Amentum Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 55 Consolidated Balance Sheets 57 Consolidated Statements of Operations 58 Consolidated Statements of Comprehensive Income (Loss) 59 Consolidated Statements of Shareholders' Equity 60 Consolidated Statements of Cash Flows 61 Notes to Consolidated Financial Statements of Amentum Holdings, Inc. 62 Note 1 — Organization and Description of Business 62 Note 2 — Summary of Significant Accounting Policies 62 Note 3 — Recent Accounting Pronouncements 67 Note 4 — Acquisitions 67 Note 5 — Revenues 69 Note 6 — Contract Balances 71 Note 7 — Sales of Receivables 71 Note 8 — Goodwill and Intangible Assets 72 Note 9 — Income Taxes 73 Note 10 — Retirement Plans 75 Note 11 — Pension Benefit Obligations 75 Note 12 — Stock Based Compensation 79 Note 13 — Debt 80 Note 14 — Fair Value of Financial Assets and Liabilities 84 Note 15 — Leases 84 Note 16 — Related Parties 86 Note 17 — Joint Ventures 86 Note 18 — Accumulated Other Comprehensive Income (Loss) 88 Note 19 — Segment Information 88 Note 20 — Composition of Certain Financial Statement Captions 88 Note 21 — Loss Per Share 90 Note 22 — Legal Proceedings and Commitments and Contingencies 90 Note 23 — Subsequent Events 91 54 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Amentum Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Amentum Holdings, Inc. (the Company) as of September 27, 2024 and September 29, 2023, the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity and cash flows for each of the three years in the period ended September 27, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 27, 2024 and September 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 27, 2024, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue recognition related to the cost-based input method for certain fixed-price contracts Description of the Matter As described in Note 2 to the consolidated financial statements, the Company generally recognizes revenue over time as performance obligations are satisfied as most of its contracts involve a continuous transfer of control to the customer. For many fixed-price contracts, revenue is recognized under a cost-based input method that requires an estimate of total costs at contract completion. Estimates of total costs at contract completion for certain fixed-price contracts are highly subjective to develop and can change over the contract performance period due to a wide range of variables, and these changes could have a material effect on the Company’s results of operations. Auditing estimates of total costs at contract completion for certain fixed-price contracts was complex due to the judgment involved in evaluating management’s estimates of contract costs at completion, which include costs of employee labor costs, materials, and subcontractors. These estimates are based on management’s assessment of the status of the contract as well as historical results. 55 How We Addressed the Matter in Our Audit To test the completeness and accuracy of the Company’s estimate of total costs at contract completion for certain fixed-price contracts that are highly subjective where revenue is recognized under a cost-based input method , our audit procedures included, among others evaluating the accuracy of management’s estimates by comparing planned costs to actual costs incurred to date, reviewing management’s projected costs for consistency with contract terms, and obtaining an understanding of the Company’s progress on the contract. Valuation of acquired customer relationship intangible assets Description of the Matter As discussed in Notes 1 and 4 to the consolidated financial statements, on September 27, 2024, the spin-off of the Jacobs Solutions Inc. Critical Mission Solutions business and portions of the Divergent Solutions business merged with Amentum Parent Holdings LLC, with the surviving entity renamed Amentum Holdings, Inc. The Company’s accounting for the acquisition included determining the fair value of the intangible assets acquired, which primarily relates to customer relationships. The Company recognized acquired customer relationship intangible assets of $1,590 million which were valued using the excess earnings method discounted cash flow approach. Auditing the Company’s preliminary accounting for the acquired customer relationship intangible assets involved subjective auditor judgement due to the estimation required in management’s determination of the fair value of the intangible assets. The estimation was primarily due to the sensitivity of the fair values to underlying assumptions including discount rates and certain prospective financial information. How We Addressed the Matter in Our Audit To test the preliminary fair value of the acquired customer relationship intangible assets, our audit procedures included, among others, evaluating the Company’s valuation methodologies and their application, evaluating the prospective financial information used in the valuation, and testing the completeness and accuracy of underlying data. We involved our valuation specialists to assist in assessing the methodologies and testing the significant assumptions, including discount rates, used to value the acquired intangible assets. For example, we compared the significant assumptions to other information such as current industry trends and historical results of the acquired business. We also performed sensitivity analyses of the significant assumptions to evaluate the change in fair value resulting from changes in the assumptions. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. Tysons, Virginia December 17, 2024 56 AMENTUM HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) September 27, 2024 September 29, 2023 ASSETS Current assets: Cash and cash equivalents $ 452 $ 305 Accounts receivable, net 2,401 1,440 Prepaid expenses and other current assets 231 186 Total current assets 3,084 1,931 Property and equipment, net 144 85 Equity method investments 123 104 Goodwill 5,556 2,891 Intangible assets, net 2,623 988 Other long-term assets 444 414 Total assets $ 11,974 $ 6,413 LIABILITIES Current liabilities: Current portion of long-term debt $ 36 $ 45 Accounts payable 764 560 Accrued compensation and benefits 696 369 Contract liabilities 113 120 Other current liabilities 356 282 Total current liabilities 1,965 1,376 Long-term debt, net of current portion 4,643 4,067 Deferred tax liabilities 370 141 Other long-term liabilities 444 413 Total liabilities 7,422 5,997 Commitments and contingencies (Note 22) SHAREHOLDERS' EQUITY Common stock, $ 0.01 par value – 1,000,000,000 shares authorized and 243,302,173 shares issued and outstanding at September 27, 2024; no shares authorized, issued or outstanding at September 29, 2023. 2 — Additional paid-in capital 4,962 772 Retained deficit ( 527 ) ( 445 ) Accumulated other comprehensive income 23 48 Total Amentum shareholders' equity 4,460 375 Non-controlling interests 92 41 Total shareholders' equity 4,552 416 Total liabilities and shareholders' equity $ 11,974 $ 6,413 See notes to consolidated financial statements 57 AMENTUM HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) For the years ended September 27, 2024 September 29, 2023 September 30, 2022 Revenues $ 8,388 $ 7,865 $ 7,676 Cost of revenues ( 7,590 ) ( 7,083 ) ( 6,905 ) Selling, general, and administrative expenses ( 353 ) ( 297 ) ( 308 ) Amortization of intangibles ( 228 ) ( 298 ) ( 272 ) Equity earnings of non-consolidated subsidiaries 74 56 38 Goodwill impairment charges — ( 186 ) ( 108 ) Operating income 291 57 121 Interest expense and other, net ( 438 ) ( 397 ) ( 153 ) Loss on extinguishment of debt ( 45 ) — ( 32 ) Gain on acquisition of controlling interest 69 — — Loss before income taxes ( 123 ) ( 340 ) ( 64 ) Benefit (provision) for income taxes 40 19 ( 14 ) Net loss ( 83 ) ( 321 ) ( 78 ) Less: net (loss) income attributable to non-controlling interests 1 7 ( 6 ) Net loss attributable to common shareholders $ ( 82 ) $ ( 314 ) $ ( 84 ) Loss per share: Basic $ ( 0.90 ) $ ( 3.49 ) $ ( 0.93 ) Diluted $ ( 0.90 ) $ ( 3.49 ) $ ( 0.93 ) See notes to consolidated financial statements 58 AMENTUM HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in millions) For the years ended September 27, 2024 September 29, 2023 September 30, 2022 Net loss $ ( 83 ) $ ( 321 ) $ ( 78 ) Other comprehensive income: Net unrealized (loss) gain on interest rate swaps ( 47 ) 25 — Foreign currency translation adjustments 8 3 ( 8 ) Pension adjustments 9 24 8 Other comprehensive (loss) income ( 30 ) 52 — Income tax benefit (provision) related to items of other comprehensive (loss) income 5 ( 13 ) ( 2 ) Other comprehensive (loss) income, net of tax ( 25 ) 39 ( 2 ) Comprehensive loss ( 108 ) ( 282 ) ( 80 ) Non-controlling interests 1 7 ( 6 ) Comprehensive loss attributable to common shareholders $ ( 107 ) $ ( 275 ) $ ( 86 ) See notes to consolidated financial statements 59 AMENTUM HOLDINGS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions) Common Stock Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity Attributable to Amentum Holdings, Inc. Non-controlling Interests Total Shareholders' Equity Shares Amount Balance at October 1, 2021 — $ — $ 752 $ ( 47 ) $ 11 $ 716 $ 106 $ 822 Net loss — — — ( 84 ) — ( 84 ) 6 ( 78 ) Other comprehensive loss, net of tax — — — — ( 2 ) ( 2 ) — ( 2 ) Acquisition of PAE Inc. — — — — — — 17 17 Distributions to non-controlling interests — — — — — — ( 56 ) ( 56 ) Equity based compensation and other — — 3 — — 3 — 3 Balance at September 30, 2022 — $ — $ 755 $ ( 131 ) $ 9 $ 633 $ 73 $ 706 Net loss — — — ( 314 ) — ( 314 ) ( 7 ) ( 321 ) Other comprehensive loss, net of tax — — — — 39 39 — 39 Acquisition of remaining interest in consolidated joint ventures — — 14 — 14 ( 14 ) — Capital contribution from non-controlling interest — — — — — — 13 13 Distributions to non-controlling interests — — — — — — ( 24 ) ( 24 ) Equity based compensation and other — — 3 — — 3 — 3 Balance at September 29, 2023 — $ — $ 772 $ ( 445 ) $ 48 $ 375 $ 41 $ 416 Net loss — — — ( 82 ) — ( 82 ) ( 1 ) ( 83 ) Other comprehensive loss, net of tax — — — — ( 25 ) ( 25 ) — ( 25 ) Acquisition of CMS 243 2 3,935 — — 3,937 63 4,000 Capital contribution — — 235 — — 235 — 235 Distributions to non-controlling interests — — — — — — ( 6 ) ( 6 ) Equity based compensation and other — — 20 — — 20 ( 5 ) 15 Balance at September 27, 2024 243 $ 2 $ 4,962 $ ( 527 ) $ 23 $ 4,460 $ 92 $ 4,552 See notes to consolidated financial statements 60 AMENTUM HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) For the years ended September 27, 2024 September 29, 2023 September 30, 2022 Cash flows from operating activities Net loss $ ( 83 ) $ ( 321 ) $ ( 78 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 23 27 20 Amortization of intangibles 228 298 272 Amortization of deferred loan costs and original issue discount 22 21 19 Goodwill impairment charges — 186 108 Derivative instruments 37 21 ( 76 ) Equity earnings of non-consolidated subsidiaries ( 74 ) ( 56 ) ( 38 ) Distributions from equity method investments 61 49 33 Deferred income taxes ( 115 ) ( 62 ) ( 7 ) Equity-based compensation 18 3 3 Gain on acquisition of controlling interest ( 69 ) — — Other 14 2 3 Changes in assets and liabilities, net of effects of business acquisition: Accounts receivable, net 81 ( 68 ) 99 Prepaid expenses and other assets 78 56 64 Accounts payable, contract liabilities, and other current liabilities ( 211 ) ( 24 ) ( 263 ) Accrued employee compensation and benefits 43 ( 82 ) ( 37 ) Other long-term liabilities ( 6 ) 17 4 Net cash provided by operating activities 47 67 126 Cash flows from investing activities Acquisitions, net of cash acquired 488 — ( 1,758 ) Purchase of property and equipment ( 11 ) ( 12 ) ( 18 ) Contributions to equity method investments ( 1 ) ( 17 ) ( 34 ) Return of capital from equity method investments — 14 24 Other ( 1 ) ( 2 ) ( 1 ) Net cash provided by (used in) investing activities 475 ( 17 ) ( 1,787 ) Cash flows from financing activities Borrowings on revolving credit facilities 562 1,201 67 Payments on revolving credit facilities ( 562 ) ( 1,201 ) ( 67 ) Proceeds from borrowing under the term loans 2,620 — 2,816 Repayments of borrowings under the credit agreement ( 4,177 ) ( 34 ) ( 992 ) Proceeds from issuance of Senior Notes 1,000 — — Payments of debt issuance fees ( 38 ) — ( 43 ) Proceeds from borrowings under other agreements 1 5 40 Repayments of borrowings under other agreements ( 13 ) ( 67 ) ( 36 ) Capital contribution 235 — — Capital contribution from non-controlling interest — 13 — Distributions to non-controlling interests ( 6 ) ( 24 ) ( 56 ) Other ( 4 ) ( 5 ) ( 5 ) Net cash (used in) provided by financing activities ( 382 ) ( 112 ) 1,724 Effect of exchange rate changes on cash 7 1 ( 6 ) Net change in cash and cash equivalents 147 ( 61 ) 57 Cash and cash equivalents, beginning of period 305 366 309 Cash and cash equivalents, end of period $ 452 $ 305 $ 366 Supplemental disclosure of cash flow information Common stock issued for the Transaction $ 3,937 $ — $ — Income taxes paid, net of receipts $ ( 95 ) $ ( 26 ) $ ( 27 ) Interest paid $ ( 373 ) $ ( 362 ) $ ( 208 ) See notes to consolidated financial statements 61 AMENTUM HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Organization and Description of Business Amentum Holdings, Inc. (collectively with its subsidiaries, “we,” “us,” “our,” “Amentum,” or the “Company”) is a global advanced engineering and technology solutions provider to a broad base of U.S. and allied government agencies, 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 environment and climate sustainability, intelligence and counter threat solutions, data fusion and analytics, engineering and integration, advanced test, training and readiness, and citizen solutions. As a leading provider of differentiated technology solutions, we have built a repertoire of deep customer knowledge, enabling us to engage our customers across multiple capabilities and markets. On September 27, 2024, the spin-off of the Jacobs Solutions Inc. (“Jacobs”) Critical Mission Solutions business and portions of the Jacobs Divergent Solutions business (and, together with the Critical Mission Solutions business, referred to as the “CMS Business” or “CMS”) merged with Amentum Parent Holdings LLC (collectively, the “Transaction”) with the surviving entity renamed Amentum Holdings, Inc. Amentum's Registration Statement on Form 10 (the “Registration Statement”), filed with the Securities and Exchange Commission (“SEC”) on July 15, 2024, was declared effective on September 18, 2024. Amentum Parent Holdings LLC is the accounting acquirer of CMS for accounting purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Amentum Parent Holdings LLC is considered the Company’s predecessor and the historical financial statements of Amentum Parent Holdings LLC prior to September 27, 2024, are reflected in this Annual Report on Form 10-K as the Company’s historical financial statements. Accordingly, the financial results of the Company prior to September 27, 2024 do not include the financial results of CMS and current and future results will not be comparable to historical results. Note 2 — Summary of Significant Accounting Policies Reporting Periods Amentum's fiscal year ends on the Friday nearest the end of September. Fiscal year 2023 and fiscal year 2024 ended on September 29, 2023 and September 27, 2024, respectively, and both included 52 weeks. Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with GAAP. The consolidated balance sheet as of September 27, 2024 is for Amentum Holdings, Inc. and includes CMS, which was acquired by the Company on September 27, 2024. The consolidated statement of operations and statement of cash flows for the year ended September 27, 2024 is for Amentum Holdings, Inc. and does not include CMS activity due to the Transaction closing on September 27, 2024. The consolidated financial statements include the accounts of the Company's wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has investments in joint ventures that are variable interest entities (“VIEs”). The VIEs are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. In cases where the Company has (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the entity that could potentially be significant to the VIE, the Company consolidates the entity. When the Company consolidates an entity that is not wholly-owned, the Company reports the minority interests in the entity as non-controlling interests in the equity section of the consolidated balance sheets. The Company has included the non-controlling interest in earnings of the entities within the consolidated net loss and deducted the same amount to derive net loss attributable to the Company. Alternatively, in cases where all of the aforementioned criteria are not met, the investment is accounted for under the equity method. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amount of revenues and expenses. The most significant estimates relate to estimating contract revenues and costs at completion, fair value measurements, fair value of goodwill and intangible assets, pension and defined benefit plan obligations, deferred tax 62 liabilities, and reserves for contract-related matters and contingencies. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is subject to a wide range of variables. Actual results may differ from these estimates. Revenue Recognition The Company generates revenue from service arrangements primarily with the U.S. government, including subcontracts with other contractors performing work for the U.S. government. The Company also serves state, local and foreign governments and commercial customers. 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. We account for a contract when the parties have approved the contract and are committed to perform their respective obligations, the rights of each party and the payment terms are identified, the contract has commercial substance, and collectability is probable. To determine the proper revenue recognition, we assess whether the distinct goods or services to be provided are to be accounted for as a single performance obligation or as multiple performance obligations. The majority of our contracts have a single performance obligation as the promise to transfer the respective goods or services is not separately identifiable from other promises in the contract and is therefore not distinct. We also evaluate whether modifications to existing contracts should be accounted for as part of the original contract or as a separate contract. Contract modifications that create new enforceable rights and obligations are accounted for prospectively. Contract modifications that do not add distinct goods or services are accounted for through cumulative catch-up adjustments. Contract modifications that add distinct goods or services and increase the contract value by an amount that reflects the standalone selling price are 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. 63 Changes in Estimates on Contracts The Company recognizes revenues on performance obligations using a cost-to-cost input method based on the ratio of costs incurred to date to total estimated costs at completion. Changes in estimates of revenues and costs of revenues related to performance obligations satisfied over time are recognized in the period in which the changes are made for the inception-to-date effect of the changes. The Company uses professional judgment when assessing risks, estimating contract revenues and costs, estimating variable consideration, and making assumptions for schedule and technical issues. The Company periodically reassesses its assumptions and estimates as needed. When estimates of total costs to be incurred on a contract exceed total revenues, a provision for the entire loss on the contract is recorded in the period in which the loss is determined. Total estimated losses are inclusive of any unexercised contract options that are probable of award. Cost of Revenues Cost of revenues includes all direct contract costs such as labor, materials, and subcontractor costs, allocations of indirect costs, and depreciation expense related to property and equipment directly attributable to contracts. Selling, General, and Administrative Expenses Selling, general, and administrative expenses include indirect costs that are allowable and allocable to contracts under federal procurement standards. Selling, general, and administrative expenses also include expenses that are unallowable under applicable procurement standards and are not allocable to contracts for billing purposes. Such unallowable expenses do not directly generate revenues but are necessary for business operations. Cash and Cash Equivalents The Company considers cash on deposit and all highly liquid investments with original maturities of three months or fewer at the date of purchase to be cash and cash equivalents. Accounts Receivable Accounts receivable include billed and billable receivables, and unbilled receivables. Billed and billable receivables represent amounts in which the right to consideration is unconditional other than the passage of time. The Company records its billed and billable receivables net of an allowance for expected credit losses. Upon determination that a specific receivable is uncollectible, the receivable is written off against the allowance for expected credit losses. Contract Assets Contract assets represent unbilled receivables in which our right to consideration is conditional upon factors other than the passage of time. Contract assets exclude billed and billable receivables. Contract assets consist of costs and fees that are billable on contract completion or billable upon other specified events, such as the completion of a milestone, retention of fees until contract completion, or resolution of a formal claim. Accounting for Sales of Accounts Receivable The Company considers accounts receivable transfers under its Master Accounts Receivable Purchase Agreement (“MARPA”) as sales under ASC 860, Transfers and Servicing , and derecognizes the sold accounts receivable from its balance sheet. The fair value of the sold accounts receivable approximated their book value due to their short-term nature. Contract Liabilities Contract liabilities represent advanced payments received from a customer and billings in excess of revenues recognized as of the balance sheet date. These amounts are subsequently recognized into revenues as the performance obligation is satisfied. Property and Equipment Property and equipment are recorded at cost and are depreciated over their estimated useful lives using the straight-line method. We review the carrying amounts of long-lived assets for impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable and the carrying amount of the asset exceeds its estimated fair value. Leases The Company enters into contractual arrangements primarily for the use of real estate facilities, information technology equipment, vehicles, and certain other equipment. These arrangements contain a lease when the Company controls the 64 underlying asset and has the right to obtain substantially all of the economic benefits or outputs from the asset. We have short-term leases, operating leases, and finance leases. The Company accounts for leases in accordance with principles contained in ASC 842, Leases . The Company categorizes leases with contractual terms longer than twelve months as either operating or finance leases. Finance leases are generally those leases that allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. Finance lease assets are amortized within cost of revenues on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and other, net and recognized using the effective interest method over the lease term. The Company records a right-of-use asset and lease liability as of the lease commencement date equal to the present value of the remaining lease payments for its operating and finance leases. Most of our leases do not provide an implicit rate that can be readily determined. Therefore, we use a discount rate based on the Company’s incremental borrowing rate, which is determined using our credit rating and information available as of the commencement date. The right-of-use asset is then adjusted for initial direct costs and certain lease incentives included in the contractual arrangement. The Company has elected the practical expedient to apply the lease recognition guidance for short-term leases defined as twelve months or fewer. Our operating lease arrangements may contain options to extend the lease term or for early termination. We account for these options when it is reasonably certain we will exercise them. Right-of-use assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets. Operating lease expense is recognized on a straight-line basis over the lease term and is recorded within cost of revenues or selling, general, and administrative expenses on the consolidated statements of operations. 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. Intangible Assets The Company primarily amortizes intangible assets using an accelerated method 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 and evaluated on an annual basis to ensure continued appropriateness unless their estimated useful lives are determined to be indefinite or the estimated cash flows indicate another pattern of amortization should be used. 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, which are Level 2 and Level 3 inputs, respectively. The market approach utilizes observable Level 2 inputs as it considered the inputs of other comparable companies. The income approach utilizes unobservable inputs and management judgment which are Level 3 fair value measurements. The analysis utilizes significant 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 impairment loss is recognized for the difference. Commitments and Contingencies Accruals for commitments and loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Defined Benefit Pension Plans 65 Accounting and reporting for the Company’s defined benefit pension plans require the use of assumptions, including but not limited to, a discount rate and an expected return on assets. We base the discount rate on a yield curve developed from corporate bonds rated AA or better with maturities consistent with our projected defined benefit plan cash flows. We evaluate the discount rate and related assumptions at least annually based on reviews of current plan information and consultation with the Company's independent actuary and the plans’ investment advisor. If these assumptions differ materially from actual results, the Company’s obligations under the defined benefit pension plans could also differ materially, potentially requiring the Company to record an additional liability. The Company’s defined benefit pension plan liabilities are developed from actuarial valuations, which are performed each year. Income Taxes The Company provides for income taxes in accordance with principles contained in ASC 740, Income Taxe s. Under these principles, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Any interest or penalties incurred in connection with income taxes are recorded as part of the provision for income taxes for financial reporting purposes. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company also evaluates any uncertain tax positions and recognizes a liability for the tax benefit associated with an uncertain tax position if it is more likely than not that the tax position will not be sustained on examination by the taxing authorities upon consideration of the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in the period in which such change occurs. The Company recognizes interest and penalties related to uncertain tax positions within benefit (provision) for income taxes in the consolidated statement of operations. Interest Rate Swap Agreements We enter into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. We designate our derivative instruments as cash flow hedges if they meet the criteria specified in ASC 815, Derivatives and Hedging . Changes in the fair value of derivatives designated and qualifying as cash flow hedges are deferred in accumulated other comprehensive income and are recognized into earnings as the hedged transactions affect earnings. Changes in the fair value of derivatives not designated and qualifying as cash flow hedges are immediately recognized in earnings and classified as interest expense. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts. The fair value of our debt approximates its carrying value. The fair value of our debt was estimated using Level 2 inputs based on our recently priced debt. Loss Per Share Basic loss per share is computed by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Due to the loss experienced by the Company, the computation of diluted loss per share does not assume the impact of restricted stock units that would have an antidilutive effect on loss per share. Information about the weighted-average number of basic and diluted shares is presented in “Note 21 — Loss Per Share”. Concentrations of Credit Risk Financial instruments that potentially subject the Company to credit risk include receivables and cash equivalents. Receivables credit risk is also limited due to the credit worthiness of the U.S. Government. Management believes the credit risk associated with the Company’s cash equivalents is limited due to the credit worthiness of the obligors of the investments underlying the cash equivalents. In addition, although the Company maintains cash balances at financial institutions that exceed federally insured limits, these balances are placed with high quality financial institutions. Approximately 90 %, 91 % and 94 % of the Company’s revenues were derived through direct contracts with agencies of the U.S. Government for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Foreign Currency Translation 66 The Company’s functional currency is generally the United States dollar except for foreign operations where the functional currency is generally the local currency. Results of operations for foreign entities are translated to U.S. dollars using the average exchange rates during the period. Assets and liabilities for foreign entities are translated using the exchange rates in effect as of the date of the balance sheet. Resulting translation adjustments are recorded as a foreign currency translation adjustment into other accumulated comprehensive income in shareholders’ equity. Comprehensive (Loss) Income Comprehensive (loss) income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Other comprehensive (loss) income refers to revenues, expenses, and gains and losses that under GAAP are included in comprehensive (loss) income, but excluded from the determination of net (loss) income. The elements within other comprehensive (loss) income consist of foreign currency translation adjustments, differences between actual amounts and estimates based on actuarial assumptions and the effect of changes in actuarial assumptions made under the Company’s pension plans and the changes in the fair value of interest rate swap agreements. The Company accounts for the residual income tax effects in comprehensive income using the portfolio method and will release the residual tax effect when the entire portfolio of the applicable balance is terminated. Note 3 — Recent Accounting Pronouncements Accounting Standards Updates Issued but Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , to improve reportable segment disclosure requirements. This update requires disclosure of significant segment expenses and other segment items in annual and interim periods. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendment requires retrospective application to all prior periods presented in the financial statements and early adoption is permitted. We are currently evaluating the impacts of the new standard on our consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , to enhance transparency and usefulness of income tax disclosures. This update requires disaggregated information about an entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be applied on a prospective or retrospective basis. We are currently evaluating the impacts of the new standard on our consolidated financial statements. Accounting Standards Updates Adopted There have been no recently adopted accounting pronouncements that are material to the Company's consolidated financial statements. Note 4 — Acquisitions Acquisition of CMS On September 27, 2024, Amentum Parent Holdings LLC completed its merger with CMS in a Reverse Morris Trust transaction. Amentum Parent Holdings LLC is the accounting acquirer of CMS. Immediately following the Transaction, the Company has 243 million issued and outstanding shares of common stock, of which Jacobs and its shareholders owned 58.5 % of the issued and outstanding shares of common stock, and Amentum Equityholder owned 37.0 %. Further, 4.5 % of the issued and outstanding shares of common stock have been placed in escrow, to be released and delivered in the future to Jacobs and its shareholders or to Amentum Equityholder, depending on the achievement of certain fiscal year 2024 targets by the CMS Business (“Additional Merger Consideration”). The final determination of this Additional Merger Consideration is expected to be completed during the measurement period. CMS is a leading provider of mission-critical, technology-driven services in government and commercial markets. The CMS Business provides test, training and operations services for missile defense systems; IT and engineering services to defense clients and the Space sector; technological solutions including installations, decommissioning, and environmental remediation to energy clients; other highly technical consulting solutions; advanced cyber training and data analytics for government professionals; advanced communication systems and aerial mapping technologies to national security clients and other technical 67 services for United States defense and intelligence clients. As a result of the Transaction, the Company will be a leading government services provider to the U.S. federal government and its allies. Under the acquisition method of accounting, total preliminary consideration exchanged for the CMS transaction was: (In millions, except per share amounts) September 27, 2024 Shares of Amentum Holdings, Inc. common stock issued to CMS shareholders 142 Per share price of Amentum Holdings, Inc. common stock 25.67 Fair value of common stock issued to CMS shareholders 1 3,654 Fair value of additional equity consideration issued to CMS shareholders 2 281 Other consideration 3 6 Fair value of consideration transferred 3,941 Fair value of previously held equity interest 4 84 Total consideration $ 4,025 (1) Represents the fair value of consideration received by Jacobs shareholders to provide 58.5 % ownership in the Company. (2) Represents the Additional Equity Consideration which is subject to the finalization of target operating profit metrics by CMS for the year ended September 27, 2024. (3) Represents other immaterial adjustments, including a) estimated equity consideration related to pre-combination share-based compensation awards, b) the settlement of CMS transaction costs paid by Amentum, and c) the removal of consideration related to the acquisition of non-controlling interests. (4) Prior to the Transaction, we held a non-controlling interest in a joint venture of 50 % which was accounted for under the equity method of accounting, with the remaining 40 % held by the CMS Business and 10 % held by an unrelated third party. As a result of the Transaction, the Company gained a controlling financial interest in the joint venture and it became a consolidated joint venture of the Company. This joint venture acquisition was accounted for as a business combination achieved in stages. Our pre-existing equity method investment in the joint venture was remeasured at an acquisition date fair value of $ 170 million by using a discounted cash flow model based on estimated future revenues, margins and discount rates, among other variables and estimates. The Company’s previously held equity interest in the joint venture was remeasured to fair value, resulting in a gain of $ 69 million, which is included in gain on acquisition of controlling interest in our consolidated statements of operations. Additionally, as of the acquisition date, the Company had a payable from the joint venture with a fair value of $ 1 million that was settled in connection with the acquisition. The Company recognized $ 79 million of transaction costs for the year ended September 27, 2024, of which $ 31 million relates to debt issuance costs that were incurred immediately following the transaction and are expensed and presented in loss on extinguishment of debt in the consolidated statements of operations. The remaining $ 48 million of transaction costs are presented within selling, general, and administrative expenses in the consolidated statements of operations. The Transaction was accounted for as a business combination. The Company assessed the fair value of the identifiable intangible assets including customer relationships and backlog, which were valued using the excess earnings method of the income approach. This method requires several judgments and assumptions to determine the fair value of the intangible assets including expected future cash flows, weighted-average cost of capital, discount rates, useful lives of assets and expected long-term growth rates. The goodwill recognized was attributable to the synergies expected to be achieved by combining the businesses of Amentum and CMS, expected future contracts and the acquired workforce. The goodwill is partially deductible for tax purposes. The purchase price was allocated, on a preliminary basis, to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess purchase consideration recorded as goodwill. The Company is still evaluating the determination of fair values allocated to various assets and liabilities, including, but not limited to, intangible assets, accounts receivable, other current assets, property and equipment, equity method investments and joint ventures, other long-term assets, income taxes, deferred taxes, accounts payables, other current liabilities, contract liabilities, other long-term liabilities, non-controlling interests, additional merger consideration and goodwill. The allocation of the purchase price is preliminary and subject to change as the Company continues to obtain and assess relevant information that existed as of the acquisition date, including but not limited to, information pertaining to CMS’ legal proceedings, reserves, income taxes, contracts with customers, and pre-acquisition contingencies. Additionally, in connection and in accordance with the terms of the spin-off, prior to the spin-off and Transaction, CMS provided a cash payment to Jacobs of approximately $ 911 million, after adjustments based on the levels of cash, debt and working capital in the CMS Business, which is subject to final settlement between the parties, as set forth in the Merger Agreement, and may result in changes to the purchase price allocation. The Company expects to have sufficient information available to resolve these items within one year of the CMS acquisition date. The preliminary allocation of the purchase price is as follows: 68 ( Amounts in millions) Preliminary Allocation of Purchase Price Cash and cash equivalents $ 488 Accounts receivable 1,043 Prepaid expenses and other current assets 82 Property and equipment 72 Equity method investments 17 Goodwill 2,665 Intangible assets 1,860 Other long-term assets 107 Current portion of long-term debt ( 8 ) Accounts payable ( 257 ) Accrued compensation and benefits ( 285 ) Contract liabilities ( 48 ) Other current liabilities ( 98 ) Long-term debt, net of current portion ( 1,122 ) Deferred tax liabilities ( 353 ) Other long-term liabilities ( 75 ) Non-controlling interests ( 63 ) Total consideration $ 4,025 The estimated fair value of acquired backlog of $ 270 million is amortized on an accelerated basis over approximately 1 year and the estimated fair value of customer relationship intangible assets of $ 1,590 million is amortized on an accelerated basis over approximately 14 years. The fair value attributed to these intangible assets acquired was based on assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques, and thus represents a Level 3 fair value measurement. The income approach was primarily used to value the intangible assets, consisting primarily of acquired program and contract intangibles and backlog. The income approach indicates value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Pro Forma Combined Financial Information The following unaudited pro forma financial information presents the combined results of operations for CMS and the Company for the pre-acquisition periods of the twelve months ended September 27, 2024 and September 29, 2023, respectively: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 Revenues $ 13,858 $ 13,371 Net income (loss) attributable to common shareholders 145 ( 170 ) The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the Transaction as though it had occurred on October 1, 2022. The unaudited pro forma combined financial information includes adjustments for intangible asset amortization, stock-based compensation, interest expense, policy adjustments, and other transaction costs. The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on October 1, 2022 nor is it indicative of future operating results. Note 5 — Revenues Disaggregation of Revenues The Company disaggregates revenues by customer, contract type, prime contractor versus subcontractor, and geographic location. These categories represent how the nature, amount, timing, and uncertainty of revenues and cash flows are affected. 69 Disaggregated revenues by customer-type were as follows: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Department of Defense and U.S. Intelligence Community $ 5,603 $ 5,265 $ 5,384 Other U.S. Government Agencies 1,984 1,867 1,802 Commercial and International 801 733 490 Total revenues $ 8,388 $ 7,865 $ 7,676 Disaggregated revenues by contract-type were as follows: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Cost-plus-fee $ 5,198 $ 4,941 $ 5,256 Fixed-price 2,226 2,089 1,777 Time-and-materials 964 835 643 Total revenues $ 8,388 $ 7,865 $ 7,676 Disaggregated revenues by prime contractor versus subcontractor were as follows: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Prime contractor $ 7,510 $ 6,958 $ 6,879 Subcontractor 878 907 797 Total revenues $ 8,388 $ 7,865 $ 7,676 Revenues by geographic location are reported by the country in which the work is performed and were as follows: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 United States $ 6,055 $ 5,748 $ 5,908 International 2,333 2,117 1,768 Total revenues $ 8,388 $ 7,865 $ 7,676 Changes in Estimates on Contracts Changes in estimated contract earnings at completion using the cumulative catch-up method of accounting were recognized in revenues as follows: For the years ended ( Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Favorable earnings at completion adjustments $ 83 $ 88 $ 75 Unfavorable earnings at completion adjustments ( 38 ) ( 46 ) ( 27 ) Net favorable adjustments $ 45 $ 42 $ 48 Impact on diluted loss per share attributable to common shareholders (1) $ 0.40 $ 0.37 $ 0.42 (1) The impact on diluted loss per share attributable to common shareholders is calculated using our statutory rate. Remaining Performance Obligations 70 The Company’s remaining performance obligations balance represents the expected revenues to be recognized for the satisfaction of remaining performance obligations on existing contracts. This balance excludes unexercised contract option years and task orders that may be issued as part of an indefinite delivery, indefinite quantity contract. The remaining performance obligations balance as of September 27, 2024 and September 29, 2023 was $ 12.9 billion and $ 6.2 billion, respectively. As of September 27, 2024, the Company expects to recognize approximately 60 % and 80 % of the remaining performance obligations balance as revenues over the next 12 and 24 months, respectively, with the remainder to be recognized thereafter. Note 6 — Contract Balances The Company's contract balances consisted of the following (in millions): As of Description of Contract Related Balance Classification September 27, 2024 September 29, 2023 Billed and billable receivables Accounts receivable, net $ 1,378 $ 825 Contract assets Accounts receivable, net 986 581 Related party receivables Accounts receivable, net 37 34 Long-term contract assets Other long-term assets 138 138 Contract liabilities - deferred revenues and other contract liabilities Contract liabilities ( 113 ) ( 120 ) Contract assets primarily relate to accruals for reimbursable costs and fees in which our right to consideration is conditional. Long-term contract assets relate to a prior acquisition and are discussed further in Note 22 — Legal Proceedings and Commitments and Contingencies. The Company recognized revenues of $ 98 million and $ 60 million during the years ended September 27, 2024 and September 29, 2023, respectively, that was included in Contract liabilities as of September 29, 2023 and September 30, 2022, respectively. Note 7 — Sales of Receivables On March 26, 2024, the Company entered into a Master Accounts Receivable Purchase Agreement (“MARPA”) with MUFG Bank, Ltd., (the “Purchaser”) for the sale of certain designated eligible U.S. Government receivables. Under the MARPA, the Company can sell certain eligible receivables up to a maximum amount of $ 250 million. The Company’s receivables are sold under the MARPA without recourse for any U.S. Government credit risk. The Company does not retain an ongoing financial interest in the transferred receivables other than cash collection and administrative services. The Company estimated that its servicing fee was at fair value and therefore no servicing asset or liability related to these receivables was recognized as of September 27, 2024. Proceeds from the sold receivables are reflected in operating cash flows on the statement of cash flows. The Company's MARPA activity consisted of the following (in millions): As of and for the Year Ended September 27, 2024 Beginning balance: $ — Sales of receivables 1,574 Cash collections ( 1,397 ) Outstanding balance sold to Purchaser (1) 177 Cash collected, not remitted to Purchaser (2) ( 39 ) Remaining sold receivables $ 138 (1) For the year ended September 27, 2024, the Company recorded a net cash inflow of $ 177 million in its cash flows from operating activities, respectively, from sold receivables. MARPA cash flows are calculated as the change in the outstanding balance during the fiscal year. (2) Includes the cash collected on behalf of but not yet remitted to the Purchaser as of September 27, 2024. This balance is included in Other accrued liabilities as of the balance sheet date. 71 Note 8 — Goodwill and Intangible Assets Goodwill The table below presents changes in the carrying amount of goodwill for the periods presented: (Amounts in millions) Total Balance as of September 30, 2022 $ 3,002 Acquisition of PAE (1) 75 Goodwill impairment charges ( 186 ) Balance as of September 29, 2023 2,891 Acquisition of CMS 2,665 Balance as of September 27, 2024 $ 5,556 (1) Represents changes to goodwill resulting from measurement period adjustments recorded in fiscal year 2023 associated with the acquisition of PAE Incorporated (“PAE”) purchase price allocation. During the first quarter of fiscal year 2023, we amended our organizational structure and performed an interim goodwill impairment test. Our interim quantitative goodwill impairment test concluded that the carrying value of one reporting unit exceeded its fair value. As a result, a non-cash impairment charge of $ 186 million was recognized during the year ended September 29, 2023. Had the information included in the quantitative test been known at the date of our fiscal year 2022 annual impairment test, there would have been no material change in the measurement of the impairment charge. In the fourth quarter of fiscal year 2024, we performed our annual goodwill impairment test and concluded no impairment charges were necessary. Accumulated goodwill impairment was $ 294 million as of both September 27, 2024 and September 29, 2023. Intangible Assets Intangible assets, net consisted of the following: As of September 27, 2024 (Amounts in millions, except years) Weighted Average Useful Life (Years) Gross Carrying Value Accumulated Amortization Net Backlog 2.4 $ 931 $ ( 552 ) $ 379 Customer relationship intangible assets 12.9 2,781 ( 550 ) 2,231 Capitalized software 4.8 23 ( 10 ) 13 Total intangible assets, net $ 3,735 $ ( 1,112 ) $ 2,623 As of September 29, 2023 (Amounts in millions, except years) Weighted Average Useful Life (Years) Gross Carrying Value Accumulated Amortization Net Backlog 6.7 $ 702 $ ( 547 ) $ 155 Customer relationship intangible assets 11.1 1,191 ( 372 ) 819 Capitalized software 5.3 21 ( 7 ) 14 Total intangible assets, net $ 1,914 $ ( 926 ) $ 988 Amortization expense was $ 228 million, $ 298 million and $ 272 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Future amortization expense is expected to be as follows: 72 Year Ending September 30, ( Amounts in millions) 2025 $ 481 2026 417 2027 345 2028 270 2029 225 Thereafter 885 Total $ 2,623 Note 9 — Income Taxes The domestic and foreign components of Loss before income taxes are as follows: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Domestic $ ( 328 ) $ ( 526 ) $ ( 213 ) Foreign 205 186 149 Loss before income taxes $ ( 123 ) $ ( 340 ) $ ( 64 ) The Benefit (provision) for income taxes consists of the following: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Current income tax (provision): Federal $ ( 44 ) $ ( 30 ) $ ( 3 ) State ( 13 ) ( 5 ) ( 8 ) Foreign ( 18 ) ( 9 ) ( 10 ) Total current income tax (provision) ( 75 ) ( 44 ) ( 21 ) Deferred income tax benefit (provision): Federal 110 49 9 State 10 13 ( 4 ) Foreign ( 5 ) 1 2 Total deferred income tax benefit 115 63 7 Benefit (provision) for income taxes $ 40 $ 19 $ ( 14 ) The major elements contributing to the difference between the U.S. federal statutory rate and the effective tax rate are as follows: 73 For the years ended September 27, 2024 September 29, 2023 September 30, 2022 (Dollars in millions) Amount % Amount % Amount % Statutory Rate $ 26 21.0 % $ 72 21.0 % $ 13 21.0 % State income tax, net of the federal benefit ( 2 ) ( 2.0 ) % 7 2.2 % ( 10 ) ( 15.5 ) % Non-controlling interests — ( 0.2 ) % ( 2 ) ( 0.5 ) % 1 2.0 % Goodwill impairment — — % ( 39 ) ( 11.5 ) % ( 23 ) ( 35.3 ) % Transaction costs ( 1 ) ( 0.8 ) % — — % ( 1 ) ( 2.1 ) % Equity-based compensation ( 4 ) ( 3.0 ) % — — % — — % Nontaxable or nondeductible items 1 0.4 % — ( 0.1 ) % 1 0.4 % Tax differential on foreign operations ( 1 ) ( 0.5 ) % ( 4 ) ( 1.0 ) % — ( 0.1 ) % Tax credits 5 4.6 % 2 0.6 % 1 1.8 % Valuation allowance 16 13.0 % ( 17 ) ( 5.1 ) % 4 5.9 % Benefit (provision) for income taxes $ 40 32.5 % $ 19 5.6 % $ ( 14 ) ( 21.9 ) % Deferred income taxes are recorded for differences in the basis of assets and liabilities for financial reporting and income tax purposes. The following table presents the components of Total deferred tax liabilities, net as September 27, 2024 and September 29, 2023: As of (Amounts in millions) September 27, 2024 September 29, 2023 Deferred tax assets: Operating lease liabilities $ 60 $ 52 Reserves 37 36 Accrued compensation and benefits 92 45 Interest expense 160 97 Foreign tax credit 27 35 Research expenditures 23 12 Net operating losses and capital losses 76 33 Other 11 10 Valuation allowance ( 76 ) ( 51 ) Total deferred tax assets 410 269 Deferred tax liabilities: Acquired intangible assets ( 573 ) ( 220 ) Operating lease right-of-use assets ( 58 ) ( 51 ) Property and equipment, net ( 13 ) ( 14 ) Equity method and consolidated investments ( 113 ) ( 83 ) Other ( 18 ) ( 37 ) Total deferred tax liabilities ( 775 ) ( 405 ) Total deferred tax liabilities, net ( 365 ) ( 136 ) Total deferred tax liabilities, net consists of deferred tax liabilities of $ 370 million and $ 141 million as of September 27, 2024 and September 29, 2023, respectively, and a net deferred tax asset of $ 5 million and $ 5 million recorded within other long-term assets as of September 27, 2024 and September 29, 2023, respectively. 74 Included in net deferred tax assets are valuation allowances of $ 76 million and $ 51 million as of September 27, 2024 and September 29, 2023, respectively, primarily attributable to net operating losses, capital losses, and disallowed interest expense. The increase of $ 25 million in valuation allowance for the year ended September 27, 2024 was primarily related to the recognition of valuation allowances for capital loss and net operating losses recorded through acquisition accounting, partially offset by the release of a portion of the valuation allowance related to disallowed interest in the United States. Valuation allowances are recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. We expect to realize the benefit of these deferred tax assets primarily through future reversals of our deferred tax liabilities. Although realization is not assured, we believe it is more likely than not that all deferred tax assets for which valuation allowances have not been established will be realized. We have approximately $ 76 million and $ 33 million of tax effected loss carryforwards related to the domestic and foreign income tax returns as of September 27, 2024 and September 29, 2023, respectively. The federal and foreign net operating losses have an indefinite carryforward and the federal capital losses have a five year carryforward. The state net operating loss carryforward will begin to expire in 2025. We also have $ 27 million of foreign tax credit carryforwards that will begin to expire in 2030, if unutilized. We account for uncertain tax positions in accordance with ASC 740, Income Taxes, which prescribes the more likely than not threshold for recognition of a tax position in the financial statements. The amount of unrecognized tax benefits as of September 27, 2024 and September 29, 2023 was $ 9 million and $ 14 million, respectively. The following table summarizes the activity related to unrecognized tax benefits: (Amounts in millions) Unrecognized Tax Benefits Balance at September 30, 2022 $ 15 Reductions for tax positions related to prior years ( 1 ) Balance at September 29, 2023 14 Additions for tax positions related to prior years 9 Reductions for tax positions related to prior years ( 7 ) Additions for tax positions related to current years 2 Lapse of statute of limitations ( 5 ) Settlements ( 4 ) Balance at September 27, 2024 $ 9 We file income tax returns in numerous tax jurisdictions, including the U.S., and numerous states and foreign jurisdictions around the world. The statute of limitations varies by jurisdiction in which the Company operates. The statute of limitations is open for U.S. federal income tax returns and certain other foreign tax authorities for years 2015 through 2024. The statute of limitations for state income tax returns is open for years 2019 through 2024, with certain exceptions. Note 10 — Retirement Plans 401(k) Savings Plan The Company has one participant-directed, defined contribution, 401(k) savings plan for the benefit of employees that meet certain eligibility requirements. We incurred total retirement plan expense of $ 55 million, $ 54 million and $ 53 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Deferred Compensation Plans The Company has non-qualified deferred compensation programs which provide benefits payable to directors, officers, and certain key employees or their designated beneficiaries at specified future dates, upon retirement or death. The plans are unfunded and benefits are paid from the general assets of the Company. Participants’ cash deferrals earn a return based on the participants’ selection of investments in several hypothetical investment options. Note 11 — Pension Benefit Obligations 75 The Company sponsors various postretirement benefit plans in the United States including defined benefit pension plans (“Defined Benefit Pension Plans”). The Defined Benefit Pension Plans are closed to new participants and benefits are generally based on the employee’s years of creditable service and compensation. The Defined Benefit Pension Plans benefit obligations and the fair value of the plan assets were measured as of September 27, 2024. The following tables provide reconciliations of the changes in the Defined Benefit Pension Plans benefit obligations, reconciliations of the changes in the fair value of assets for the years ended September 27, 2024, September 29, 2023 and September 30, 2022 and reconciliations of the funded status as of September 27, 2024 and September 29, 2023. For the years ended ( Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Change in benefit obligation Benefit obligation at beginning of period $ 292 $ 310 $ 422 Interest cost 17 16 9 Benefits paid from the plans ( 22 ) ( 21 ) ( 21 ) Actuarial (gain) loss 26 ( 13 ) ( 100 ) Benefit obligation at end of period $ 313 $ 292 $ 310 For the years ended ( Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Change in plan assets Fair value of plan assets at beginning of period $ 281 $ 271 $ 366 Actual return on plan assets 55 30 ( 74 ) Employer contributions to plans 1 — — Benefits paid from the plans ( 22 ) ( 20 ) ( 21 ) Fair value of plan assets at end of period $ 315 $ 281 $ 271 For the years ended ( Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Reconciliation of funded status: Fair value of plan assets at end of year $ 315 $ 281 $ 271 Benefit obligation at end of year 313 292 310 Net amount recognized at end of year $ 2 $ ( 11 ) $ ( 39 ) The following table sets forth the amounts recognized in the consolidated balance sheets as of September 27, 2024 and September 29, 2023: ( Amounts in millions) September 27, 2024 September 29, 2023 Amount recognized in the consolidated balance sheets: Other long-term assets $ 2 $ — Other long-term liabilities — ( 11 ) Net amount recognized in the balance sheets $ 2 $ ( 11 ) The following table sets forth the components of net periodic benefit cost for the Defined Benefit Pension Plans for the years ended September 27, 2024, September 29, 2023 and September 30, 2022: 76 For the years ended ( Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Components of net periodic benefit: Interest cost on projected benefit obligation $ 17 $ 16 $ 9 Expected return on plan assets ( 17 ) ( 18 ) ( 18 ) Amortization of net gain ( 3 ) ( 2 ) — Net periodic benefit $ ( 3 ) $ ( 4 ) $ ( 9 ) Actuarial gains and losses are amortized using a corridor approach. The gain or loss corridor is equal to 10 % of the greater of the projected benefit obligation and the fair value of plan assets. Gains and losses in excess of the corridor are amortized over the average remaining lifetime expectancy of the plan participants. The change in plan assets and benefit obligations recognized in other comprehensive income during the year was net income of $ 9 million, $ 24 million and $ 8 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. The amount of applicable deferred income taxes included in other comprehensive income arising from a change in net prior service cost and net (loss) income was a provision of $ 3 million, $ 6 million and $ 2 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. The following table provides additional information for the Defined Benefit Pension Plans with accumulated benefit obligations in excess of plan assets as of September 27, 2024 and September 29, 2023: ( Amounts in millions) September 27, 2024 September 29, 2023 Benefit obligation $ 313 $ 292 Accumulated benefit obligation 313 292 Fair value of plan assets 315 281 The required minimum contributions for the Defined Benefit Pension Plans are not significant. In addition, the Company may make discretionary contributions. The following table provides the expected future benefit payments for the fiscal years ending September 30: ( Amounts in millions) 2025 2026 2027 2028 2029 Thereafter Defined Benefit Pension Plans $ 24 $ 23 $ 23 $ 24 $ 24 $ 114 The following are the underlying assumptions for the Defined Benefit Pension Plans as of September 27, 2024, September 29, 2023 and September 30, 2022: For the years ended September 27, 2024 September 29, 2023 September 30, 2022 Weighted-average assumptions to determine benefit obligation: Discount rate 5.0 % 6.0 % 5.6 % Weighted-average assumptions to determine net periodic benefit cost: Discount rate 6.0 % 5.6 % 2.8 % Expected long-term rate of return on plan assets 7.0 % 7.0 % 6.5 % Defined Benefit Pension Plan costs are determined using the assumptions as of the beginning of the plan year. The funded status is determined using the assumptions as of the end of the plan year. The following table summarizes the Company’s target allocation for fiscal years 2024 and 2023 asset allocation as of September 27, 2024 and September 29, 2023: 77 Fiscal Year 2024 Target Allocation Percentage of Plan Assets as of September 27, 2024 Fiscal Year 2023 Target Allocation Percentage of Plan Assets as of September 29, 2023 Asset Category: Equities 30.0 % 29.9 % 50.5 % 52.2 % Debt 67.8 % 68.2 % 47.7 % 44.6 % Cash 2.2 % 1.9 % 1.8 % 3.2 % Total 100.0 % 100.0 % 100.0 % 100.0 % The Company’s plans seek a competitive rate of return relative to an appropriate level of risk depending on the funded status and obligations of each plan and typically employ both active and passive investment management strategies. The Company’s risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. The target asset allocation selected for each plan reflects a risk/return profile that the Company believes is appropriate relative to each plan’s liability structure and return goals. To develop the expected long‑term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio and the diversification of the portfolio. This resulted in the selection of a 7.0 % weighted‑average long‑term rate of return on assets assumption for the fiscal years ended September 27, 2024 and September 29, 2023. As of September 27, 2024 and September 29, 2023, the fair values of the Defined Benefit Pension Plan by major asset categories were as follows: September 27, 2024 September 29, 2023 Carrying Value Quoted Prices in Active Markets (Level 1) Carrying Value Quoted Prices in Active Markets (Level 1) ( Amounts in millions) Investments measured at fair value Cash and cash equivalents $ 6 $ 6 $ 9 $ 9 Investment funds Diversified and equity funds — — 147 147 Fixed income funds 128 128 62 62 Total investments measured at fair value $ 134 $ 134 $ 218 $ 218 Investments measured at NAV Investment funds Common collective funds - debt 87 63 Diversified and equity funds 94 — Total investments measured at NAV 181 63 Total $ 315 $ 281 Cash equivalents are mostly comprised of short‑term money‑market instruments and are valued at cost, which approximates fair value. Equity investment funds categorized as Level 1 are traded on active national and international exchanges and are valued at their closing prices as of our measurement dates. Fixed income investment funds categorized as Level 1 are publicly traded on an active exchange. Common collective funds are valued based on net asset value (“NAV”) per share or unit as a practical expedient as reported by the fund manager, multiplied by the number of shares or units held as of the measurement date. Accordingly, these NAV‑based investments have been excluded from the fair value hierarchy. These collective investment funds have minimal redemption notice periods and are redeemable daily at the NAV, less transaction fees, without significant restrictions. There are no significant unfunded commitments related to these investments. Multiemployer Pension Plans We are subject to several collective-bargaining agreements (“CBAs”) that require contributions to a multiemployer defined benefit pension plan that covers its union-represented employees. As of September 27, 2024, approximately 24 % of our personnel are covered by a CBA and 10 % of our personnel are covered by a CBA that will expire in one year. 78 The following table outlines our participation in multiemployer pension plans as of September 27, 2024, September 29, 2023 and September 30, 2022. We participated in the International Association of Machinists National Pension Fund (“IAMNPF”) and Western Conference of Teamsters Pension Trust (“WCTPT”) and certain other plans were aggregated in the Other line in the following table as contributions to each of these plans are not material. The “EIN/PN” column provides the Employer Identification Number (“EIN”) and the three-digit plan number (“PN”). The most recent Pension Protection Act (“PPA”) zone status available for 2024 and 2023 is indicated below. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are between 65% and 80% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates if the plan has a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) which is either pending or has been implemented. In addition to regular plan contributions, we may be subject to a surcharge if the plan is in the red zone. The “Surcharge Imposed” column indicates whether a surcharge has been imposed on contributions to the plan. The last column lists the expiration date of the collective-bargaining agreements to which the plan is subject. PPA Zone Status FIP / RP Status Total Contributions by the Company (Amounts in millions) Pension Fund EIN/PN 2024 2023 Pending / Implemented September 27, 2024 September 29, 2023 September 30, 2022 Surcharge Imposed Expiration Date of CBA IAMNPF (1) 516031295 / 001 Red Red RP Implemented $ 29 $ 9 $ 21 10.0 % October 31, 2024 to May 31, 2029 WCTPT (2) 91-6145047 / 001 Green Green No 9 9 7 No September 30, 2025 to September 30, 2029 Other 16 6 13 Total $ 54 $ 24 $ 41 (1) Of the 40 CBAs that require contributions to this plan, the contributions through the expiration date of the collective-bargaining agreement will approximate $ 73.0 million to the IAMNPF. (2) Of the ten CBAs that require contributions to this plan, the contributions through the expiration date of the collective-bargaining agreement will approximate $ 40.0 million to the WCTPT. Note 12 — Stock Based Compensation Amentum Joint Venture LP Class B units Prior to the Transaction, certain members of management were awarded Time-Vested Class B units and Performance-Vested Class B units in Amentum Joint Venture LP, our previous parent company (“AJVLP” and “Amentum Equityholder”). The Time-Vested Class B units vested 20 % a year over five years and the Performance-Vested Class B units vested upon the consummation of a change in control transaction and achievement of certain return metrics associated with such transaction. Both the Time-Vested Class B units and Performance-Vested Class B units were equity classified awards in Amentum Joint Venture LP. The fair value of the Class B units was estimated based on the date of the grant using the Black-Scholes-Merton option-pricing model. We recognized compensation expense for the Time-Vested Class B units based on grant date fair values. Prior to the Transaction, compensation expense for the Time-Vested Class B units was recognized on a straight-line basis ratably over the requisite service period, which was the vesting period. In connection with the completion of the Transaction on September 27, 2024, the unvested Time-Vested and Performance-Vested Class B units were discretionarily modified to vest in connection with the Transaction. Due to the modification, we recognized $ 13 million of compensation expense in the consolidated statements of operations. As of September 27, 2024, there was no unrecognized compensation expense related to the Time-Vested Class B units or the Performance-Vested Class B units. Amounts recognized for forfeitures are adjusted periodically to reflect actual forfeitures. For the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022, we recognized Class B unit compensation expense of $ 18 million, $ 3 million and $ 3 million, respectively. For the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022, there were no income tax benefits recognized from Class B unit compensation expense. Conversion of Restricted Stock Units due to Transaction As part of the Transaction, 65,182 Jacobs’ restricted stock units were converted to 342,741 of Amentum time-based restricted stock units (“RSUs”). The fair value of the RSUs was determined based on the Company’s common stock on the Transaction 79 date. The RSUs generally vest 50 % a year over two years , 33 % a year over three years , 25 % a year over four years or cliff vest in three years . RSU compensation expense is recognized on a straight-line basis ratably over the requisite service period, which is generally the vesting period, unless otherwise specifically noted. No compensation expense was recognized for RSUs for the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022. As of September 27, 2024, there was $ 5 million of unrecognized compensation expense related to the RSUs, scheduled to be recognized over a weighted-average period of 2.1 years. Note 13 — Debt Debt consisted of the following: As of (Amounts in millions) September 27, 2024 September 29, 2023 Term Loan $ 3,750 $ — First Lien Term Facilities — 3,292 Second Lien Term Facilities — 885 Senior notes 1,000 — Other 17 29 Total debt 4,767 4,206 Unamortized original issue discount and unamortized deferred financing costs ( 88 ) ( 94 ) Total debt, net of original issue discount and deferred financing costs 4,679 4,112 Less current portion of long-term debt ( 36 ) ( 45 ) Total long-term debt, net of current portion $ 4,643 $ 4,067 New Credit Facility On January 31, 2020, we entered into a first lien credit agreement (“Prior First Lien Credit Agreement”) for a senior secured credit facility (the “Prior Credit Facility”) for, among other things, working capital and general corporate purposes with a banking syndicate and JPMorgan Chase Bank, N.A. as administrative agent. The Prior Credit Facility was subsequently amended on November 20, 2020 in connection with the acquisition of DefCo Holdings, Inc, on February 15, 2022, in connection with the acquisition of PAE Incorporated, and on May 25, 2023 to transition our interest rates from the London Interbank Offered Rate (“LIBOR”) to the Term Benchmark Risk Free Rate (“Term Benchmark RFR”). As amended, the Company’s Prior First Lien Credit Agreement consisted of a $ 1,090 million First Lien Tranche 1 Term Facility and a $ 2,266 million First Lien Tranche 3 Term Facility (collectively, the “Prior First Lien Term Facilities”), a $ 350 million revolving credit facility (“Prior Revolver”), a $ 168 million letter of credit subfacility and a $ 50 million swingline subfacility. On September 27, 2024, in connection with the consummation of the Transaction, we repaid all outstanding borrowings and other amounts under the Prior First Lien Credit Agreement and the second lien credit agreement dated as of January 31, 2020, as amended (together with the Prior First Lien Credit Agreement, the “Prior Credit Agreements”) and the Prior Credit Agreements were terminated on September 27, 2024. On September 27, 2024, we entered into a Credit Agreement (the “Credit Agreement”), by and among Amentum, the borrowing subsidiaries from time to time party thereto, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, for a new senior secured credit facility (the “New Credit Facility”). The New Credit Facility provides for a seven year , $ 3,750 million term facility (“Term Loan”) and a five year , $ 850 million revolving facility (“Revolver”) including a $ 200 million letter of credit subfacility and a $ 100 million swingline subfacility. The Credit Agreement was originally entered into by Amentum Parent Holdings LLC, and Amentum became a party to, and a borrower under the Credit Agreement as a result of the merger between Amentum and Amentum Parent Holdings LLC entered into in connection with the Transaction. A portion of the Term Loan, in the amount of $ 1,130 million, was originally borrowed on September 27, 2024 by Amentum under a separate term credit agreement, also entered on September 27, 2024, but immediately after the effective time of the merger, that separate term credit agreement was superseded and replaced in its entirety by the Credit Agreement, and such portion of the term facility is now outstanding under, and governed by, the Credit Agreement. The remaining $ 2,620 million of the term facility was borrowed on September 27, 2024. The Revolver and the Term Loan mature on September 27, 2029 and September 27, 2031, respectively. The New Credit Facility is secured by substantially all of our assets and guaranteed by substantially all of our domestic subsidiaries. 80 A portion of the New Credit Facility was used, together with other cash sources, to repay in full all outstanding borrowings and other amounts under the Prior Credit Agreements and to pay related fees and expenses related to the financing and the related transactions. Proceeds of the Revolver under the Credit Agreement may be used for general corporate purposes. Due to the debt modification, we recognized $ 31 million, zero and $ 32 million of debt issuance costs presented within loss on extinguishment of debt in the consolidated statements of operations for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Debt issuance costs previously presented in selling, general, and administrative expenses in the consolidated statements of operations in our 2023 Annual Report were reclassified to loss on extinguishment of debt in the consolidated statements of operations. Further, we recognized $ 14 million due to a loss on the debt modification presented within loss on extinguishment of debt in the consolidated statements of operations during the fiscal year ended September 27, 2024. There was no such charge during the years ended September 29, 2023 and September 30, 2022. As of September 27, 2024 and September 29, 2023, the available borrowing capacity under the New Credit Facility and the Prior Credit Facility were $ 808 million and $ 306 million, respectively, and included $ 42 million and $ 44 million, respectively, in issued letters of credit. As of September 27, 2024 and September 29, 2023, there were no amounts borrowed under the Revolver and Prior Revolver. Interest Rates on Term Loan and Prior First Lien Term Facilities Under the New Credit Facility, the interest rate per annum applicable to the Term Loan is, at the Company’s option, equal to either the Alternate Base Rate (“ABR”) plus 1.25 % or the Term Secured Overnight Financing Rate (“SOFR”) plus 2.25 %. The interest rate per annum shall be reduced by 0.25 % in the event certain corporate ratings are achieved. The ABR is the rate equal to the highest of (a) the Prime Rate in effect on such day, (b) the New York Federal Reserve Bank (“NYFRB”) Rate in effect on such day plus 0.50 % or (c) SOFR for a one-month interest period as published two U.S. Government Securities Business Days prior to such day plus 1.00 %. Under the Prior Credit Facility, the interest rate per annum applicable to the Tranche 1 Term Loan was, at the Company's option, equal to either the ABR plus 2.50 % to 3.00 % or the Term Benchmark Risk Free Rate (“Term Benchmark RFR”) plus 3.50 % to 4.00 % based on our first lien leverage ratio. The ABR is the rate equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Reserve Bank Rate in effect on such day plus 0.50 %, and the Adjusted Term SOFR for a one-month interest period plus 1.00 %. The interest rate per annum applicable to the Tranche 3 Term Loan was, at the Company's option, equal to either the ABR plus 2.50 % to 3.00 % or the Term Benchmark RFR which had a floor of 0.50 %, plus 3.50 % to 4.00 % based on our first lien leverage ratio. Term Loan and Prior First Lien Term Facilities Amortization Payments and Prepayments Under the New Credit Facility, commencing March 31, 2025, we are required to make quarterly principal amortization payments equal to 0.25 % of the original principal amount of the Term Loan, with the remainder of the principal being due at maturity. Any repayments and prepayments of borrowings under the term facility may not be reborrowed. Beginning with fiscal year 2025, the New Credit Facility contains an annual requirement to submit a portion of our excess cash flow (as defined in the New Credit Facility), within ten business days of delivering annual financial statements, as a Term Loan prepayment. No such prepayments have been required or made. Under the Prior Credit Facility, we were required to make quarterly principal amortization payments of 0.25 % of the original principal amount of the Prior First Lien Term Facilities with the remainder of the principal being due at maturity. The Prior Credit Facility also contained an annual requirement to submit a portion of our excess cash flow (as defined in the Prior Credit Facility), within five business days of delivering annual financial statements, as a Prior First Lien Term Facilities prepayment. No such prepayments were required or made. Interest Rates on Revolver & Swingline Loans Under the New Credit Facility, borrowings under the Revolver are available in U.S. dollars, Canadian dollars, euro and Sterling. The interest rate per annum applicable to the Revolver, at the Company's option, is equal to either the ABR or Canadian Prime Rate plus 0.50 % to 1.25 % or the Term SOFR, EURIBOR or Term Canadian Overnight Report Rate Average (“CORRA”) plus 1.50 % to 2.25 % based on our first lien leverage ratio. Under the Prior Credit Facility, the interest rate per annum applicable to the Prior Revolver, at the Company's option, was equal to either the ABR or Canadian Prime Rate plus 2.50 % to 3.00 % or the Term Benchmark RFR plus 3.50 % to 4.00 % based on our first lien leverage ratio. Interest Rates on Letter of Credit Subfacility and Unused Commitment Fees Under the New Credit Facility, a portion of the revolving facility is available for the issuance of letters of credit in U.S. dollars, Canadian dollars, euro, Sterling and certain other foreign currencies. The interest rate per annum applicable to the letter of credit subfacility is equal to a range between 1.50 % to 2.25 % based on our first lien leverage ratio. All of our letters of credit 81 under the New Credit Facility are also subject to a 0.125 % fronting fee. The unused commitment fee on our Revolver is 0.25 % to 0.40 % based on our first lien leverage ratio. Under the Prior Credit Facility, the interest rate per annum applicable to the letter of credit subfacility was equal to a range between 3.50 % to 4.00 % based on our first lien leverage ratio. All of our letters of credit under the Prior Credit Facility were also subject to a 0.125 % fronting fee. The unused commitment fee on our Prior Revolver was 0.25 % to 0.50 % based on our first lien leverage ratio. Covenants The Credit Agreement contains customary prepayment rights and customary mandatory prepayments, as well as customary affirmative and negative covenants that apply to Amentum and its restricted subsidiaries, including limitations on indebtedness, liens, restricted payments, restricted debt payments, investments, burdensome agreements, disposition of assets, transactions with affiliates, conduct of business and fundamental changes. The Term Loan does not include any financial maintenance covenants. The Revolver includes a financial maintenance covenant that requires, in certain circumstances tied to the usage of the Revolver and commencing with the second full fiscal quarter ending after September 27, 2024, compliance with a maximum first lien net leverage ratio of 5.25 to 1.00, stepping down to 5.00 to 1.00 commencing with the fifth full fiscal quarter ending after September 27, 2024. A breach of the financial maintenance covenant will only result in a default or event of default with respect to the Term Loan if the lenders under the Revolver have, as a result of such breach, demanded repayment of the obligations under the Revolver or otherwise accelerated such obligations (and terminated the commitments under the Revolver) and such demand or acceleration has not been rescinded. The Credit Agreement contains customary events of default (with customary qualifications, exceptions, grace periods and notice provisions), including nonpayment of principal, interest, fees or other amounts, defaults under other agreements, breach of loan documents, breach of representations and warranties, voluntary and involuntary bankruptcy or appointment of receiver, unsatisfied judgments and attachments, certain ERISA events, change of control, invalidity of guaranties, collateral documents and other loan documents, and obligations ceasing to constitute senior indebtedness for purposes of certain subordinated indebtedness. The obligations of Amentum and any borrowing subsidiaries under the Credit Agreement and certain designated cash management obligations, hedging obligations and ancillary services obligations, are unconditionally guaranteed on a senior basis (subject to customary exceptions) by, and secured by perfected first-priority security interests (subject to permitted liens and other customary exceptions) in substantially all tangible and intangible assets of Amentum and its wholly owned material domestic restricted subsidiaries. Second Lien Term Loan On January 31, 2020, we entered into a second lien credit agreement (“Second Lien Credit Agreement”) with a banking syndicate and Royal Bank of Canada as administrative agent, which was subsequently amended on February 15, 2022, in connection with the acquisition of PAE, and on May 25, 2023 to transition our interest rates from LIBOR to Adjusted Term SOFR. As amended, the Company’s Second Lien Credit Agreement consisted of a $ 335 million Second Lien Tranche 1 Term Facility and a $ 550 million Second Lien Tranche 2 Term Facility (collectively, the “Second Lien Term Facilities”), which maturing on January 31, 2028 and February 15, 2030, respectively. On September 27, 2024, in connection with the consummation of the Transaction, we entered into the Credit Agreement and a portion of the proceeds received from the New Credit Facility and the Senior Notes were used to payoff the remaining principal of the Second Lien Term Facilities. Interest Rates and Fees The interest rate per annum applicable to the Second Lien Tranche 1 Term Loan was, at the Company's option, equal to either the ABR plus 7.75 % or Adjusted Term SOFR plus 8.75 %, which had a floor of 1.25 %. The interest rate per annum applicable to the Second Lien Tranche 2 Term Loan was equal to Adjusted Term SOFR plus 7.50 %, which had a floor of 0.75 %. Second Lien Term Loan Amortization Payments and Prepayments We were not required to make principal amortization payments with respect to the Second Lien Term Facilities prior to maturity. On May 31, 2024, we made a $ 150 million voluntary principal payment on the Second Lien Tranche 1 Term Facility. The original issue discount and deferred financing costs for the year ended September 27, 2024 was reduced by $ 3 million related to the write-off of original issue discount and deferred financing costs, presented within interest expense and other, net in the consolidated statements of operations as a result of the payment. The Second Lien Term Facilities contained an annual requirement to submit a portion of our excess cash flow (as defined in the Second Lien Credit Agreement), within five business days of delivering annual financial statements, as a Second Lien Term Facilities prepayment. No such prepayments were required or made. 82 Senior Notes In connection with the consummation of the Transaction, on August 13, 2024, the Company completed an offering of $ 1.0 billion in aggregate principal amount of 7.250 % senior notes due August 1, 2032 (the “Senior Notes”). The proceeds of the notes offering were initially funded into escrow and released concurrently with the consummation of the merger. Interest on the Senior Notes accrues at the rate of 7.250 % per annum and is payable on February 1 and August 1 of each year, commencing on February 1, 2025. The Senior Notes are governed by the terms of the indenture dated as of August 13, 2024 (the “Indenture”), among Amentum Holdings, Inc., the Guarantors (as defined below) and U.S. Bank Trust Company National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”). The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by (1) the Company, and (2) our wholly-owned domestic restricted subsidiaries that currently guarantee the New Credit Facility (the “Guarantors”). The Senior Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any other jurisdiction. The Senior Notes may not be offered or sold in the United States or to U.S. persons (as defined in Regulation S) except in transactions exempt from, or not subject to, the registration requirements of the Securities Act. Accordingly, the Senior Notes were offered only to (1) “qualified institutional buyers” as defined in Rule 144A under the Securities Act and (2) outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act. Covenants The Indenture contains covenants that limit, among other things, our ability to: • incur additional indebtedness; • create liens or use assets as security in other transactions; • make certain payments, including loans, advances or capital contributions; • acquire capital stock, acquire all or substantially all of the assets of a division, line of business or other business unit; • dispose of certain assets; • make prepayments, redemptions and repurchases, more than one year prior to stated maturity, of certain debt; and • engage in transactions with affiliates. These covenants are subject to a number of important exceptions and qualifications as set forth in the Indenture. Upon the occurrence of specific kinds of change of control events (unless we elect to redeem the Senior Notes at our option prior thereto), holders of Senior Notes will have the right to require us to repurchase some or all of the Senior Notes at 101 % of their face amount, plus accrued and unpaid interest to the repurchase date. Optional Redemption The Senior Notes are redeemable at the option of the Company, in whole or in part, at any time and from time to time, upon not less than 30 nor more than 60 days’ prior notice. At any time prior to August 1, 2027, we may, at our option and on one or more occasions, redeem all or a part of the Senior Notes, at a redemption price equal to 100.000 % of the principal amount of the Senior Notes redeemed plus (i) a premium of either the highest of (a) 1.00 % of the principal amount of the Senior Notes or (b) the United States Treasury Rate as of the redemption date plus 50 basis points, and (ii) accrued and unpaid interest. At any time prior to August 1, 2027, we may, at our option and on one or more occasions, redeem up to 40.0 % of the aggregate principal amount of the Senior Notes at a redemption price equal to (i) 107.250 % of the aggregate principal amount, in an amount equal to or less than the amount of net cash proceeds from one or more equity offerings, as defined in the Indenture, to the extent such net cash proceeds are received by or contributed to the Company or a Guarantor, plus (ii) accrued and unpaid interest. The Senior Notes may be redeemed at the following prices (expressed as a percentage of the principal amount), plus accrued and unpaid cash interest, if any, if redeemed during the 12-month period commencing on August 1 of the years set forth below: Redemption date Price On or after August 1, 2027 103.625 % On or after August 1, 2028 101.813 % On August 1, 2029 and thereafter 100.000 % Debt Maturity Schedule Future principal maturities of the Company’s long-term debt as of September 27, 2024 are as follows: 83 Year Ending September 30, ( Amounts in millions) 2025 $ 37 2026 43 2027 39 2028 38 2029 38 Thereafter 4,572 Total $ 4,767 Cash Flow Hedges The Company utilizes derivative financial instruments to manage interest rate risk related to its variable rate debt. The Company’s objective is to manage its exposure to interest rate movements and reduce volatility of interest expense. The Company entered into several interest rate swaps with an aggregate notional value of $ 1.9 billion that were designated as cash flow hedges, in which the Company will pay at the fixed rate and receive payment at a floating rate indexed to the three-month term SOFR through maturity. The swaps mature at various dates through January 31, 2027. The change in fair value of the interest rate swaps is presented within accumulated other comprehensive income on our consolidated balance sheet and subsequently reclassified into interest expense and other, net on our consolidated statements of income and comprehensive loss in the period when the hedged transaction affects earnings. Note 14 — Fair Value of Financial Assets and Liabilities ASC 820 — Fair Value Measurements and Disclosures establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: • Level 1, defined as observable inputs such as quoted prices in active markets; • Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and • Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis and the level they fall within the fair value hierarchy (in millions): Fair Value Description Classification Fair Value Hierarchy September 27, 2024 September 29, 2023 Interest rate swaps Prepaid expenses and other current assets Level 2 $ 8 $ 56 Interest rate swaps Other long-term assets Level 2 1 20 Interest rate swaps Other accrued liabilities Level 2 ( 3 ) — Interest rate swaps Other long-term liabilities Level 2 ( 13 ) — Note 15 — Leases We primarily lease office space, warehouses, housing, equipment and vehicles and recognize a right-of-use asset and lease liability on the lease commencement date through calculation of the present value of unpaid lease payments over the lease term. All lease payments are based on the passage of time and certain leases are subject to annual escalations for increases in base rents. The Company's lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We have no significant long-term purchase agreements with service providers and our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Short-Term Leases We have elected the practical expedient for short-term lease recognition exemption by class of underlying asset which results in off-balance sheet accounting for leases with an initial term of 12 months or less (“short-term leases”). We recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. We also elected a package of practical expedients permitted under ASC 842 which allows the carry forward of historical lease classifications. 84 Short-term lease rental expense was $ 40 million, $ 42 million and $ 46 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Operating Leases The Company's operating leases primarily include our material leases of buildings (consisting primarily of our corporate office lease commitments) and equipment and, if applicable, embedded leases associated with real estate, equipment and vehicles in certain contracts with an initial term of 12 months or longer. These leases are classified as operating leases and are recognized as right-of-use assets and operating lease liabilities on the consolidated balance sheets. The following tables present our operating leases as of September 27, 2024 and September 29, 2023: As of (Amounts in millions) Classification September 27, 2024 September 29, 2023 Assets Operating lease right-of-use assets Other long-term assets $ 250 $ 216 Total leased assets $ 250 $ 216 Liabilities Current Current portion of operating lease liabilities Other current liabilities $ 67 $ 53 Noncurrent Long-term portion of operating lease liabilities Other long-term liabilities 193 167 Total lease liabilities $ 260 $ 220 Maturity of Lease Liabilities (Amounts in millions) Operating Leases September 30, 2025 $ 74 September 30, 2026 67 September 30, 2027 54 September 30, 2028 40 September 30, 2029 25 Thereafter 20 Total lease payments 280 Less: imputed interest ( 20 ) Present value of lease liabilities (1) $ 260 (1) As most of the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. As of Lease Term and Discount Rate September 27, 2024 September 29, 2023 Weighted average remaining lease term (years) Operating leases 4.4 4.9 Weighted average discount rate Operating leases 4.0 % 3.0 % The following tables present selected financial information for the years ended September 27, 2024, September 29, 2023 and September 30, 2022: 85 Lease Cost For the years ended (Amounts in millions) Classification September 27, 2024 September 29, 2023 September 30, 2022 Operating lease cost Cost of revenues $ 44 $ 40 $ 22 Selling, general and administrative expenses 16 24 22 Net lease cost $ 60 $ 64 $ 44 Other Information For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Cash paid for amounts included in the measurement of lease liabilities Operating lease payments $ 58 $ 68 $ 46 Operating lease right-of-use assets obtained in exchange for new operating lease liability 4 1 5 Note 16 — Related Parties Related Party Receivables The Company has related party receivables due from our equity method investments, discussed further in Note 17 — Joint Ventures. Consulting and Management Fees We have a Master Consulting and Advisory Services agreement (“Consulting Agreement”) with American Securities LLC and Lindsay Goldberg LLC where, pursuant to the terms of the agreement, they make personnel available to us for the purpose of providing certain management and advisory services. We incurred $ 4 million of consulting fees in conjunction with the Consulting Agreement for the each of the years ended September 27, 2024, September 29, 2023 and September 30, 2022. For the year ended September 30, 2022, we incurred $ 14 million of American Securities LLC and Lindsay Goldberg LLC fees in conjunction with the consummation of the PAE acquisition. No such American Securities LLC and Lindsay Goldberg LLC fees were incurred for the years ended September 27, 2024 and September 29, 2023. Capital Contribution Immediately prior to the Transaction, Amentum Equityholder contributed $ 235 million in cash to the Company. Note 17 — Joint Ventures The Company’s joint ventures provide services to customers including program management and operations and maintenance services. Joint ventures, the combination of two or more partners, are generally formed for a specific project. Management of the joint venture is typically controlled by a joint venture executive committee, comprised of representatives from the joint venture partners. The joint venture executive committee normally provides management oversight and controls decisions which could have a significant impact on the joint venture. We account for joint ventures in accordance with ASC 810, Consolidation , as discussed in Note 2 — Summary of Significant Accounting Policies. The Company analyzes its joint ventures and classifies them as either: • a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or • a VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or the joint venture is not a VIE and the Company does not hold the majority voting interest. The following table presents selected financial information for our consolidated joint ventures that are VIEs as of September 27, 2024 and September 29, 2023: 86 As of (Amounts in millions) September 27, 2024 September 29, 2023 Cash and cash equivalents $ 160 $ 55 Current assets 322 56 Non-current assets 2 4 Total assets $ 484 $ 115 Current liabilities $ 190 $ 44 Non-current liabilities 1 2 Total liabilities 191 46 Total Amentum equity 228 44 Non-controlling interests 65 25 Total equity 293 69 Total liabilities and equity $ 484 $ 115 The following table presents selected financial information for our consolidated joint ventures that are VIEs for the years ended September 27, 2024, September 29, 2023 and September 30, 2022: For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Revenues $ 370 $ 334 $ 653 Cost of revenues ( 337 ) ( 281 ) ( 589 ) Net income 29 50 64 The Company has an ownership share in approximately 25 active joint ventures that are accounted for as equity method investments and the Company’s ownership percentages generally range from 10 % to 51 %. The following table presents selected financial information for our unconsolidated joint ventures, included as equity method investments on the consolidated balance sheets, as of September 27, 2024 and September 29, 2023: As of (Amounts in millions) September 27, 2024 September 29, 2023 Current assets $ 701 $ 572 Non-current assets 43 45 Total assets $ 744 $ 617 Current liabilities $ 422 $ 351 Non-current liabilities 16 17 Total liabilities 438 368 Joint ventures' equity 306 249 Total liabilities and joint ventures' equity $ 744 $ 617 The following table presents selected financial information for our equity method investments for the years ended September 27, 2024, September 29, 2023 and September 30, 2022: 87 For the years ended (Amounts in millions) September 27, 2024 September 29, 2023 September 30, 2022 Revenues $ 2,634 $ 2,373 $ 1,792 Cost of revenues ( 2,442 ) ( 2,215 ) ( 1,718 ) Net income 183 152 66 Related party receivables due from our equity method investments were $ 37 million and $ 34 million as of September 27, 2024 and September 29, 2023, respectively. These receivables are a result of items purchased and services rendered by us on behalf of our equity method investments. We have assessed these receivables as having minimal collection risk based on our historic experience with these joint ventures and our inherent influence through our ownership interest. The related party revenues earned from our equity method investments was $ 126 million and $ 45 million for the years ended September 27, 2024 and September 29, 2023, respectively. Many of our joint ventures only perform on a single contract. The modification or termination of a contract under a joint venture could trigger an impairment in the fair value of our investment in these entities. In the aggregate, our maximum exposure to losses was $ 123 million related to our equity method investments as of September 27, 2024. Note 18 — Accumulated Other Comprehensive Income (Loss) The accumulated balances and reporting period activities for the years ended September 27, 2024, September 29, 2023 and September 30, 2022 related to accumulated other comprehensive income (loss) are summarized as follows: Gain (Loss) on Derivative Instruments Foreign Currency Translation Adjustments Pension Related Adjustments Income Tax (Provision) Benefit Related to Items of Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) (Amounts in millions) Balance at October 1, 2021 $ — $ — $ 14 $ ( 3 ) $ 11 Other comprehensive income (loss) before reclassification — ( 8 ) 8 ( 2 ) ( 2 ) Balance at September 30, 2022 — ( 8 ) 22 ( 5 ) 9 Other comprehensive income (loss) before reclassification 27 3 26 ( 14 ) 42 Amounts reclassified from accumulated other comprehensive income (loss) ( 2 ) — ( 2 ) 1 ( 3 ) Balance at September 29, 2023 25 ( 5 ) 46 ( 18 ) 48 Other comprehensive (loss) income before reclassification ( 31 ) 8 11 2 ( 10 ) Amounts reclassified from accumulated other comprehensive (loss) income ( 16 ) — ( 2 ) 3 ( 15 ) Balance at September 27, 2024 $ ( 22 ) $ 3 $ 55 $ ( 13 ) $ 23 Note 19 — Segment Information We operate our business activities and report financial results as one business segment. The presentation of financial results as one reportable segment 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. Substantially all of the Company’s tangible long-lived assets are located in the United States. As such, long-lived assets by geographic location are not presented. Note 20 — Composition of Certain Financial Statement Captions The following tables present financial information of certain consolidated balance sheet captions. 88 Property and equipment, net As of (Amounts in millions) Useful Lives September 27, 2024 September 29, 2023 Aircraft 5 to 10 years $ 13 $ 14 Buildings 20 to 40 years 14 — Computers and related equipment 1 to 5 years 34 19 Finance lease right-of-use assets Shorter of lease term or useful life 20 19 Leasehold improvements Shorter of lease term or useful life 42 20 Office furniture and fixtures 1 to 7 years 19 4 Vehicles and equipment 1 to 10 years 80 66 Gross property and equipment 222 142 Less accumulated depreciation ( 78 ) ( 57 ) Total property and equipment, net $ 144 $ 85 Depreciation expense was $ 23 million, $ 27 million and $ 20 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. As of September 27, 2024, September 29, 2023 and September 30, 2022, Property and equipment, net, also included the accrual for property additions in accounts payable of $ 1 million, $ 2 million and $ 0 million, respectively. Other long-term assets As of (Amounts in millions) September 27, 2024 September 29, 2023 Operating lease right-of-use assets $ 250 $ 216 Long-term contract assets 138 138 Other 56 60 Total other long-term assets $ 444 $ 414 Accrued compensation and benefits As of (Amounts in millions) September 27, 2024 September 29, 2023 Wages, compensation and other benefits $ 421 $ 219 Accrued vacation 275 150 Total accrued compensation and benefits $ 696 $ 369 89 Other current liabilities As of (Amounts in millions) September 27, 2024 September 29, 2023 Contract losses $ 61 $ 101 Current portion of operating lease liabilities 67 53 MARPA payable 39 — Reserves 50 26 Customer payables 33 35 Income tax payable 17 23 Accrued other taxes 42 13 Other 47 31 Total other current liabilities $ 356 $ 282 Other long-term liabilities As of (Amounts in millions) September 27, 2024 September 29, 2023 Operating lease liabilities $ 193 $ 167 Reserves 185 167 Other 66 79 Total other long-term liabilities $ 444 $ 413 Note 21 — Loss Per Share For the periods prior to September 27, 2024, the Company retrospectively adjusted the weighted average shares used in determining loss per share to reflect the conversion of the ownership interests of Amentum Parent Holdings LLC held by AJVLP that converted into 90,021,804 shares of the Company’s common stock at Transaction close. As discussed in Note 12 — Stock Based Compensation certain employees of the Company were granted stock-based compensation in the form of Class B Time-Vested and Performance-Vested units of AJVLP. The compensation expense associated with such awards is recognized in the Company’s financial statements, however as such shares represent outstanding equity of AJVLP, and not of the Company, such awards do not impact the Company’s calculation of the weighted average shares outstanding. For the year ended September 27, 2024, Jacobs’ restricted stock units converted to Amentum time-based restricted stock were excluded from the computation of diluted loss per share because inclusion of these amounts would have had an anti-dilutive effect. There were no anti-dilutive shares in fiscal year 2023 or 2022. Basic and diluted loss per share are computed as follows (in millions, except per share data): For the years ended September 27, 2024 September 29, 2023 September 30, 2022 Net loss attributable to common shareholders $ ( 82 ) $ ( 314 ) $ ( 84 ) Weighted-average number of basic shares outstanding during the period 91 90 90 Weighted-average number of diluted shares outstanding during the period 91 90 90 Basic loss per share $ ( 0.90 ) $ ( 3.49 ) $ ( 0.93 ) Diluted loss per share $ ( 0.90 ) $ ( 3.49 ) $ ( 0.93 ) Note 22 — Legal Proceedings and Commitments and Contingencies The Company is involved in various claims, disputes and administrative proceedings arising in the normal course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties 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 90 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. Payments to the Company on cost-plus-fee contracts are provisional and are subject to adjustments upon audit by the Defense Contract Audit Agency (“DCAA”). In management’s opinion, audit adjustments that may result from audits not yet completed or started are not expected to have a material adverse effect on the Company’s operations and liquidity. Pending Litigation and Claims Department of Energy Claims In January 2020, the Company purchased assets and assumed liabilities associated with AECOM Energy & Construction, Inc. (the “Acquired Affiliate”) from AECOM (the “Seller”). At the time of the acquisition, the Acquired Affiliate had pending claims against the U.S. Department of Energy (“DOE”) related to a contract performed prior to the acquisition. The Company and the Seller agreed that all future claim recoveries and costs with the DOE would be split 10 % to the Company and 90 % to the Seller. Following the DOE’s denial of the claims, on December 20, 2020, the Acquired Affiliate filed an appeal of these decisions in the U.S. Court of Federal Claims. The Company has estimated and recorded $ 138 million within other long-term assets on the balance sheet and $ 125 million within other long-term liabilities on the balance sheet representing the Company’s payable to the Seller related to this matter. No changes to these amounts have been recorded since the acquisition. The Company intends to cooperate with the Seller in the pursuit of all claimed amounts but can provide no certainty that the Company will recover the claims. The Company does not believe any additional incurred claims or costs related to this matter will have a material adverse effect on the Company’s results of operations. U.S. Government Investigations We primarily sell our services to the U.S. Government. These contracts are subject to extensive legal and regulatory requirements, and we are occasionally the subject of investigations by various agencies of the U.S. Government who investigate whether our operations are being conducted in accordance with these requirements. Such investigations could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed on us, or could lead to suspension or debarment from future U.S. Government contracting. U.S. Government investigations often take years to complete and may result in adverse action against us. Any adverse actions arising from such matters could have a material effect on our ability to invoice and receive timely payment on our contracts, perform contracts or compete for contracts with the U.S. Government and could have a material effect on our operating performance. There are currently no investigations that are expected to have a material impact on our results of operations. Note 23 — Subsequent Events Trading of Common Stock Amentum's common stock began regular-way trading on the New York Stock Exchange (“NYSE”) on September 30, 2024 under the ticker symbol “AMTM”. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.