backlog. Contracts can remain in backlog for extended periods of time because of the nature of the project and the timing of the particular services required by the contract. The risk of contracts in backlog being canceled or suspended generally increases during periods of widespread economic slowdowns or in response to changes in commodity prices.
In some markets, there is a continuing trend toward cost-plus-fee contracts with incentive-fee arrangements. Typically, our incentive fees are based on such things as achievement of target completion dates or target costs, overall safety performance, overall customer satisfaction and other performance criteria. If we fail to meet such targets or achieve the expected performance standards, we may receive a lower, or even zero, incentive fee, resulting in lower gross margins. Accordingly, the contracts in backlog, assuming they produce the revenues currently expected, may not generate gross margins at the rates we have realized in the past.
The provision of our services may expose us to significant monetary damages or even criminalviolations in the event of liabilities resulting from our activities, including noncompliance with regulatory requirements, and our insurance policies
may not provide adequate coverage, which could have a material adverse impact on our business, financial condition, and results of operations and damage our reputation.
We provide services that are subject to professional standards and qualifications, including providing services that are based on our professional engineering expertise, as well as our other professional credentials. These services must comply with various professional standards, duties and obligations regulating the performance of such services. Our business, for example, may involve professional judgments regarding the planning, design, development, construction, operations and management of government and industrial facilities. While we do not generally accept liability for consequential damages in our contracts, and although we have adopted a range of insurance, risk management and risk avoidance programs designed to reduce potential liabilities, we may be deemed to be responsible for these professional judgments, recommendations or opinions if they are later determined to be inaccurate, or if a catastrophic event or other failure occurs at one of our work sites. Any unfavorable legal ruling against us could result in substantial monetary damages, disqualification to perform services in the future, or even criminalviolations.
Such events could result in significant professional liability and warranty or other claimsagainst us that could be highly publicized and have reputational harm, especially if public safety is impacted. We could also be liable to third parties, including through class actions, even if we are not contractually bound to those third parties. These liabilities could exceed our insurance limits or the fees we generate, may not be covered by insurance at all due to various exclusions in our coverage and could impact our ability to obtain insurance in the future. Further, even where coverage applies, the policies have limits and deductibles or retentions, which could result in our assumption of exposure for certain amounts with respect to any claim filed against us. In addition, indemnification from customers or subcontractors may not be available. An uninsured claim, either in part or in whole, as well as any claim covered by insurance but subject to a policy limit, high deductible and/or retention, if successful and of a material magnitude, could have a material adverse impact on our business, financial condition and results of operations.
We are a party to claims and litigation in the normal course of business, including litigation inherited through acquisitions. Our business operations can result in substantial injury or damage to employees or others, and expose us to substantial claims and litigation and investigations relating to, among other things, personal injury, loss of life, business interruption, property damage, or pollution and environmental damage. We can also be exposed to claims if we agreed that our work will achieve certain performance standards or satisfy certain technical requirements and those standards or requirements are not met. In many of our contracts with customers, subcontractors and vendors, we agree to retain or assume potential liabilities for damages, penalties, losses and other exposures relating to projects that could result in claims that greatly exceed the anticipated profits relating to those contracts. In addition, while customers and subcontractors may agree to indemnify us against certain liabilities, such third parties may refuse or be unable to pay us.
With a workforce of approximately 50,000 people globally, we are also party to labor and employment claims in the normal course of business. Certain of these claims relate to allegations of harassment and discrimination, pay equity, denial of benefits, wage and hour violations, whistleblower protections, concerted protected activity, and other employment protections, and may be pursued on an individual or class action basis depending on applicable laws and regulations. Some of such claims may be insurable, while other such claims may not.
In addition, claims received from subcontractors or made by us for change orders can be the subject of lengthy negotiations, arbitration or litigation proceedings, which could result in the investment of significant amounts of working capital pending the resolution of the relevant change orders and claims. A failure to promptly recover on these types of claims could have a material adverse impact on our liquidity and financial results. Additionally, irrespective of how well we document the nature of our claims and change orders, the cost to prosecute and defendclaims and change orders can be significant.
Litigation and regulatory proceedings are subject to inherent uncertainties and unfavorable rulings can and do occur. Pending or future claimsagainst us could result in professional liability, product liability, criminal liability, warranty obligations, default under our credit agreement and other liabilities which, to the extent we are not insured against a loss or our insurer fails to provide coverage, could have a material adverse impact on our business, financial condition, and results of operations and damage our reputation.
Employee, agent or partner misconduct, or our overall failure to comply with laws or regulations, could weaken our ability to win contracts, which could result in reduced revenues and profits.
We are subject to the risk of misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by our employees, agents or partners, which could have a significant negative impact on our business and reputation. Such misconduct includes the failure to comply with government procurement regulations, regulations regarding the protection of classified information, regulations prohibiting bribery and other corrupt practices, regulations regarding the pricing of labor and other costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, regulations pertaining to export control, environmental laws, employee wages, pay and benefits, and any other applicable laws or regulations. For example, we routinely provide services that may be highly sensitive
or that relate to critical national security matters; if a security breach were to occur, our ability to receive future government contracts could be severely limited. The precautions we take to prevent and detect these activities may not be effective and we could face unknown risks or losses. Our failure to comply with applicable laws or regulations, or acts of misconduct subjects us to the risk of fines and penalties, cancellation of contracts, loss of security clearance and suspension or debarment from contracting, any of which could damage our reputation, weaken our ability to win contracts and result in reduced revenues and profits and could have a material adverse impact on our business, financial condition and results of operations. See “Risks Related to Regulatory Compliance”.
Cybersecurity or privacy breaches, or systems and information technology interruption or failure could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.
We are subject to certain risks related to interruptions, errors and delays in our information technology systems. In the event we are unable to maintain or improve the efficiency and efficacy of our systems, the operation of such systems could result in the material loss, corruption, or release of data. Further, a significant percentage of our employees continue to work under remote or hybrid working arrangements, which may pose additional data security risks. These risks will continue as we continue to operate both remote and hybrid arrangements for employees. If we experience compromises to security that result in performance or availability problems, our customers may lose trust and confidence in us. In addition, our computer and communication systems and operations could be damaged or interrupted by natural disasters, force majeure events, telecommunications failures, power loss, acts of war or terrorism, computer viruses, malicious code, physical or electronic security breaches, intentional or inadvertent user misuse or error or similar events or disruptions. Any of these or other events could have a material adverse impact on our business, financial condition, protection of personal data and intellectual property and results of operations, as well as those of our customers.
As a government contractor and a provider of information technology services operating in multiple regulated industries and geographies, we and our service providers, suppliers and subcontractors collect, store, transmit and otherwise process personal, confidential, proprietary and sensitive information, including classified information. As a result, our information technology systems, including those provided by third-party cloud providers or other infrastructure-as-a-service providers, which have grown over time, including through acquisitions, have, and will continue to experience threats, including unauthorized access, computer hackers, computer viruses, malicious code, ransomware, phishing, organized cyber-attacks and other security problems and system disruptions, including unauthorized access to and disclosure of our and our customers’ proprietary, classified or other protected information. Such threats have caused, and may also seek to cause in the future, payments due to or from us to be misdirected to fraudulent accounts, which may not be recoverable by us.
While we have security measures and technology in place designed to protect our and our customers’ proprietary, classified and other protected information, there can be no assurance that our efforts will prevent all threats to our computer systems. Military action and conflicts and geopolitical shifts raise concerns about a potential increase in cyber-attacks generally as a result of the military conflict, including as between Russia and Ukraine, and related sanctions imposed by the United States and other countries. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. Because the techniques used to obtain unauthorized access or sabotage systems change frequently, become more sophisticated and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. As a result, we may be required to expend significant resources to protect against the threat of system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches. Any of these events could damage our reputation, cause us to incur significant liability and have a material adverse effect on our business, financial condition and results of operations.
For additional information on the regulatory requirements governing data privacy and security, see “Risks Related to Regulatory Compliance—Our business is subject to complex and evolving laws and regulations regarding data privacy and security which could subject us to investigations, claims or monetary penaltiesagainst us, require us to change our business practices or otherwise adversely affect our business, financial condition and results of operations.”
If we do not have adequate indemnification for our nuclear services, or business is slowed by the extensive regulatory processes for approval and licensing for new and existing nuclear technologies or socio-political opposition to nuclear-related technology and activities, it could adversely affect our business, financial condition and results of operations.
The Price-Anderson Nuclear Industries Indemnity Act, commonly called the Price-Anderson Act (“PAA”), is a U.S. federal law, which, among other things, regulates radioactive materials and the nuclear energy industry, including liability and compensation in the event of nuclear related incidents. The PAA provides certain protections and indemnification to nuclear energy plant operators and DOE contractors. The PAA protections and indemnification apply to us as part of our services to the U.S. nuclear energy industry and DOE for new facilities, maintenance, modification, decontamination and decommissioning of nuclear energy, weapons and research facilities.
We offer similar services in other jurisdictions outside the U.S. For those jurisdictions, varying levels of nuclear liability protection is provided by international treaties, and/or domestic laws, such as the Nuclear Liability and Compensation Act of
Canada and the Nuclear Installations Act of the United Kingdom, insurance and/or assets of the nuclear installation operators (some of which are backed by governments) as well as under appropriate enforceable contractual indemnifications and hold-harmless provisions. These protections and indemnifications, however, may not cover all of our liabilities that could arise in our performance of these services. To the extent the PAA or other protections and indemnifications do not apply to our services, the cost of losses associated with liability not covered by the available protections and indemnifications, or by virtue of our loss of business because of these added costs could have a material adverse impact on our business, financial condition and results of operations.
In addition, certain of our contracts provide a wide range of nuclear services to the U.S. and U.K. governments. If the policies of those governments were to de-emphasize nuclear matters, it may have a material adverse impact on our business, financial condition and results of operations.
Uncertainty over global tariffs, or the financial impact of tariffs, may negatively impact our results.
Our business could be adversely impacted by changes in the U.S. Government’s approach to tariffs and other trade policies. As a result of major U.S. Government trade policy changes announced by President Trump, there is currently significant uncertainty with respect to tariffs that may impact our supply chain. New or increased tariffs for imports into the United States, as well as new or increased tariffs or trade bans imposed by other countries, could have an adverse effect on both our U.S. and international operations due to increased costs of materials, disruptions or delays in deliveries, and greaterdifficulty in planning and operating our business. While our business in the U.S. primarily provides labor services to our customers, some of our U.S. work involves providing goods that may be subject to tariffs. Our non-U.S. work could also be impacted by greater costs for goods sourced from the U.S. due to increased tariffs imposed by other countries. To date, the Company has not experienced a material negative impact from the recent changes in tariff policies. Although we plan to continue to monitor trade policy developments closely and to mitigate the adverse impacts of any changes where possible, we may not be able to fully mitigate such impacts in all situations.
Risks Related to International Operations
Our international operations are exposed to additional risks and uncertainties, including unfavorable political developments and weak foreign economies.
Our business is dependent on the continued success of our international operations, and we expect our international operations to continue to account for a significant portion of our revenues. Our international operations are subject to a variety of risks, including:
• recessions and other economic crises in other regions, such as Europe, Asia or other specific foreign economies and the impact on our costs of doing business in those countries;
• recent geopolitical tensions and conflict between the U.S. government and certain South and Central American countries;
• difficulties in staffing and managing foreign personnel and operations, including challenges related to logistics, communications and professional licensure of our international workforce;
• unexpected changes in foreign government policies and regulatory requirements;
• potential non-compliance with a wide variety of laws and regulations, including anti-corruption, export control and anti-boycott laws and similar non-U.S. laws and regulations;
• potential non-compliance with regulations and evolving industry standards regarding consumer protection and data use and security, including the GDPR approved by the European Union and the Data Protection Act approved by the United Kingdom;
• lack of developed legal systems to enforce contractual or intellectual property rights;
• expropriation and nationalization of our assets in a foreign country;
• renegotiation or nullification of our existing contracts;
• the adoption of new, and the expansion of existing, trade or other restrictions;
• embargoes, duties, tariffs or other trade restrictions, including sanctions;
• geopolitical developments that impact our or our customers’ ability to operate in a foreign country;
• changes in labor conditions;
• acts of war, aggression between nations, civil unrest, force majeure, and terrorism;
• the ability to finance efficiently our foreign operations;
• social, political, and economic instability;
• changes to tax policy;
• currency exchange rate fluctuations;
• limitations on the ability to repatriate foreign earnings; and
• U.S. federal government policy changes in relation to the foreign countries in which we operate.
The lack of a well-developed legal system in some of these countries may make it difficult to enforce our contractual rights. In addition, military action, geopolitical shifts or continued unrest, particularly in the Middle East, could disrupt our operations in the region and elsewhere and may also impact the supply or pricing of oil, increase our security costs and cost of compliance with local laws, and present risks to our reputation. Additionally, recent events, including changes in U.S. trade policies and responsive changes in policy by foreign jurisdictions and similar geopolitical developments and uncertainty in the E.U., Asia and elsewhere, have increased levels of political and economic unpredictability globally, and may increase the volatility of global financial markets and the global and regional economies.
To the extent our international operations are affected by unexpected or adverse economic, political and other conditions, our business, financial condition and results of operations may be adversely affected.
Changes in domestic and foreign governmental laws, regulations and policies, changes in statutory tax rates and laws, and unanticipated outcomes with respect to tax audits could adversely affect our business, profitability and reputation.
Our domestic and international sales and operations are subject to risks associated with changes in laws, regulations and policies (including changes in the FAR, export/import laws, tax policies, environmental and employment requirements and other similar legal requirements). Failure to comply with any of the foregoing laws, regulations and policies could result in civil and criminal, monetary and non-monetary penalties, as well as damage to our reputation. In addition, our costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental, employment, data security, data privacy, health and safety, environmental, and employment laws may exceed our estimates. While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect our business, results of operations and reputation.
We are subject to taxation in a number of jurisdictions. Accordingly, our effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates. A material change in the statutory tax rate or interpretation of local law in a jurisdiction in which we have significant operations could adversely impact our effective tax rate and impact our financial results.
Our tax returns are subject to audit and taxing authorities could challenge our operating structure, taxable presence, application of treaty benefits or transfer pricing policies. If changes in statutory tax rates or laws or audits result in assessments different from amounts estimated, our business, results of operations and financial condition could be adversely affected. In addition, changes in tax laws could have an adverse effect on our customers, resulting in lower demand for our products and services.
We work in international locations where there are high security risks, which could result in harm to our employees or unanticipated costs.
Some of our services are performed in high-risk locations, including for example Iraq, where the country or location is subject to political, social or economic risks, or war, terrorism or civil unrest. In those locations where we have employees or operations, we may expend significant efforts and incur substantial security costs to maintain the security of our personnel. Despite these activities, in these locations, we cannot always guarantee the security of our personnel. Acts of terrorism, threats of armed conflicts and human rights violations in or around various areas in which we operate could limit or disrupt markets and our operations, including disruptions resulting from the evacuation of personnel or the cancellation of contracts, and in some instances, cause damage to our reputation. The loss of key employees or contractors, whether as a result of injury, death or attrition, may adversely impact our business operations.
Risks Related to Acquisitions, Investments, Joint Ventures and Divestitures
Our use of joint ventures, partnerships and strategic investments in entities exposes us to risks and uncertainties, many of which are outside of our control.
As is common in our industry, we perform certain contracts as a member of joint ventures, partnerships, and similar arrangements. This situation exposes us to a number of risks, including the risks that our partners may be unable to fulfill their obligations to us or our customers and that our reputation may be negatively affected due to the actions of our joint venture or other partners.
Further, we have limited ability to control the actions of our joint venture partners, including with respect to nonperformance, default, bankruptcy or legal or regulatory compliance. Our partners may be unable or unwilling to provide the required levels of financial support to the partnerships. If these circumstances occur, we may be liable for claims and losses attributable to the partner by operation of law or contract. These circumstances could also lead to disputes and litigation with our partners or customers, all of which could have a material adverse impact on our reputation, business, financial condition and results of operations.
We depend on the management effectiveness of our joint venture partners. Differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major issues, which could materially affect the business and operations of these ventures. In addition, in many of the countries in which we engage in joint ventures, it may be difficult to enforce our contractual rights under the applicable joint venture agreement. If we are not able to enforce our contractual rights, we may not be able to realize the benefits of the joint venture or we may be subject to additional liabilities.
We participate in joint ventures and similar arrangements in which we are not the controlling partner. In these cases, we have limited control over the actions of the joint venture. These joint ventures may not be subject to the same requirements regarding internal controls and internal control over financial reporting that we follow. To the extent the controlling partner makes decisions that negatively impact the joint venture or internal control problems arise within the joint venture, it could have a material adverse impact on our business, financial condition and results of operations.
The failure by a joint venture partner to comply with applicable laws, regulations or customer requirements could negatively impact our business and, for government customers, could result in fines, penalties, suspension or even debarment being imposed on us, which could have a material adverse impact on our business, financial condition and results of operations.
An impairment charge on our goodwill or intangible assets could have a material adverse impact on our financial position and results of operations.
Because we have grown in part through acquisitions, goodwill and intangible assets represent a substantial portion of our assets. As of October 3, 2025, we have $5.7 billion of goodwill, representing 49.8% of the total assets of $11.5 billion. Under U.S. GAAP, we are required to test goodwill carried in our Consolidated Balance Sheets for possible impairment on an annual basis, and whenever events occur, or circumstances change, that indicate impairments could exist and that the carrying value of such goodwill may not be recoverable, based upon a fair value approach. These impairment tests are based on several factors requiring judgment. We also assess the recoverability of the unamortized balance of our intangible assets when indications of impairment are present based on expected future probability and undiscounted expected cash flows and their contribution to our overall operations. We evaluate goodwill for impairment annually on the first day of the fourth quarter of the fiscal year or whenever events or circumstances indicate that the carrying value may not be recoverable.
If our market capitalization drops significantly below the amount of net equity recorded on our balance sheet, it might indicate a decline in our fair value and would require us to further evaluate whether our goodwill has been impaired. If the fair value of our reporting units is less than their carrying value, we could be required to record an impairment charge. The amount of any impairment could be significant and could have a material adverse impact on our financial position and results of operations for the period in which the charge is taken. For a further discussion of goodwill impairment testing, please see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Our business strategy relies in part on acquisitions and strategic investments to sustain our growth, as well as targeted divestitures. These transactions present certain risks and uncertainties.
Our business strategy involves growth through, among other things, the acquisition of, and strategic investments in, other companies. We also engage in portfolio shaping through divestitures. These transactions, as well as transactions we may engage in in the future, present a number of risks, including:
• assumption of liabilities of an acquired business, including liabilities that were unknown at the time the transactions were negotiated, such as if the target company failed to comply with U.S. federal, state, local and foreign laws and regulations and/or contractual requirements with government customers;
• valuation methodologies may not accurately capture the value of the target company’s business;
• failure to realize anticipated benefits, such as cost savings, synergies, business opportunities and growth opportunities within the anticipated time-frame or at all;
• the loss of key customers or suppliers, including as a result of any actual or perceived conflicts of interest;
• difficulties or delays in obtaining regulatory approvals, licenses and permits;
• the effects of divertingleadership’s attention from day-to-day operations to matters involving the integration of target companies;
• potentially substantial transaction costs associated with business combinations, strategic investments and/or divestitures;
• potential impairment resulting from the overpayment for an acquisition or investment or post-closingdeterioration in the target company's business;
• difficulties relating to assimilating the leadership, personnel, benefits, services, and systems of an acquired business and to assimilating marketing and other operational capabilities;
• increased financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial and non-financial reporting and internal controls;
• risk that we are not able to complete strategic divestitures on satisfactory terms and conditions, including non-competition arrangements applicable to certain of our business lines, or within expected timeframes;
• risks that indemnification related to businesses divested or spun off that we may be required to provide or otherwise bear may be significant and could negatively impact our business; and
• the potential for claims for damages by the sellers of any business if we enter into an acquisition agreement that we do not ultimately consummate, or if disputes with sellers or buyers arise post-closing relating to post-closing covenants or payment obligations.
While we may obtain indemnification rights from the sellers of acquired businesses and/or insurance that could mitigate certain of these risks, such rights may be difficult to enforce, the losses may exceed any dedicated escrow funds and the indemnitors may not have the ability to financially support the indemnity, or the insurance coverage may be unavailable or insufficient to cover all losses.
If our leadership is unable to successfully integrate acquired companies or implement our growth strategy with respect to acquisitions and/or strategic investments, our operating results could be harmed. Moreover, we may not continue to successfully expand or the growth or expansion may not result in profitability.
In addition, we may not locate suitable acquisition or investment targets or may not be able to consummate any such transactions on terms and conditions acceptable to us. Existing cash balances and cash flows from operations, together with borrowing capacity under our senior secured credit facility, may be insufficient to make acquisitions and/or strategic investments. Future acquisitions and/or strategic investments may require us to obtain additional equity or debt financing, which may not be available on attractive terms, or at all. Acquisitions and/or strategic investments may also bring us into businesses we have not previously conducted and expose us to additional business risks that are different than those we have traditionally experienced.
Risks Related to Regulatory Compliance
As a U.S. federal government contractor, we are subject to various procurement and other laws and regulations and could be adversely affected by a failure to comply with these laws and regulations or changes in such laws and regulations.
U.S. federal government contractors must comply with many significant procurement regulations and other specific legal requirements. These regulations and requirements, although customary in U.S. federal government contracting, increase our performance and compliance costs and are regularly evolving. We are subject to and expected to perform in compliance with a vast array of federal and state civil and criminal laws, including, but not limited to:
• the Truthful Cost or Pricing Data requirements (commonly referred to as the Truth in Negotiations Act);
• the Procurement Integrity Act;
• the Anti-Kickback Act;
• the Cost Accounting Standards;
• the FAR and agency FAR supplements;
• the International Traffic in Arms Regulations promulgated under the Arms Export Control Act;
• the Close the Contractor Fraud Loophole Act;
• the Foreign Corrupt Practices Act (“FCPA”);
• the Service Contract Act;
• the Davis-Bacon Act;
• immigration laws and regulations;
• tax laws and regulations;
• import-export controls and trade restrictions; and
• federal and state employment laws and regulations (including equal opportunity and affirmative action requirements).
For example, our global operations require importing and exporting goods and technology across international borders which requires compliance with both export regulatory laws and International Trafficking in Arms Regulations (“ITAR”). Although we have policies and procedures to comply with U.S. and foreign international trade laws, the violation of such laws could subject us and our employees to civil or criminalpenalties, including substantial monetary fines, or other adverse actions including denial of import or export privileges or debarment from participation in U.S. federal government contracts, and could damage our reputation and our ability to do business. Similarly, the companies we acquire may have issues with regulatory compliance and the integration of those companies may present challenges, which could risk violations of governmental requirements.
Additionally, we are subject to the FalseClaims Act (the “FCA”), which provides for substantial damages and penalties where, for example, a contractor presents a false or fraudulent claim to the government for payment or approval. Actions under the FCA may be brought by the government or by individuals (including employees or former employees) on behalf of the government (who may then share a portion of any recovery). If we fail to comply with these laws and regulations, we may also sufferharm to our reputation, which could impair our ability to win awards of contracts in the future or receive renewals of existing contracts. If we are subject to civil and criminalpenalties and administrative sanctions or sufferharm to our reputation, our business, financial condition and results of operations could be materially and adversely affected. We are currently, and may, from time to time, be subject to government investigation or litigation brought by or on behalf of the government under the FCA. Because of the inherent uncertainties of litigation, we are unable to predict the outcome of these proceedings, though we believe that the resolution of these matters will not have a material effect on our results of operations. However, we may be subject to additional FCA litigation, which could include claims for treble damages, and these suits may remain under seal (and hence, be unknown to us) for some time while the U.S. federal government decides whether to intervene on behalf of the plaintiff.
Under our U.S. federal government contracts, we are required to report significant overpayments we receive from the U.S. federal government and other specified violations to the relevant agency inspector general. In addition, compliance with procurement laws and regulations, as well as performance under the terms of government contracts and subcontracts, is periodically reviewed by U.S. federal government agencies. We and many of our customers operate in highly regulated environments, which requires us or our customers to obtain, and to comply with, federal, state and local government permits and approvals. These permits or approvals are subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with, or the loss or modification of, the conditions of permits or approvals subjects us to the risk of penalties or other liabilities, could have a material adverse impact on our business, financial condition and result of operations.
If we are found to have violated the law, or are found not to have acted responsibly as defined by the law, we may be subject to civil and criminalpenalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. federal government, any of which could have an adverse effect on its financial position, results of operations and/or cash flows.
Compliance with diverse and changing legal requirements is costly, time-consuming and requires significant resources. We conduct business in certain identified growth areas, such as national security and national intelligence, that are highly regulated and may expose us to increased compliance risk. New laws, regulations, or procurement requirements, or changes to current laws and regulations and requirements (including, for example, changes in the FAR, regulations relating to allowability of compensation costs, counterfeit parts, specialty metals and conflict minerals), can increase our costs and risks and reduce our profitability. U.S. federal government contract violations could result in the imposition of civil and criminalpenalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. federal government. We could also sufferseriousharm to our reputation. Any interruption or termination of our ability to bid on U.S. federal government contracts could materially and adversely affect our business, financial condition and results of operations.
In addition, we are subject to various additional international procurement and other laws and regulations, including the United Kingdom Bribery Act, with similar impacts to us for failure to comply.
The U.S. federal government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.
Our industry continues to experience significant changes to business practices as a result of an increased focus on affordability, efficiencies and recovery of costs, among other items. U.S. federal government agencies may face restrictions or pressure regarding the type and amount of services that they may obtain from private contractors. Legislation, regulations and initiatives dealing with procurement reform, including changes in the FAR, deterrence of fraud, and stricter environmental compliance or
sustainability requirements could have an adverse effect on us. Moreover, shifts in the buying practices of U.S. federal government agencies (such as increased usage of fixed-price contracts and multiple award contracts) could have adverse effects on government contractors, including us. Any of these changes could impair our ability to obtain new contracts or contract renewals. Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our business, financial condition and results of operations.
Our business is subject to complex and evolving laws and regulations regarding data privacy and security which could subject us to investigations, claims or monetary penalties, require us to change our business practices or otherwise adversely affect our business, financial condition and results of operations.
We are subject to a variety of laws and regulations in the U.S., at the federal, state and local levels and abroad, such as the General Data Protection Regulation in the European Union, relating to data privacy and security. These laws and regulations are complex, constantly evolving, and may be subject to significant change in the future. In addition, the application, interpretation and enforcement of these laws and regulations are often uncertain, particularly in new and rapidly evolving areas of technology, and may differ in material respects among jurisdictions, interpreted and applied inconsistently among jurisdictions or in a manner that is inconsistent with our current policies and practices, all of which can make compliance challenging and costly, and expose us to related risks and liabilities.
As a contractor supporting defense and national security customers, we are also subject to certain additional, specific regulatory compliance requirements relating to data privacy and security. Under the Defense Federal Acquisition Regulation Supplement and other federal regulations, we are required to implement the security and privacy controls in National Institute of Standards and Technology Special Publications on certain of our networks and information technology systems. To the extent that we do not comply with applicable security and control requirements, and there is unauthorized access to or disclosure of sensitive information (including personal information), this could potentially result in a contract termination or information security issues, which could materially and adversely affect our business and financial results and lead to reputational harm. We will be subject to the DOW Cybersecurity Maturity Model Certification (“CMMC”) requirements, which will require contractors that process, store, or transmit critical national security information on their information technology systems to receive specific third-party certifications relating to specified cybersecurity standards to be eligible for contract awards. In addition, our subcontractors, and in some cases our vendors, also may be required to adhere to the CMMC program requirements and, potentially, to achieve certification. Should our supply chain fail to meet compliance requirements or achieve certification, this may adversely affect our ability to receive awards or execute on relevant government programs. We are in the process of evaluating our readiness and preparing for the CMMC requirements, but to the extent we are unable to achieve certification in advance of contract awards that specify the requirement in the future, we will be unable to bid on such contract awards or follow-on awards for existing work with the DOW, depending on the level of standard as required for each solicitation, which could adversely impact our business, financial condition and results of operations. In addition, any obligations that may be imposed on us under the CMMC program may be different from or in addition to those otherwise required by applicable laws and regulations, which may cause additional expense for compliance.
The overarching complexity of data privacy and security laws and regulations around the world poses a compliance challenge that could manifest in costs, damages or liability in other forms as a result of failure to implement proper programmatic controls, failure to adhere to those controls, or the breach of applicable data privacy and security requirements by us, our employees, our business partners (including our service providers, suppliers or subcontractors) or our customers. We also expect that there will continue to be new proposed laws, regulations and industry standards concerning data privacy and security, and we cannot yet determine the impact such future laws, regulations and standards, or amendments to or re-interpretations of existing laws, regulations or standards, may have on our business. Any failure or perceived failure by us, our service providers, suppliers, subcontractors or other business partners to comply with applicable laws, regulations, our public privacy policies and other public statements about data privacy and security and other obligations in these areas could result in regulatory or government actions lawsuits against us (including civil claims, such as representative actions and other class action-type litigation), legal liability, monetary penalties, fines, sanctions, damages and other costs, orders to cease or change our processing of data, changes to our business practices, diversion of internal resources, and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations. We may also incur substantial expenses in implementing and maintaining compliance with such laws, regulations and other obligations.
Increasing scrutiny and changing and conflicting expectations from governmental organizations, customers, and our employees with respect to our sustainability practices may impose additional costs on us or expose us to new or additional risks.
There is increased scrutiny from governmental organizations, customers, and employees on companies’ sustainability practices and disclosures. If our sustainability practices do not meet evolving rules and regulations or stakeholder expectations and standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform or cannot publicly disclose for certain customers and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and our ability to attract new business and customers could be negatively impacted, as could
our attractiveness as an investment, service provider, employer, or business partner. Similarly, any failure or perceived failure in our efforts to execute our sustainability strategy, to achieve our current or future related goals, targets, and objectives, or to satisfy various reporting standards within the timelines expected by stakeholders or at all, could also result in similar negative impacts. Organizations that provide information to investors on corporate governance and related matters have developed rating processes for evaluating companies on their approach to sustainability matters, and unfavorable ratings of our sustainability efforts may lead to negative investor sentiment, diversion of investment to other companies, and difficulty in hiring skilled employees. In addition, complying or failing to comply with existing or future federal, state, local, and foreign legislation and regulations applicable to our sustainability efforts, which may conflict with one another, could cause us to incur additional compliance and operational costs or actions and suffer reputational harm, which could materially and adversely affect our business, financial condition and results of operations.
Risks Related to Our Indebtedness and Credit Markets
We have a significant amount of indebtedness (including associated covenants), which could adversely affect our financial condition or decrease our business flexibility.
The Credit Facility consists of our term facility maturing on September 27, 2031 and our revolving facility maturing on September 27, 2029. In August 2024, the Company also completed an offering of $1,000 million in aggregate principal amount of 7.250% senior notes due August 1, 2032.
Our level of indebtedness could have important consequences, including, but not limited to:
• reducing our flexibility to respond to changing business and economic conditions, and increasing our vulnerability to general adverse economic and industry conditions;
• requiring us to dedicate a substantial portion of our cash flows from operations to make debt service payments, thereby reducing the availability of cash flows to fund working capital, capital expenditures, dividends, share repurchases, acquisitions and investments and other general corporate purposes;
• limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate;
• limiting our ability to obtain additional financing to fund our working capital, capital expenditures, dividends, acquisitions and debt service requirements and other financing needs;
• increasing our vulnerability to increases in interest rates in general because a substantial portion of our indebtedness is bears interest at floating rates; and
• placing us at a competitive disadvantage to our competitors that have less debt.
Each financial institution that is part of the syndicate for the revolving facility is responsible on a several, and not joint, basis for providing a portion of the loans to be made under the revolving facility. If any financial institution or group of financial institutions with a significant portion of the commitments in the revolving facility fails to satisfy its or their respective obligations to extend credit under the revolving facility and we are unable to find a replacement for such participant or participants on a timely basis (if at all), our liquidity and results of operations may be adversely affected.
Our ability to service our indebtedness will depend on our future operating performance and financial results, which will be subject, in part, to factors beyond our control, including interest rates and general economic, financial and business conditions. If we do not have sufficient cash flow to service our indebtedness, we may need to refinance all or part of our indebtedness, borrow more money or sell securities or assets, some or all of which may not be available to us at acceptable terms or at all. In addition, we may need to incur additional indebtedness in the future. Although the terms of our indebtedness allow us to incur additional indebtedness, this would be subject to certain limitations which may preclude us from incurring the amount of indebtedness we otherwise desire.
Restrictions imposed by our senior credit facility limit our ability to operate the business and to finance our future operations or capital needs or to engage in other business activities.
The terms of the senior secured credit facility restrict us from engaging in specified types of transactions. For example, these restrictions include covenants limiting the ability of Amentum and its restricted subsidiaries, among other things, to:
• incur or guarantee additional indebtedness;
• create or incur liens;
• pay dividends on capital stock or redeem, repurchase or retire capital stock, warrants or indebtedness, as applicable;
• enter burdensome agreements restricting non-loan parties;
• make investments, loans, advances and acquisitions;
• sell assets, including capital stock of subsidiaries;
• consolidate or merge;
• engage in sale and lease-back transactions;
• engage in transactions with our affiliates; and
• amend our organizational documents, change its fiscal year or engage in different, material lines of business.
In addition, the revolving credit facility under the first lien credit agreement contains a financial maintenance covenant. Our ability to comply with these restrictions may be affected by events beyond our control, and we may not be able to maintain compliance with them. A breach of this covenant or any of the covenants described above could result in an event of default.
If an event of default occurs under the senior secured credit facility, the relevant lenders could elect to declare all amounts outstanding under the credit facility to be immediately due and payable and/or exercise their rights under the related security documents. If the indebtedness under the credit facility was to be accelerated, our assets may not be sufficient to repay such indebtedness in full. Any acceleration of amounts due under the credit facility or the substantial exercise by the relevant lenders of their rights under the security documents would have a material adverse effect on Amentum. In addition, an event of default under the credit facility may also be triggered under other debt instruments.
Our credit facility includes variable rates, which subject us to interest rate risk and could cause our debt service obligations to increase and net income and cash flows to correspondingly decrease.
Borrowings under the credit facility are at variable rates of interest and expose us to interest rate risk. In the recent past, inflation and other factors have resulted in an increase in interest rates generally. If interest rates were to continue to increase, our debt service obligations on the variable rate indebtedness referred to above would increase even if the principal amount borrowed remained the same, and our net income and cash flows would correspondingly decrease.
In addition, the senior secured credit facility references the Secured Overnight Financing Rate (“SOFR”) as the primary benchmark rate for our variable rate indebtedness. SOFR is a relatively new reference rate with a limited history, and changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates. As a result, the amount of interest payable on our variable rate indebtedness is difficult to predict.
Risks Related to the Transaction
We may not realize the anticipated financial and other benefits, including growth opportunities, expected from the Transaction.
We expect to realize synergies, growth opportunities and other financial and operating benefits as a result of the Transaction. The success of Amentum in realizing these benefits, and the timing of their realization, depends, among other things, on the successful integration following the Transaction. Even if we are able to integrate successfully, we cannot predict with certainty if or when these synergies, growth opportunities and other benefits will be realized, or the extent to which they will actually be achieved. For example, some of the benefits from the Transaction are being and may be offset by costs incurred in integrating the businesses. Realization of any synergies, growth opportunities or other benefits could be affected by the factors described in other risk factors and a number of factors beyond our control, including, without limitation, general economic conditions, increased operating costs and regulatory developments.
Any contractual arrangements may be on less favorable terms than the existing arrangements from which the Company benefits, may not efficiently mitigate dis-synergies arising from the Transaction, and may be inadequate to provide for the ongoing operation and growth of our business, preserve continuity for customers, deliver key capabilities or otherwise provide for continued cooperation in relevant business areas.
If the distribution in connection with the Transaction does not qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code, including as a result of actions taken in connection with the separation and distribution or the merger or as a result of subsequent acquisitions of shares of Jacobs or Amentum, then Jacobs and/or Jacobs’ shareholders that received Amentum common stock in the distribution could be required to pay substantial U.S. federal income taxes, and, in certain circumstances, we could be obligated to indemnify Jacobs for any tax liability imposed on Jacobs arising from our actions or inactions.
The consummation of the distribution was conditioned upon, among other things, the receipt by Jacobs of (1) the IRS ruling and (2) the distribution tax opinions from outside counsel and an accounting firm. Jacobs has received the distribution tax opinions and the IRS ruling, and although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect or if undertakings made to the IRS in connection with the letter ruling request are or have been violated, then Jacobs will not be able
to rely on the IRS ruling. In addition, the distribution tax opinions are based on, among other things, the IRS ruling as to the matters addressed by such ruling, current law and certain representations made by Jacobs and Amentum and certain assumptions. Any change in currently applicable law, which may be retroactive, or the failure of any representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by outside counsel and the accounting firm in the distribution tax opinions. The distribution tax opinions represent outside counsel’s and the accounting firm’s respective judgments and are not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions reached in such opinions.
In general, if the distribution were determined not to qualify as a transaction described in Section 355 of the Code, for U.S. federal income tax purposes each U.S. holder of Jacobs common stock who received Amentum common stock in the distribution would generally be treated as receiving a taxable distribution equal to the fair market value of the Amentum common stock received by the U.S. holder, which would generally result in: (1) a taxable dividend to the U.S. holder to the extent of the U.S. holder’s pro rata share of Jacobs’ current and accumulated earnings and profits; (2) a reduction in the U.S. holder’s basis (but not below zero) in Jacobs common stock to the extent the amount received exceeds the U.S. holder’s share of Jacobs’ earnings and profits; and (3) a taxable gain from the exchange of Jacobs common stock to the extent the amount received exceeds the sum of the U.S. holder’s share of Jacobs’ earnings and profits and the U.S. holder’s basis in its Jacobs common stock. Further, for any clean-up distributions by Jacobs, each U.S. holder who receives Amentum common stock in the clean-up distribution would generally be treated as receiving a taxable distribution equal to the fair market value of the Amentum common stock received by the U.S. holder in the clean-up distribution.
In addition, if the contribution and certain related transactions in the internal reorganization were determined not to qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code for U.S. federal income tax purposes, or if the distribution were determined not to qualify as a transaction described in Section 355 of the Code for U.S. federal income tax purposes, Jacobs generally would recognize taxable gain with respect to the transfer of Amentum common stock in the distribution and in any clean-up distribution (or in prior steps of the internal reorganization), which could result in significant tax to Jacobs.
Even if the contribution and certain related transactions in the internal reorganization, otherwise qualify as a transaction described in Sections 355 and 368(a)(1)(D) of the Code, and the distribution otherwise qualifies as a transaction described in Section 355 of the Code, the distribution (or prior steps of the internal reorganization) would nonetheless be taxable to Jacobs (but not to U.S. holders of Jacobs common stock) pursuant to Section 355(e) of the Code if one or more persons acquire a 50% or greater interest (measured by vote or value) in the stock of Jacobs or Amentum, directly or indirectly, as part of a plan or series of related transactions that includes the distribution. For purposes of Section 355(e) of the Code, any acquisitions of Jacobs or Amentum stock, directly or indirectly, within the period beginning two years before the distribution and ending two years after the distribution are generally presumed to be part of such a plan, although Jacobs may, depending on the facts and circumstances, be able to rebut that presumption. Further, for purposes of this test, the merger will be treated as part of a plan that includes the distribution, but it is expected that the merger, standing alone, will not cause the distribution to be taxable to Jacobs under Section 355(e) of the Code because Jacobs’ shareholders owned at least 50.1% of the common stock of Amentum immediately following the merger. However, if the IRS were to determine that other acquisitions of Jacobs stock, either before or after the distribution, or Amentum stock, after the merger, were part of a plan or series of related transactions that included the distribution, such determination could result in the recognition of a significant amount of taxable gain by Jacobs (but not by Jacobs’ shareholders) for U.S. federal income tax purposes under Section 355(e) of the Code.
Under the tax matters agreement, Amentum may be obligated, in certain cases, to indemnify Jacobs against taxes and certain tax-related losses in connection with the transactions that arise as a result of Amentum’s or Amentum Equityholder’s actions, or failure to act. Any such indemnification obligation likely would be substantial and likely would have a material adverse effect on Amentum.
Under the terms of the Transaction, we are restricted from taking certain actions that could adversely affect the intended tax treatment of the transactions, and such restrictions could limit our ability to implement strategic initiatives that otherwise would be beneficial.
The tax matters agreement executed in connection with the Transaction generally restricts us and our affiliates from taking certain actions after the distribution of CMS that could adversely affect the intended tax treatment of the Transaction. In particular, for a two-year period following the distribution date, except as described below:
• Amentum will continue the active conduct of CMS’s trade or business and the trade or business of certain CMS subsidiaries;
• Amentum will not voluntarily dissolve or liquidate or permit certain CMS subsidiaries to voluntarily dissolve or liquidate;
• Amentum will not enter into, and will not permit certain CMS subsidiaries to enter into, any transaction or series of transactions (or any agreement, understanding, or arrangement) as a result of which one or more persons would acquire
(directly or indirectly) stock comprising 50% or more of the vote or value of the Amentum (taking into account the stock acquired pursuant to the merger) or such CMS subsidiaries;
• Amentum will not engage in, or permit certain CMS subsidiaries to engage in, certain mergers or consolidations;
• Amentum will not, and will not permit certain CMS subsidiaries to, sell, transfer or otherwise dispose of (i) 30% or more of the gross assets of CMS, certain CMS subsidiaries, or (ii) the active trade or business of CMS or certain CMS subsidiaries, subject to certain exceptions;
• Amentum will not, and will not permit certain CMS subsidiaries to, redeem or repurchase stock or rights to acquire stock;
• Amentum will not, and will not permit certain CMS subsidiaries to, permit any shareholder of Amentum or of such CMS subsidiaries to become a “controlling shareholder” within the meaning of Treasury Regulations Section 1.355-7;
• Amentum will not, and will not permit certain CMS subsidiaries to, amend their certificates of incorporation (or other organizational documents) or take any other action affecting the voting rights of any stock or stock rights of Amentum or such CMS subsidiaries;
• Amentum will not, and will not permit certain CMS subsidiaries to, take any other action that would, when combined with any other direct or indirect changes in ownership of Amentum stock (including pursuant to the merger), have the effect of causing one or more persons to acquire stock representing 50% or more of the vote or value of Amentum, or otherwise jeopardize the tax-free status of the transactions;
• Amentum Equityholder will not, and will not permit its direct owners or its affiliates to, directly or indirectly acquire any stock of Amentum and certain CMS subsidiaries; and
• Amentum Equityholder will not, and will not permit its direct owners or its affiliates to, permit Amentum or certain CMS subsidiaries to enter into any transaction or series of transactions (or any agreement, understanding, or arrangement) as a result of which one or more persons would acquire (directly or indirectly) stock comprising 50% or more of the vote or value of Amentum (taking into account the stock acquired pursuant to the merger) or such CMS subsidiaries; unless, in each case (except with respect to the second-to-last bullet above), prior to taking any such action, (1) Amentum or Amentum Equityholder, as applicable, shall have requested that Jacobs obtain a private letter ruling from the IRS and Jacobs shall have received such private letter ruling in form and substance satisfactory to Jacobs in its sole and absolute discretion, (2) Amentum or Amentum Equityholder, as applicable, shall have provided Jacobs with an unqualified tax opinion in form and substance satisfactory to Jacobs in its sole and absolute discretion, or (3) Jacobs shall have waived the requirement to obtain such private letter ruling or unqualified tax opinion.
Failure to adhere to these requirements could result in tax being imposed on Jacobs for which Amentum could bear responsibility and for which Amentum could be obligated to indemnify Jacobs under the tax matters agreement. Any such indemnification obligation would likely be substantial and would likely have a material adverse effect on Amentum. In addition, even if Amentum is not responsible for tax liabilities of Jacobs under the tax matters agreement, Amentum nonetheless could be liable under applicable tax law for such liabilities if Jacobs were to fail to pay such taxes. Moreover, these restrictions could have a material adverse effect on Amentum’s liquidity and financial condition, and otherwise could impair Amentum’s ability to implement strategic initiatives and Amentum’s indemnity obligation to Jacobs might discourage, delay or prevent a change of control that Amentum shareholders may consider favorable.
Our accounting and other management systems and resources may not be adequate to meet the financial reporting and other requirements to which we are subject as a publicly traded company. Fulfilling our obligations incident to being a public company and implementing the requirements of and related rules under the Sarbanes-Oxley Act of 2002, is expensive and time-consuming, and any delays or difficulty in satisfying these obligations could have a material adverse effect on our future results of operations and our stock price.
Starting in fiscal year 2025, as a public company, the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, as well as the New York Stock Exchange rules, require us to adhere to various corporate governance practices and a variety of reporting requirements and complex accounting rules. Compliance with these public company obligations requires us to devote significant management time and place significant additional demands on our finance, accounting, and legal staff and on our management systems, including our financial, accounting and information systems. Other expenses associated with being a public company include increased auditing, accounting, and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees, listing fees, as well as other expenses.
In particular, starting in fiscal year 2025, the Sarbanes-Oxley Act of 2002 requires us to document and test the effectiveness of our internal control over financial reporting in accordance with an established internal control framework, and to report on our conclusions as to the effectiveness of our internal controls. It also requires an independent registered public accounting firm to
test our internal control over financial reporting and report on the effectiveness of such controls. In addition, we are required under the Exchange Act to maintain disclosure controls and procedures and internal control over financial reporting. Because of inherent limitations in any internal control environment, there can be no assurance that all control issues and instances of fraud, errors or misstatements, if any, within the Company has been or will be detected on a timely basis. Such deficiencies could result in the correction or restatement of financial statements of one or more periods.
Any failure to maintain effective controls or implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. We also rely on third parties for certain calculations and other information that support our accounting and financial reporting, which includes reports from such organizations on their controls and systems that are used to generate this data and information. Any failure by such third parties to provide us with accurate or timely information or to implement and maintain effective controls may cause us to fail to meet our reporting obligations as a publicly traded company. In addition, as we operate our financial management systems, we could experience deficiencies in their operation that could have an adverse effect on the effectiveness of our internal control over financial reporting.
In the future, when required, if we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our consolidated financial statements, which could result in a decrease in the value of our common stock. Starting in fiscal year 2025, failure to comply with the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the SEC, the New York Stock Exchange, or other regulatory authorities.
Certain of our directors and officers may have conflicts of interest because of their former positions with or financial interests in Jacobs.
Because of their former positions with Jacobs, certain of our directors and officers own Jacobs common stock. Even though our board of directors consists of a majority of directors who are independent, some of our directors continue to have a financial interest in Jacobs common stock. Continuing ownership of Jacobs common stock could create, or appear to create, potential conflicts of interest if we have disagreements with Jacobs about the contracts between us that continue or face decisions that could have different implications for us and Jacobs.
Our amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in corporate opportunities.
Our amended and restated certificate of incorporation provides for the allocation of certain corporate opportunities between us and affiliates of Amentum Equityholder. Under these provisions, neither Amentum Equityholder, its affiliates and subsidiaries, nor any of its or their officers, directors, agents, stockholders, members or partners have any duty to communicate or offer any corporate opportunity to us and to the fullest extent of the law shall not be liable to us or our shareholders for breach of fiduciary duty or otherwise solely by reason of the fact that Amentum Equityholder or its affiliate acquires a corporate opportunity for itself, directs such opportunity to another person or otherwise does not communicate such opportunity to us. For instance, a director of our company who also serves as a director, officer or employee of an affiliate of Amentum Equityholder may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition and results of operations if attractive corporate opportunities are allocated by affiliates of Amentum Equityholder to itself or its subsidiaries or affiliates instead of to us.
Delaware law and anti-takeover provisions in our amended and restated articles of incorporation, amended and restated bylaws, stockholders agreement and other governance documents may impede or discourage a takeover or change of control and limit the power of our shareholders.
We are a Delaware corporation. Certain anti-takeover provisions of the Delaware general corporation law impose restrictions on the ability of others to acquire control of us. In addition, certain provisions of our governance documents may impede or discourage a takeover. For example:
• vacancies occurring on our board can be filled only by our Board of Directors;
• increasing or decreasing the size of the Board of Directors will require the affirmative vote of at least 80% of the members of the Board of Directors at such time;
• prior to the second anniversary of the closing date, Sponsor Stockholder must vote its Amentum common stock in favor of the Executive Chair of the Board of Directors and shall not seek, propose or vote its Amentum common stock in favor of their removal, other than for cause;
• shareholders do not have the right to call a special meeting or to act by written consent;
• certain of the provisions in our amended and restated certificate of incorporation require supermajority shareholder approval for amendments;
• shareholders will have to follow certain procedures and notice requirements in order to present certain proposals or nominate directors for election at shareholder meetings;
• the stockholders agreement prohibits, for three years following the closing of the transactions, amendments to our amended and restated certificate of incorporation and bylaws to provide the stockholders with proxy access rights; and
• our Board of Directors has the power to designate and issue, without any further vote or action by our shareholders, shares of preferred stock from time to time in one or more series.
In addition, we are subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which could have the effect of delaying or preventing a change of control that you may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.
These types of provisions, as well as the stockholders agreement, could make it more difficult for a third party to acquire control of us, even if the acquisition would be beneficial to our shareholders. Accordingly, shareholders may be limited in the ability to obtain a premium for their shares.
Risks Related to Our Common Stock
Amentum Equityholder owns a significant percentage of our common stock.
Amentum Equityholder holds a substantial portion of the issued and outstanding shares of Amentum common stock. Amentum Equityholder also holds the right to nominate members to stand for election to our Board of Directors. As a result, Amentum Equityholder has a significant influence on matters requiring shareholder approval, including the election of directors and other corporate decisions. Amentum Equityholder (including its affiliates) may have interests that differ from other shareholders. This will limit shareholders’ ability to influence corporate matters, and as a result, actions may be taken that shareholders may not view as beneficial and may also adversely affect the trading price of our common stock.
Affiliates of Amentum Equityholder are private equity firms in the business of making investments in entities in a variety of industries. Conflicts of interest could arise in the future between us, on the one hand, and the affiliates of Amentum Equityholder, on the other hand, including the portfolio companies of such equityholders, concerning among other things, potential competitive business activities or business opportunities. The other portfolio companies of the affiliates of Amentum Equityholder may compete with us for investment or business opportunities. These conflicts of interest may not be resolved in our favor. We have also renounced our interest in certain business opportunities.
In addition, Amentum Equityholder, as Sponsor Stockholder under the stockholders agreement, has certain rights with respect to director nominations. In particular, Amentum Equityholder has the right to nominate a specified number of directors for election to our Board of Directors, depending on its level of ownership of our common stock. Specifically, if Amentum Equityholder beneficially owns at least 25.1% of the issued and outstanding shares of our common stock, Amentum Equityholder is entitled to nominate to stand for election five individuals, two of whom must qualify as independent, to a 13-member Board of Directors. If Amentum Equityholder beneficially owns at least 15% but less than 25.1% of the issued and outstanding shares of our common stock, Amentum Equityholder is entitled to nominate to stand for election three individuals, none of whom must qualify as independent, to a 13-member Board of Directors. If Amentum Equityholder beneficially owns at least 5% but less than 15% of the issued and outstanding shares of our common stock, Amentum Equityholder is entitled to nominate to stand for election one individual to a 13-member Board of Directors. If the Board of Directors consists of a number of directors other than 13, then the number of individuals Amentum Equityholder is entitled to nominate, if any, will be adjusted to be 5/12ths of the number of directors constituting the Board of Directors at any time Amentum Equityholder beneficially owns at least 25.1% of the issued and outstanding shares of our common stock, 1/4th of the number of directors constituting the Board of Directors at any time Amentum Equityholder beneficially owns at least 15% but less than 25.1% of the issued and outstanding shares of our common stock or 1/12th of the number of directors constituting the Board of Directors at any time Amentum Equityholder beneficially owns at least 5% but less than 15% of the issued and outstanding shares of our common stock, in each case, rounded down to the nearest whole number, provided that, prior to the date on which Amentum Equityholder no longer owns at least 5% of our issued and outstanding shares of common stock (the “Fallaway Date”), if rounding down would otherwise result in Amentum Equityholder being entitled to designate a total of zero director nominees on the Board of Directors, such adjustment will instead be rounded up to one director nominee. For the absence of doubt, in no event will Amentum Equityholder be entitled to designate more than 5/12ths of the number of directors on the Board of Directors. From and after the Fallaway Date, Amentum Equityholder will no longer be entitled to nominate any individuals to the Board of Directors.
Amentum Equityholder has distributed the shares of our common stock that it holds to its limited partners. The affiliates of the private equity firms that are the largest equity holders in Amentum Equityholder hold a substantial portion of the issued and outstanding shares of Amentum common stock and assume the rights and obligations of Amentum Equityholder as the Sponsor Stockholder under the stockholders agreement that are described above.
Our quarterly results may fluctuate significantly, which could have a material negative effect on the price of our common stock.
Our quarterly operating results may fluctuate significantly or fall below the expectations of securities analysts, which could have a material adverse impact on the price of our common stock. Fluctuations are caused by a number of factors, including:
• legal proceedings, disputes and/or government investigations;
• fluctuations in the spending patterns of our government and commercial customers;
• U.S. federal government budgetary process, including government shutdowns;
• the number and significance of contracts executed during a quarter;
• unanticipated changes in contract performance, particularly with contracts that have funding limits;
• the timing of resolving change orders, requests for equitable adjustments and other contract adjustments;
• delays incurred in connection with a contract;
• changes in prices of commodities or other supplies;
• changes in foreign currency exchange rates;
• weather conditions that delay work at work sites;
• the timing of expenses incurred in connection with acquisitions or other corporate initiatives;
• the decision by the Board of Directors to begin or cease paying a dividend, and the expectation that if we pay dividends, we will declare dividends at the same or higher levels in the future;
• natural disasters or other crises;
• staff levels and utilization rates;
• changes in prices of services offered by our competitors; and
• general economic and political conditions.
There can be no assurance that we will pay dividends on our common stock.
We do not expect to declare or pay any cash dividends on our common stock. Any future determination as to the timing, declaration, amount and payment of any dividends will be within the discretion of our Board of Directors, and will depend upon, among other things, our financial condition, earnings, capital requirements of our operating subsidiaries, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by our Board of Directors, including legal and contractual restrictions. Moreover, if we determine to pay any dividends in the future, there can be no assurance that we will continue to pay such dividends or the amount of such dividends.
Your percentage of ownership in Amentum may be diluted in the future.
Your percentage ownership may be diluted in the future by the equity awards that we expect to grant to our directors, officers and other employees. We have approved an incentive plan that provides for the grant of common stock-based equity awards to our directors, officers and other employees. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments that we may make in the future or as necessary to finance our ongoing operations.
A significant number of shares of our common stock may be sold or otherwise disposed of, which may cause our stock price to decline.
Any sales of substantial amounts of our common stock in the public market, or the perception that such sales might occur may cause the market price of our common stock to decline. As of October 3, 2025, we have an aggregate of 243,464,776 shares of common stock issued and outstanding. We cannot predict whether large amounts of our common stock will be sold in the open market. We are also unable to predict whether a sufficient number of buyers of our common stock to meet the demand to sell shares of our common stock at attractive prices would exist at that time.
Our stock price may be volatile.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:
• actual or anticipated fluctuations in our operating results due to factors related to our business;
• success or failure of our business strategies;
• our quarterly or annual earnings, or those of other companies in our industry;
• our ability to obtain financing as needed;
• announcements by us or our competitors of significant acquisitions or dispositions;
• changes in accounting standards, policies, guidance, interpretations or principles;
• the failure of securities analysts to cover our common stock after the separation and distribution;
• changes in earnings estimates by securities analysts or our ability to meet those estimates;
• the operating and stock price performance of other comparable companies;
• investor perception of our company and our industry;
• overall market fluctuations;
• results from any material litigation or government investigation;
• changes in laws and regulations (including tax laws and regulations) affecting our business;
• changes in capital gains taxes and taxes on dividends affecting shareholders; and
• general economic conditions and other external factors.
Low trading volume for our stock could amplify the effect of the above factors on our stock price volatility.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.
Our amended and restated certificate of incorporation designates certain courts within the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the federal district courts of the United States as the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act, which could limit our shareholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or shareholders to us or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of our amended and restated certificate of incorporation, amended and restated bylaws or the DGCL, or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware and (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine, in each case, may be brought only in specified courts in the State of Delaware. As described below, this provision applies to suits brought to enforce any duty or liability created by the Securities Act or the Exchange Act, or any other claim for which there is exclusive federal or concurrent federal and state jurisdiction.
Our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. However, Section 22 of the Securities Act provides that federal and state courts have concurrent jurisdiction over lawsuits brought pursuant to the Securities Act or the rules and regulations thereunder. To the extent the exclusive forum provision restricts the courts in which claims arising under the Securities Act may be brought, there is uncertainty as to whether a court would enforce such a provision. Our amended and restated certificate of incorporation also provides that any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and to have consented to the foregoing provisions; provided, however, that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. This provision does not apply to claims brought under the Exchange Act.
We recognize that the forum selection clause in our amended and restated certificate of incorporation may impose additional litigation costs on shareholders in pursuing any such claims, particularly if the shareholders do not reside in or near the State of Delaware. Additionally, the forum selection clause in our amended and restated certificate of incorporation may limit our shareholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers, employees or agents, which may be costlier and may discourage such lawsuits against us and our directors, officers, employees
and agents even though an action, if successful, might benefit our shareholders, although such shareholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our shareholders.
Risks Related to Climate Change
Climate change-related weather issues could have a material adverse impact on our, or our customers’, equipment and infrastructure which could negatively impact our business, financial condition and results of operations.
Climate change-related events, such as increased frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions, excessive heat and other natural disasters, may have a long-term impact on our business, financial condition and results of operations. For example, access to clean water and reliable energy in the locations where we conduct our services is critical to our operations. Flooding, high winds and fires could damage our equipment, or infrastructure at our customer sites, causing safety hazards and environmental damage. Accordingly, a natural disaster, such as a severe storm, flood or electrical blackout due to severe heat, has the potential to disrupt our and our customers’ businesses and may cause us to experience work stoppages, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of coverage, legal liability and reputational losses.
Further, the risks caused by climate change span across the full spectrum of the industry sectors we serve. The direct physical risks that climate change poses to infrastructure through chronic environmental changes, such as rising sea levels and temperatures, and acute events, such as hurricanes, droughts and wildfires, exist in each of these sectors. Infrastructure owners could face increased costs to maintain their assets, which could result in reduced profitability and fewer resources for our services and solutions. These types of physical risks could in turn lead to or be accompanied by transitional risks (i.e., societal changes in response to the threat of climate change), such as market and technology shifts, including decreased demand for our services and solutions, reputational risks, such as how our values and practices regarding a low carbon transition are viewed by external and internal stakeholders, as well as policy and legal risks, such as the extent to which low-carbon transitions are driven by the governments in the jurisdictions in which we operate around the globe, all of which could have a material adverse impact on our business, financial condition and results of operations.
We may be affected by market or regulatory responses to climate change.
Growing public concern about climate change has resulted in increased focus by local, state, regional, national and international regulatory bodies on GHG emissions and climate change issues, which impacts our operations globally. New regulatory requirements, as well as related policy changes, could increase the costs of the contracts we conduct for our customers or, in some cases, prevent a program from going forward, thereby potentially reducing the demand for our services, which could in turn have a material adverse impact on our business, financial condition and results of operations. However, policy changes and climate legislation could also increase the overall demand for our services as our customers and partners work to decarbonizing their industries, transitioning from fossil fuels to renewable energy sources and developing integrated and sustainable solutions, which could have a positive impact on our business. We cannot predict when or whether any of these various proposals may be enacted or what the precise effects may be on us or on our customers.
We may also incur additional expenses as a result of U.S. and international regulators requiring additional public disclosures regarding GHG emissions, and/or broader environmental, social or governance-related performance indicators and other factors. The financial and management resources required to achieve and maintain compliance with such regulations may be significant, particularly given the fact that various countries and regions are implementing different, and in some cases conflicting, requirements.
General Risk Factors
Demand for our services is impacted by economic downturns, reductions in government or private spending and times of political uncertainty.
We provide full spectrum engineering and technology solutions to customers operating in a number of sectors and industries, including programs for various national governments, including the United States, United Kingdom and Australia; aerospace; automotive; pharmaceuticals and biotechnology; infrastructure; environmental; nuclear services, including decommissioning, power solutions and new nuclear technologies; and other general industrial and consumer businesses and sectors. These sectors and industries and the resulting demand for our services have been, and we expect will continue to be, subject to significant fluctuations due to a variety of factors beyond our control, including economic conditions and changes in customer spending, particularly during periods of economic or political uncertainty. Consequently, our results have varied, and may continue to vary, depending upon the demand for future projects in the markets and the locations in which we operate.
Uncertain global economic, socioeconomic and political conditions may negatively impact our customers’ ability and willingness to fund their projects, including their ability to raise capital and pay, or timely pay, our invoices. These factors may also cause our customers to reduce their capital expenditures, alter the mix of services purchased, seek more favorable pricing and other contract terms and otherwise slow their spending on our services. For example, in the public sector, declines in tax revenues as well as other economic declines may result in lower government spending. In addition, under such conditions, many of our competitors may be more inclined to take greater or unusual risks or accept terms and conditions in contracts that we might not deem acceptable. These conditions may reduce the demand for our services, which may have a material adverse impact on our business, financial condition and results of operations.
Additionally, uncertain economic, socioeconomic and political conditions may make it difficult for our customers, our vendors, and us to accurately forecast and plan future business activities. We cannot predict the outcome of changing trade policies or other unanticipated socioeconomic or political conditions, nor can we predict the timing, strength or duration of any economic recovery or downturn worldwide or in our customers’ markets. Weak economic conditions could have a material adverse impact on our business, financial condition and results of operations. Furthermore, if a significant portion of our projects are concentrated in a specific geographic area or industry, our business may be disproportionately affected by regional conflicts, negative trends or economic downturns in those specific geographic areas or industries.
We may not be able to protect our intellectual property or that of our customers.
Our technology and intellectual property provide us, in certain instances, with a competitive advantage. Although we seek to protect our intellectual property through registration, enforcement, licensing, contractual arrangements, security controls and similar mechanisms, we may not be able to successfully preserve our rights, and they could lapse, expire or be invalidated, narrowed in scope, circumvented, challenged or become obsolete. Trade secrets are generally difficult to protect. We implement technical and administrative measures to protect our confidential information and trade secrets, including by requiring our employees and contractors be subject to confidentiality and invention assignment obligations, but such measures may be inadequate to deter or prevent misappropriation of our confidential information or otherwise protect our intellectual property. In addition, the laws of some foreign countries in which we operate do not protect intellectual property rights to the same extent as the laws of the U.S. If we are unable to enforce, protect and maintain our intellectual property rights or if there are any successful intellectual property challenges or infringement proceedings against our intellectual property or us, our ability to differentiate our service offerings could be reduced. Litigation to enforce our intellectual property against third parties, to defendagainst third-party claims of intellectual property infringement, or to determine or challenge the scope, validity or enforceability of intellectual property rights, even if we ultimately prevail, could be costly and could divert our leadership’s attention away from other aspects of our business.
We also hold licenses to third-party technology or intellectual property which may be utilized in our business operations. If we are no longer able to license such technology or intellectual property on commercially reasonable terms or at all, our business and financial performance could be adversely affected.
We may use third-party open source software in our products. Some open source licenses, such as “copyleft” open source licenses, require end-users who distribute software and services that include open source software to also make available all or part of such software’s source code. If our activities were determined to be non-compliant with the terms of any applicable “copyleft” open source licenses, we may be required to publicly release all or part of our proprietary source code for limited or no cost and our business and financial performance could be adversely affected.
If our intellectual property rights or work processes become obsolete, we may not be able to differentiate our service offerings and some of our competitors may be able to offer more attractive services to our customers. Our competitors may independently attempt to develop or obtain access to technologies that are similar or superior to our technologies.
We will also need to continue to respond to and anticipate changes resulting from artificial intelligence and other similarly disruptive technologies. If we are not successful in preserving and protecting our intellectual property rights and licenses, including trade secrets, or in staying ahead of developing artificial intelligence technologies, our business, financial condition and results of operations could be materially adversely affected.
Our customers or other third parties may also provide us with their proprietary technology and intellectual property. There is a risk we may not sufficiently protect our or their information from improper use or dissemination and, as a result, could be subject to claims and litigation and resulting liabilities, loss of contracts or other consequences that could have a material adverse impact on our business, financial condition and results of operations.
Government authorities may obtain certain information related to, or rights in or to the intellectual property in, our products or services. This may allow government authorities to disclose such information or license such intellectual property to third parties, including our competitors, which could have a material adverse impact on our business, financial condition and results of operations.
Indemnity provisions in various agreements to which we are party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights, data protection and other losses.
Our agreements with our customers and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable to them for lossessuffered or incurred as a result of claims of infringement, misappropriation, or other violation of intellectual property rights, data protection, compliance with laws, damages caused by us to property or persons, or other liabilities relating to or arising from our products or services, our acts or omissions under such agreements, or other contractual obligations. Any dispute with a customer or other third party with respect to such obligations could have adverse effects on our relationship with such customer or other third party and other existing or prospective customers, reduce demand for our products or services, and adversely affect our business, financial conditions, and results of operations.
Impairment of long-lived assets or restructuring activities may require us to record a significant charge to earnings.
Our long-lived assets, including our lease right-of-use assets, equity method investments and others, are subject to periodic testing for impairment. Failure to achieve sufficient levels of cash flow at the asset group level could result in impairment of our long-lived assets. Further changes in the business environment could lead to changes in the scope of operations of our business. These changes, including the closure of one or more offices, could result in restructuring and/or asset impairment charges.
Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers.
We design and develop technologically advanced and innovative products and services utilized by our customers in various environments. The needs of our customers change and evolve regularly, including in response to complex and rapidly evolving technologies. Our success depends upon our ability to identify emerging technological trends, develop technologically advanced, innovative and cost-effective products and services and market these products and services to our customers. Our success also depends on our continued access to suppliers of important technologies and components. Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, or depend on factors not wholly within our control. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and intellectual property rights, labor, learning curve assumptions or materials and components could prevent us from achieving such contractual requirements. Failure to meet these obligations could adversely affect our business, financial condition and results of operations. In addition, our offerings cannot be tested and proven in all situations and are otherwise subject to unforeseenproblems that could negatively affect revenue and profitability, such as problems with quality and workmanship, country of origin and delivery of subcontractor services. Among the factors that may affect revenue and profits could be unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseenproblems, loss of follow-on work, and, in the case of certain contracts, repayment to the government customer of contract costs and fee payments we previously received.
We use artificial intelligence, machine learning, data science and similar technologies in our business, and challenges with properly managing such technologies could result in reputational harm, competitive harm, and legal liability, and adversely affect our business, financial condition and results of operations.
Artificial intelligence, machine learning, data science and similar technologies (collectively, “AI”) may be enabled by, or integrated into, some of our solutions or may be used in the development of our solutions. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed or biased. Datasets used to train or develop AI systems may be insufficient, unlawfully obtained, of poor quality, or contain biased information. Such datasets may also contain personal data or other protected information or third-party content for which insufficient rights, including intellectual property rights, have been obtained. The use or integration of AI systems trained on such datasets, or of the outputs generated by such systems, may result in the infringement or other violation of third-party rights (including intellectual property or data privacy rights), and may otherwise result in liability, including legal liability, or adversely affect our business, reputation, brand, financial condition and results of operations. Inappropriate, biased, discriminatory, illegal or otherwise wrongful practices by data scientists, engineers, and end-users of our systems or elsewhere (including the integration or use of third-party AI tools) could impair the acceptance of AI solutions and could result in burdensome new regulations that may limit our ability to use existing or new AI technologies. If the recommendations, forecasts, analyses, or other content that AI applications produce or assist in producing are, or are alleged to be, deficient, inaccurate, unfair, discriminatory, biased, or otherwise wrongful or unlawful we could be subject to competitive harm, legal liability, and brand or reputational harm. In addition, we expect that there will continue to be new laws or regulations concerning the use of AI. It is possible that certain governments may seek to regulate, limit, or block the use of AI in our products and services or otherwise impose other restrictions that may affect or impair the usability or efficiency of our services for an extended period of time or indefinitely. Our competitors or other third parties may incorporate AI into their product development, product offerings, technology and infrastructure products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our business, financial condition and results of operations.
We maintain our cash at financial institutions, often in balances that exceed federally insured limits.
The majority of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in depository accounts may at times exceed the $250,000 Federal Deposit Insurance Corporation insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. Any material loss that we may experience in the future could have a material adverse effect on our financial position and could materially impact our ability to pay our operational expenses or make other payments. Banking institution failures, or changes in legislation and regulation, may adversely impact other entities that would, in turn, impact us. If our customers, suppliers, insurers, joint venture partners, sureties, or other parties with whom we do business with are affected by issues in the banking industry it may have an adverse impact on our operational and financial performance.
Our businesses could be materially and adversely affected by events outside of our control.
Extraordinary or force majeure events beyond our control, such as natural or human caused disasters, pandemics, and geopolitical conflicts, could negatively impact our ability to operate. As an example, from time to time we face unexpectedsevere weather conditions that may result in weather-related delays that are not always reimbursable under a fixed-price contract; evacuation of personnel and curtailment of services; increased labor and material costs in areas resulting from weather-related damage and subsequent increased demand for labor and materials for repairing and rebuilding; inability to deliver materials, equipment and personnel to work locations in accordance with contract schedules; and loss of productivity. Among other things, a pandemic could have significant adverse health consequences for our employees, limit their ability to perform work, and reduce our ability to perform our contracts.
When making contract proposals, we rely heavily on our estimates of costs and timing to complete the associated projects, as well as assumptions regarding technical issues. However, we may remain obligated to perform our services after any natural or human caused event, unless a force majeure clause or other contractual provision provides us with relief from our contractual obligations. Our profitability may be adversely affected when we incur contract costs that we cannot bill to our customers. If we are not able to react quickly to such events, or if a high concentration of our projects is in a specific geographic region that suffers from a natural or human caused catastrophe, our operations may be significantly affected, which could have a material adverse impact on our operations. In addition, if we cannot complete our contracts on time, we may be subject to potential liability claims by our customers which may reduce our profits.
The expiration of our collective bargaining agreements could result in increased operating costs or work disruptions, which could potentially affect our results of operations.
Some of our employees are covered by collective bargaining agreements with unions. The length of these agreements varies. We cannot predict how stable our union relationships will be or whether we will be able to successfully negotiate successor agreements without impacting our financial condition, and may, in the future, experience labor disruptions associated with the expiration or renegotiation of collective bargaining agreements or otherwise, which may cause a significant disruption of operations. In addition, we may face increased operating costs as a result of higher wages or benefits paid to union members, which could adversely affect our business, financial condition and results of operations.
Our benefit plan expenses and obligations may fluctuate depending on various factors, including inflation and changes in levels of interest rates.
We have various employee benefit plan obligations that require us to make contributions to satisfy, over time, our underfundedbenefit obligations, which are generally determined by calculating the projected benefit obligations minus the fair value of plan assets. We may have to contribute additional cash to meet any underfundedbenefit obligations. If we are required to contribute a significant amount of the deficit for underfundedbenefit plans, our cash flows could be materially and adversely affected.
Additionally, we provide health care and other benefits to our employees. In recent years, costs for health care have increased more rapidly than general inflation in the U.S. economy. If this trend in health care costs continues, our cost to provide such benefits could increase, which could have a material adverse impact on our financial condition and results of operations.
We are also a participating employer in various Multi-Employer Pension Plans (“MEPPs”) associated with some of the work we perform on a union basis, which MEPPs are managed by third-party trusts and over which we have no control, including as to how the MEPPs are managed or financial investment decisions are made. If any of these MEPPs is underfunded, we could face the imposition of underfunded liability or withdrawal liability at a materially adverse level.
Current and future environmental, health, and safety laws could require significant additional costs to achieve or maintain compliance and/or to address liabilities.
We are subject to environmental, health, and safety laws and regulations governing, among other things, discharges to air and water, the handling, storage and disposal of hazardous or nuclear wastes or substances, the remediation of contamination and the protection of human health and safety in each of the jurisdictions in which we operate. These laws and regulations and the risk of attendant litigation can cause significant delays to a project and add significantly to its cost. Violations of these
regulations could subject us and our management to civil and criminalpenalties and other liabilities, including claims for personal injury or property or environmental damages. Failure to comply with any environmental, health, or safety laws or regulations, whether actual or alleged, may expose us to fines, penalties or potential litigation liabilities, including costs, settlements and judgments, any of which could adversely affect our business, financial condition and results of operations.
Various U.S. federal, state, local and foreign environmental laws and regulations may impose liability for property or environmental damages, including natural resources damages, as well as the investigation and cleanup of hazardous or nuclear wastes or substances on property currently or previously owned by us, or by third parties, or otherwise arising out of our waste management and disposal or environmental remediation activities. These laws may impose responsibility and liability without regard to knowledge of or fault in connection with the presence of contaminants. Liabilities incurred under these laws may be retroactive, as well as joint and several. The discovery of additional contaminants or the future imposition of new or unanticipated clean-up obligations at these or other sites could have a material adverse impact on our financial condition and results of operations.
Future changes to health, safety, and environmental laws and regulations could affect us in significant and currently unpredictable ways. Such changes could, for example, result in the relaxation or repeal of laws and regulations relating to the environment, which could decrease our compliance costs but also result in a decline in the demand for our environmental services and, in turn, could negatively impact our revenue. New environmental laws and regulations, remediation obligations, enforcement actions, as well as stricter standards or stricter interpretations of existing requirements, or the future discovery of contamination or claims for damages to persons, property, natural resources or the environment could result in material costs and liabilities that we currently do not anticipate. At this time, it is not possible for us to predict the extent to which any such changes, if enacted, would result in operational or business risks or opportunities for the Company.
A failure to attract, train, retain and utilize skilled employees and our senior management team would adversely affect our ability to execute our strategy and may disrupt our operations.
The success of our business is dependent upon our ability to hire, retain and utilize qualified personnel, including engineers, architects, designers, craft personnel and corporate leadership professionals who have the required experience and expertise at a reasonable cost. Competition for skilled personnel is intense, and competitors aggressively recruit key employees. In addition, many U.S. federal government programs require contractors to have security clearances and specialized training. Depending on the level of required clearance, security clearances can be difficult and time-consuming to obtain and personnel with security clearances are in great demand. Particularly in highly specialized areas, it has become more difficult to retain employees and meet all of our needs for employees in a timely manner, which may affect our growth in the current and future fiscal years. Although we intend to continue to devote significant resources to recruit, train and retain qualified employees, we may not be able to attract, effectively train and retain these employees. Any failure to do so could impair our ability to efficiently perform our contractual obligations, meet our customers’ needs in a timely manner and ultimately win new business, all of which could adversely affect our future results. In addition, salaries and related costs are a significant portion of the cost of providing our services and, accordingly, our ability to efficiently utilize our workforce impacts our profitability. If our employees are under-utilized, our profitability could suffer.
We believe that our success also depends on the continued employment of a highly qualified and experienced senior management team and that team’s ability to retain existing business and generate new business. The loss of key personnel in critical functions could lead to lack of business continuity or disruptions in our business until we are able to hire and train replacement personnel.
We may experience a negative impact to our reputation as a result of socio-political opposition to U.S. government policies that are reflected in U.S. government contracts we bid, win and perform.
From time to time, we may bid, win and perform government contracts that are the result of U.S. government policies that may be opposed by certain stockholders, suppliers, customers or other stakeholders. Any resulting negative impact on our reputation may have a material adverse impact on our business, financial condition, results of operations and stock price.
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We conduct our business activities and report financial results as two reportable segments: Digital Solutions (“DS”) and Global Engineering Solutions (“GES”). The DS segment provides advanced digital and data-driven solutions including intelligence analytics, space system development, cybersecurity, and next generation IT across the federal government and commercial clients. The GES segment provides large-scale environmental remediation, nuclear power solutions, platform engineering, sustainment and supply chain management across all 7 continents for the U.S. government and allied nations. The presentation of financial results as two reportable segments is consistent with the way the Company operates its business and the manner in which our chief operating decision maker (“CODM”), currently our Chief Executive Officer, manages the operations of the Company for purposes of allocating resources and assessing performance.
Budgetary and Regulatory Environment
In fiscal year 2025, we generated approximately 81% of our revenues from contracts with the U.S. federal government, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. federal government. We carefully follow the U.S. federal budget, legislative and contracting trends and activities and evolve our strategies accordingly.
In May 2025, the President’s U.S. federal government fiscal year (“GFY”) 2026 budget request was submitted to Congress. As compared to the GFY 2025 budget, the GFY 2026 budget request maintained defense discretionary spending at $892 billion, reduced non-defense discretionary spending by approximately 21% to $557 billion, and increased GFY 2026 defense spending to $1.01 trillion, an increase of 13% from the GFY 2025 enacted level. Final appropriations legislation for GFY 2026 was not passed as of October 1, 2025, the first day of GFY 2026, and the federal government shut down most agencies of the federal government until November 12, 2025, when a continuing resolution was passed to reopen the federal government and provide funding through January 30, 2026. While we view the budget environment as constructive and believe core funding sources for our primary customer-based markets will continue to experience bipartisan tailwinds, there can be no certainty about the level of funding for any particular GFY or that appropriations bills will be passed in a timely manner. During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a continuing resolution (“CR”), a temporary measure allowing the government to continue operations at prior year funding levels. Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract awards decisions, and other factors.
Under the Trump administration, the Department of Government Efficiency was created, the One Big, Beautiful Bill Act was passed which made certain tax cuts permanent, reduced healthcare spending and increased spending related to border security, defense, NASA and energy production, and the U.S. Government is in the process of, or has announced its intent to, increase
current tariffs, impose additional tariffs, and expand tariffs on goods imported from various countries into the United States. We continue to monitor the actions of the administration which could result in a change to budgetary priorities or impact federal government procurement timing. Although a limited number of our contracts for the U.S. Government have been affected by changes in budgetary priorities by the administration, the impact has not been material to date. Decreases in, or delays in approving, the federal government’s budget, decreases in government spending on the types of programs that we support, delays in government contract awards, and pauses on government contracts on which we are currently performing could have an adverse impact on our business.
Market Environment
We believe our scale, breadth of capabilities, and depth of experience give us a robust understanding of our customers’ evolving needs. Given our portfolio diversity, we believe our total addressable market, and associated growth rate, is sufficient to support our strategic growth plans.
We believe Amentum’s capabilities are strategically aligned to well-funded, long-term priorities for the federal government, allied nations, and commercial customers. Specifically, we believe we are well positioned to continue to win new business driven by the following trends in our addressable market:
• Increasing demand for outsourced services and solutions with federal government customers;
• Increased global demand for clean and environmentally sustainable solutions;
• Increased spending on government-wide modernization priorities;
• Increasing government focus on near-peer competitors and other nation state threats;
• Increasing discretionary spending for Indo-Pacific regional activities and initiatives; and
Results of Operations for the Years Ended October 3, 2025, September 27, 2024 and September 29, 2023
The following table presents our results of operations for the periods presented:
For the Year Ended October 3, 2025
Year to Year Change
For the Year Ended September 27, 2024
Year to Year Change
For the Year Ended September 29, 2023
(Dollars in millions)
Dollars
Percent
Dollars
Percent
Revenues
Cost of revenues
Selling, general, and administrative expenses
Amortization of intangibles
Equity earnings of non-consolidated subsidiaries
Goodwill impairment charges
Operating income
Interest expense and other, net
Loss on extinguishment of debt
Gain on acquisition of controlling interest
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss) including non-controlling interests
Less: net income (loss) attributable to non-controlling interests
Net income (loss) attributable to common shareholders
Results of Operations October 3, 2025 vs September 27, 2024
Revenues — The increase in revenues was primarily attributable to revenues from the merger with CMS.
Cost of revenues — The increase in cost of revenues was primarily attributable to the increased revenues volume from the merger with CMS. As a percentage of revenues, cost of revenues was 89.5% and 90.5% for the years ended October 3, 2025 and September 27, 2024, respectively.
Selling, general, and administrative expenses (“SG&A”) — The increase in SG&A was primarily attributable to the merger with CMS. SG&A as a percentage of revenues increased to 4.3% for the year ended October 3, 2025 from 4.2% for the year ended September 27, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.
Amortization of intangibles — Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which increased due to the merger with CMS.
Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments and decreased due to utilization of fair market value adjustments assigned to certain equity method investments obtained in the merger with CMS partially offset by the performance of our non-consolidated subsidiaries.
Interest expense and other, net — The decrease in interest expense and other, net was primarily due to the reduction to our Term Loan principal balance as compared to the year ended September 27, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the fiscal year ended October 3, 2025.
Loss on extinguishment of debt — The loss on extinguishment of debt for the year ended October 3, 2025 was due to $722 million of voluntary principal payments on the Term Loan. The loss on extinguishment of debt for the year ended September 27, 2024 was due to a loss on the debt modification of $14 million and debt issuance costs of $31 million.
Gain on acquisition of controlling interest — The gain on acquisition of controlling interest was primarily due to the acquisition of a joint venture which was accounted for as a business combination achieved in stages, in which the Company’s previously held equity interest in the joint venture was remeasured to fair value, resulting in a gain of $69 million during the fiscal year ended September 27, 2024.
(Provision) benefit for income taxes — The effective tax rate for the year ended October 3, 2025 was 48.7%, as compared to 32.5% for the year ended September 27, 2024. The change in the effective tax rate was primarily due to the recognition of a valuation allowance against a deferred tax asset related to disallowed interest expense, release of a valuation allowance related to domestic capital losses, and the tax effect of the Rapid Solutions divestiture during the year ended October 3, 2025.
Net income attributable to non-controlling interests — Net income attributable to non-controlling interests includes the utilization of fair market value adjustments assigned to certain non-controlling interests obtained in the merger with CMS partially offset by the minority interests in our consolidated joint ventures that are not wholly-owned.
Results of Operations September 27, 2024 vs September 29, 2023
Revenues — The increase in revenues was primarily attributable to new contract awards and growth on existing programs.
Cost of revenues — The increase in cost of revenues was primarily driven by increased revenue volume. As a percentage of revenues, cost of revenues was 90.5% and 90.1% for the years ended September 27, 2024 and September 29, 2023, respectively.
Selling, general, and administrative expenses — SG&A as a percentage of revenues increased from 3.8% for the year ended September 29, 2023 to 4.2% for the year ended September 27, 2024 primarily due to an increase in acquisition, transaction and integration costs.
Amortization of intangibles — Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which decreased as a result of the accelerated method of amortization utilized to amortize our intangibles which best approximates the proportion of the future cash flows estimated to be generated in each period over the estimated useful life of the applicable asset.
Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments and increased due to performance and operational efficiencies during the year ended September 27, 2024.
Goodwill impairment charges — In the fiscal year ended September 27, 2024, we completed our annual goodwill impairment test and concluded that no impairment charge was necessary as a result of this assessment. During the fiscal year ended September 29, 2023, we performed goodwill impairment tests which concluded that the carrying value of certain reporting units exceeded fair value. As a result, a non-cash impairment charge of $186 million was recognized during the year ended September 29, 2023.
Interest expense and other, net — The increase in interest expense and other, net was primarily due to an increase in interest rates on our variable rate debt and a reduced benefit from our interest rate swaps.
Loss on extinguishment of debt — The loss on extinguishment of debt was due to a loss on the debt modification of $14 million and debt issuance costs of $31 million during the fiscal year ended September 27, 2024.
Gain on acquisition of controlling interest — The gain on acquisition of controlling interest was primarily due to the acquisition of a joint venture which was accounted for as a business combination achieved in stages, in which the Company’s previously held equity interest in the joint venture was remeasured to fair value, resulting in a gain of $69 million during the fiscal year ended September 27, 2024.
Benefit for income taxes — The effective tax rate for the year ended September 27, 2024 was 32.5%, as compared to 5.6% for the year ended September 29, 2023. The change in the effective tax rate was primarily due to the partial release of a valuation allowance against a deferred tax asset related to disallowed interest expense during the year ended September 27, 2024 and the impact of goodwill impairment charges recognized during the year ended September 29, 2023 that are nondeductible for income tax purposes.
Net (loss) income attributable to non-controlling interests — Net income attributable to non-controlling interests include the minority interests in our consolidated joint ventures that are not wholly-owned, which decreased due to performance on certain consolidated joint ventures and the completion of certain contracts.
Segment Results for the Years Ended October 3, 2025, September 27, 2024 and September 29, 2023
The primary financial performance measures we use to manage our reportable segments and monitor results of operations are Revenues and Adjusted EBITDA. The following tables present our performance measures by reportable segment:
Digital Solutions
For the Year Ended October 3, 2025
Year to Year Change
For the Year Ended September 27, 2024
Year to Year Change
For the Year Ended September 29, 2023
(Dollars in millions)
Dollars
Percent
Dollars
Percent
Revenues
Adjusted EBITDA (1)
(1) Represents a Non-GAAP financial measure - see the related explanations included below and Note 18 — Segment Information in Part II of this Annual Report on Form 10-K.
The increase in revenues for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to revenues from the merger with CMS, higher volume from new contract awards and the benefit of additional working days, partially offset by the expected ramp-down of historical programs and the divestiture of Rapid Solutions.
The increase in Adjusted EBITDA for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to the revenue growth factors described above.
The increase in revenues for the year ended September 27, 2024, as compared to the year ended September 29, 2023, was primarily attributable to new contract awards and growth on existing programs. Adjusted EBITDA remained consistent year-over-year.
Global Engineering Solutions
For the Year Ended October 3, 2025
Year to Year Change
For the Year Ended September 27, 2024
Year to Year Change
For the Year Ended September 29, 2023
(Dollars in millions)
Dollars
Percent
Dollars
Percent
Revenues
Adjusted EBITDA (1)
(1) Represents a Non-GAAP financial measure - see the related explanations included below and Note 18 — Segment Information in Part II of this Annual Report on Form 10-K.
The increase in revenues for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to revenues from the merger with CMS, the ramp up of new contract awards, growth on existing programs and the benefit of additional working days, partially offset by the transition of contracts from consolidated to unconsolidated joint ventures and the expected ramp-down of historical programs.
The increase in Adjusted EBITDA for the year ended October 3, 2025, as compared to the year ended September 27, 2024, was primarily attributable to the revenue growth factors described above.
The increase in revenues and adjusted EBITDA for the year ended September 27, 2024, as compared to the year ended September 29, 2023, was primarily attributable to new contract awards and growth on existing programs.
Non-GAAP Financial Measures
We include the presentation and discussion of Adjusted EBITDA, which is not a measure of financial performance under Generally Accepted Accounting Principles in the United States (“GAAP”). Adjusted EBITDA should be considered only as supplement to and should not be considered in isolation or used as a substitute for financial information prepared in accordance with GAAP. Management of the Company believes Adjusted EBITDA, when read in conjunction with the Company’s financial statements prepared in accordance with GAAP and the reconciliation herein to the most directly comparable GAAP measure, provides useful information to management, investors and other users of the Company’s financial information in evaluating operating results and understanding operating trends by adjusting for the effects of items we do not consider to be indicative of the Company’s ongoing performance, the inclusion of which can obscure underlying trends. Additionally, management of the Company uses Adjusted EBITDA in its evaluation of business performance, particularly when comparing performance to past periods, and believes Adjusted EBITDA is useful for investors because it facilitates a comparison of financial results from period to period. The computation of a non-GAAP measure may not be comparable to similarly titled measures reported by other companies, thus limiting their use for comparability.
Adjusted EBITDA
The Company defines Adjusted EBITDA as net income (loss) attributable to common shareholders adjusted for interest expense and other, net, provision for income taxes, depreciation and amortization, and certain discrete items that are not considered in the evaluation of ongoing operating performance. These discrete items include acquisition, transaction, and integration costs, non-cash gains and losses, loss on extinguishment of debt, utilization of certain fair market value adjustments assigned in purchase accounting, and stock-based compensation. While we believe Adjusted EBITDA is a useful metric in evaluating operating performance by allowing better evaluation of underlying segment performance and better period-to-period comparability, it is not a metric defined by GAAP and may not be comparable to non-GAAP metrics presented by other companies. For a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the years ended October 3, 2025, September 27, 2024 and September 29, 2023, see Note 18 — Segment Information in Part II of this Annual Report on Form 10-K.
Backlog
The Company's backlog represents the estimated amount of future revenues to be recognized under negotiated contracts. The Company’s backlog includes unexercised option years and excludes the value of task orders that may be awarded under multiple award indefinite delivery / indefinite quantity (“IDIQ”) vehicles until such task orders are issued.
The Company’s backlog is either funded or unfunded:
• Funded backlog represents contract value for which funding is appropriated less revenues previously recognized on the contract.
• Unfunded backlog represents estimated values that have the potential to be recognized as revenues from negotiated contracts for which funding has not been appropriated and from unexercised contract options.
As of October 3, 2025, the Company had total backlog of $47.1 billion, compared with $45.0 billion as of September 27, 2024, an increase of $2.1 billion primarily due to new contract awards partially offset by revenue recognized during the year ended October 3, 2025. Funded backlog as of October 3, 2025 was $5.6 billion.
The Company's backlog, by reportable segment and in total, consisted of the following (in millions):
For the years ended
October 3, 2025
September 27, 2024
GES
Total
GES
Total
Funded backlog
Unfunded backlog
Total backlog
There is no assurance that all backlog will result in future revenues being recognized, and the backlog balance is subject to increases or decreases based on the execution of new contracts, contract modifications or extensions, deobligations, early terminations, and other factors.
Revenues by Contract Type
Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we generate revenues, see “Critical Accounting Policies” below. The following table summarizes revenues by contract type as a percentage of each reportable segment and total Amentum for the periods presented:
For the years ended
October 3, 2025
September 27, 2024
September 29, 2023
GES
Total
GES
Total
GES
Total
Cost-plus-fee
Fixed-price
Time-and-materials
Total
Effects of Inflation
Given the nature of our operations and contract type mix, we expect the impact of inflation on our business may be limited for some of our contracts. During the fiscal year ended October 3, 2025, 63% of our revenues was generated under cost-plus-fee type contracts that have limited inflation risk as they include provisions that adjust revenues to cover costs affected by inflation. The remainder of our revenues was generated under time-and-materials or fixed-price type contracts which we have historically been able to price in a manner that accommodates inflation and cost increases over the period of performance but changes in our expectations with respect to inflation rates or in the overall mix of our contract types could cause future results to differ substantially.
Liquidity and Capital Resources
Existing cash and cash equivalents and cash generated by operations are our primary sources of liquidity, as well as sales of receivables under our Master Accounts Receivable Purchase Agreement (“MARPA”) and available borrowing capacity under the revolving credit facility provided for in the senior secured credit facility (the “Credit Facility”).
The Credit Facility consists of our term facility (“Term Loan”) maturing on September 27, 2031 and a $850 million revolving facility (“Revolver”) maturing on September 27, 2029, which includes a $200 million letter of credit subfacility and a $100 million swingline subfacility. The Term Loan requires quarterly principal amortization payments of $9 million, which commenced on March 31, 2025, with the remainder of the principal thereunder being due at maturity. In August 2024, the Company also completed an offering of $1,000 million in aggregate principal amount of 7.250% senior notes due August 1, 2032 (the “Senior Notes”).
The Credit Facility and the Senior Notes are guaranteed by substantially all of our wholly owned material domestic restricted subsidiaries, subject to customary exceptions set forth in the credit agreement and indenture, respectively.
The interest rates applicable to the Term Loan are floating interest rates equal to an Alternate Base Rate or Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based upon our net leverage ratio.
Each of the credit agreement and indenture requires us to comply with certain representations and warranties, customary affirmative and negative covenants and, in the case of the Revolver, under certain circumstances, a financial covenant. We were in compliance with all covenants as of October 3, 2025 and September 27, 2024.
We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, capital expenditures, scheduled principal and interest payments on our debt obligations, scheduled lease payments, and other working capital requirements over at least the next twelve months.
On June 26, 2025, we completed the sale of a hardware and product business, Rapid Solutions, to Lockheed Martin Corporation for a purchase price of $360 million in cash.
As part of our debt reduction initiatives, we made voluntary principal payments on the Term Loan of approximately $191 million, $250 million and $281 million on June 27, 2025, July 31, 2025 and September 30, 2025 , respectively. Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the Credit Facility, Senior Notes and any other indebtedness we may incur will depend on our future financial performance which could be affected by factors outside of our control, including, but not limited to, worldwide economic and financial market conditions.
See “Note 7 — Sales of Receivables” and “Note 12 — Debt” in Part II of this Annual Report on Form 10-K for additional information.
Cash Flow Information
For the years ended
(Amounts in millions)
October 3, 2025
September 27, 2024
September 29, 2023
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash Flows - October 3, 2025 vs September 27, 2024
Net cash provided by operating activities increased by $496 million when compared to the year ended September 27, 2024 primarily as a result of a $542 million increase in cash earnings due to contributions from the merger with CMS and offset by $46 million in changes in operating assets and liabilities.
Net cash provided by investing activities decreased by $247 million when compared to the year ended September 27, 2024 primarily as a result of the change in cash flows associated with the merger with CMS, partially offset by cash received from divestitures in the year ended October 3, 2025.
Net cash used in financing activities increased by $408 million when compared to the year ended September 27, 2024 primarily due to increased principal payments on our Term Loan partially offset by financing activities completed in the year ended September 27, 2024 associated with the merger with CMS.
Cash Flows - September 27, 2024 vs September 29, 2023
Net cash provided by operating activities decreased by $20 million primarily as a result of the Transaction and debt modification and higher tax and interest payments, partially offset by cash inflows from sales of receivables under the MARPA.
Net cash used in investing activities decreased by $492 million primarily as a result of the merger with CMS in the year ended September 27, 2024.
Net cash used in financing activities increased by $270 million primarily as a result of repayment of the prior first and second lien credit agreements partially offset by proceeds from the borrowings under the Term Loan and Senior Notes, and a capital contribution provided in connection with the Transaction.
Divestiture
On June 26, 2025, we completed the sale of a hardware and product business, Rapid Solutions, to Lockheed Martin Corporation for a purchase price of $ 360 million in cash. Rapid Solutions was part of the DS segment.
Contractual Obligations
For a description of the Company’s contractual obligations related to debt, pensions, leases, and retirement plans refer to “Note 10 — Retirement Plans”, “Note 12 — Debt” and “Note 14 — Leases” in Part II of this Annual Report on Form 10-K.
Commitments and Contingencies
The Company is involved in various claims, disputes, lawsuits, investigations, audits, administrative proceedings and similar matters arising in the normal course of business. Liabilities for loss contingencies arising from such matters and other sources are recorded when it is probable that an unfavorable result and/or liability will be incurred and the cost of the unfavorable result or liability can be reasonably estimated. Management is of the opinion that any liability or loss associated with such matters, either individually or in the aggregate, will not have a material adverse effect on the Company’s operations and liquidity.
For a discussion of these items, refer to “Note 21 — Legal Proceedings and Commitments and Contingencies” in Part II of this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
The process of preparing financial statements in conformity with GAAP requires the use of estimates and assumptions to determine reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of related contingent assets and liabilities. These estimates and assumptions are based on information available at the time of the estimates or assumptions, including our historical experience, where relevant. Significant estimates and assumptions are reviewed quarterly by management. The evaluation process includes a thorough review of key estimates and assumptions used in preparing our financial statements. Because of the uncertainty of factors surrounding the estimates, assumptions and judgments used in the preparation of our financial statements, actual results may materially differ from the estimates.
Our critical accounting policies and estimates are those policies and estimates that are both most important to our financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
We believe the following accounting policies require significant judgment due to the complex nature of the underlying transactions:
Revenue Recognition
Our services are generally performed under cost-plus-fee, fixed-price, or time-and-materials contracts which typically involve an annual base period of performance followed by renewal option periods that, once exercised, are generally accounted for as separate contracts.
The transaction price is the estimated amount of fixed and variable consideration we expect to receive for performance of our contracts. Variable consideration is typically in the form of award or incentive fees or a combination thereof. Variable consideration is generally based upon various objective and subjective criteria, such as meeting performance or cost targets. These estimates are based on historical award experience, anticipated performance and our best judgment based on current facts and circumstances. Management continuously monitors these factors that may affect the quality of its estimates, and material changes in estimates are disclosed accordingly. Variable consideration is included in the estimated transaction price, to the extent that it is probable that a significant reversal of cumulative revenues recognized will not occur, and there is a basis to reasonably estimate the amount of variable consideration.
The Company generally recognizes revenues over time throughout the contract performance period as control is transferred continuously to our customers as work progresses. We measure our progress towards completion using an input measure of total costs incurred divided by total costs expected to be incurred.
Revenues on cost-plus-fee contracts are recorded as contract allowable costs are incurred and fees are earned. Revenues are recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations.
Revenues on fixed-price contracts are recorded as work is performed over the period of performance. Revenues are recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with the transfer of control to the customer. For such contracts, we estimate total costs at the inception of the contract based on our assumptions of the cost elements required to complete the associated tasks of the contract and assess the impact of the risks on our estimates of total costs to complete the contract. Our cost estimates are based on assumptions that include our employee labor costs, the cost of materials, and the performance of our subcontractors. These cost estimates are subject to change as we perform under the contract and as a result, the timing of revenues and amount of profit on a contract may change as there are changes in estimated costs to complete the contract. Such adjustments are recognized on a cumulative catch-up basis in the period we identify the changes. If total expected costs exceed total estimated contract revenues, a provision for the entire expected loss on the contract is recorded in the period in which the loss is identified. Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss.
Revenues for time-and-materials contracts are recorded based on the amount for which we have the right to invoice our customers, because the amount directly reflects the value of our work performed for the customer. Revenues are recorded on the basis of contract allowable labor hours worked multiplied by the contract defined billing rates, plus the direct costs and indirect cost burdens associated with materials and subcontract work used in performance on the contract. Generally, profits on time-and-materials contracts result from the difference between the cost of services performed and the contractually defined billing rates for these services.
Business Combinations
The Company records all tangible and intangible assets acquired and liabilities assumed in a business combination at fair value as of the acquisition date, with any excess purchase consideration recorded as goodwill. Determining the fair value of acquired intangible assets requires management to make significant judgments about expected future cash flows, weighted-average cost of capital, discount rates, useful lives of assets and expected long-term growth rates. During the measurement period, not to exceed one year from the acquisition date, the Company may adjust provisional amounts recorded to reflect new information subsequently obtained regarding facts and circumstances that existed as of the acquisition date.
Goodwill
Goodwill represents the excess of amounts paid over the estimated fair value of net assets acquired from an acquisition. The Company evaluates goodwill for impairment annually on the first day of the fourth quarter of the fiscal year or whenever events or circumstances indicate that the carrying value may not be recoverable.
The evaluation includes a qualitative or quantitative assessment that compares the estimated fair value of the relevant reporting unit to its respective carrying value, including goodwill, and utilizes both market and income approaches. Under the market approach, we estimate the fair value of a reporting unit based on comparable public companies within our industry that have operations with observable and comparable economic characteristics and are similar in nature, scope and size to the reporting unit being compared. Under the income approach, we estimate the fair value of a reporting unit using a discounted cash flow model which includes judgments and assumptions about expected growth rates, terminal earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, discount rates based on weighted-average cost of capital, assumptions regarding future capital expenditures and observable inputs of other comparable companies. The fair value of each reporting unit is compared to the carrying amount of the reporting unit and if the carrying amount of the reporting unit exceeds the fair value, then an impairmentloss is recognized for the difference.
Recent Accounting Pronouncements
See “Note 3 — Recent Accounting Pronouncements” in Part II of this Annual Report on Form 10-K for additional information.
