##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 3, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _______ to _______
 Commission File Number: 333-127343
 DYNCORP INTERNATIONAL LLC
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    52-2287126
(I.R.S. Employer
Identification No.)
 3190 Fairview Park Drive, Suite 700, Falls Church, Virginia 22042
(571) 722-0210
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



DYNCORP INTERNATIONAL LLC
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONForward-Looking
Statements
    
    
    2Item 1. Financial Statements (unaudited)
    
    
    3Unaudited Consolidated Statements of IncomeFiscal Quarters
Ended July 3, 2009 and July 4, 2008
    
    
    3Unaudited Consolidated Balance SheetsJuly 3, 2009 and April
3, 2009
    
    
    4Unaudited Consolidated Statements of Cash FlowsFiscal
Quarters Ended July 3, 2009 and July 4, 2008
    
    
    5Unaudited Consolidated Statements of Members EquityFiscal
Quarters Ended July 3, 2009 and April 3, 2009
    
    
    6Notes
to Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Submission of Matters to a Vote of Security Holders
    
    
    40Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    41Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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Disclosure Regarding Forward-Looking Information
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DYNCORP
INTERNATIONAL LLC
 
 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME  (Amounts in thousands)
 For the Fiscal Quarter EndedJuly 3, 2009
    
    
    July 4, 2008Revenue
    
    $
    785,177
    
    
    $
    716,794Cost of services
    
    
    (699,093
    )
    
    
    (638,389
    )Selling, general and administrative expenses
    
    
    (23,438
    )
    
    
    (27,851
    )Depreciation and amortization expense
    
    
    (10,145
    )
    
    
    (10,560
    )Operating income
    
    
    52,501
    
    
    
    39,994Interest expense
    
    
    (14,610
    )
    
    
    (14,215
    )Earnings from affiliates
    
    
    1,054
    
    
    
    1,117Interest income
    
    
    339
    
    
    
    344Other (loss)/income, net
    
    
    (213
    )
    
    
    705Income before income taxes
    
    
    39,071
    
    
    
    27,945Provision for income taxes
    
    
    (12,627
    )
    
    
    (9,316
    )Net income
    
    
    26,444
    
    
    
    18,629Noncontrolling interests
    
    
    (5,799
    )
    
    
    (649
    )Net income attributable to DynCorp International LLC
    
    $
    20,645
    
    
    $
    17,980
   3




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##### Table of Contents



DYNCORP
INTERNATIONAL LLC
 
 UNAUDITED CONSOLIDATED BALANCE SHEETS  (Amounts in thousands)
 As ofJuly 3, 2009
    
    
    April 3, 2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    159,293
    
    
    $
    200,222Restricted cash
    
    
    5,700
    
    
    
    5,935Accounts receivable, net of allowances of $348 and $68, respectively
    
    
    639,470
    
    
    
    564,432Prepaid expenses and other current assets
    
    
    110,025
    
    
    
    124,214Total current assets
    
    
    914,488
    
    
    
    894,803Property and equipment, net
    
    
    18,481
    
    
    
    18,338Goodwill
    
    
    420,180
    
    
    
    420,180Tradename
    
    
    18,318
    
    
    
    18,318Other intangibles, net
    
    
    133,763
    
    
    
    142,719Deferred income taxes
    
    
    8,430
    
    
    
    12,788Other assets, net
    
    
    31,965
    
    
    
    32,068Total assets
    
    $
    1,545,625
    
    
    $
    1,539,214LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    30,540Accounts payable
    
    
    196,198
    
    
    
    160,419Accrued payroll and employee costs
    
    
    120,500
    
    
    
    137,993Deferred income taxes
    
    
    9,615
    
    
    
    8,278Other accrued liabilities
    
    
    117,381
    
    
    
    111,590Income taxes payable
    
    
    5,437
    
    
    
    5,986Total current liabilities
    
    
    449,131
    
    
    
    454,806Long-term debt, less current portion
    
    
    566,383
    
    
    
    569,372Other long-term liabilities
    
    
    5,618
    
    
    
    6,779Total Liabilities
    
    
    1,021,132
    
    
    
    1,030,957Commitments and contingenciesMembers equity:Members units, 100 outstanding
    
    
    331,298
    
    
    
    331,008Retained earnings
    
    
    200,200
    
    
    
    179,555Purchases of Parents common stock
    
    
    (9,330
    )
    
    
    (8,618
    )Accumulated other comprehensive loss
    
    
    (3,510
    )
    
    
    (4,424
    )Total members equity attributable to DynCorp International LLC
    
    
    518,658
    
    
    
    497,521Noncontrolling interests
    
    
    5,835
    
    
    
    10,736Total equity
    
    
    524,493
    
    
    
    508,257Total liabilities and members equity
    
    $
    1,545,625
    
    
    $
    1,539,214
   4




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DYNCORP
INTERNATIONAL LLC
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Dollars in thousands)
 For the Fiscal Quarter EndedJuly 3, 2009
    
    
    July 4, 2008Cash flows from operating activitiesNet income
    
    $
    26,444
    
    
    $
    18,629Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    10,424
    
    
    
    10,811Amortization of deferred loan costs
    
    
    1,000
    
    
    
    821Allowance for losses on accounts receivable
    
    
    264
    
    
    
    Earnings from affiliates
    
    
    (1,054
    )
    
    
    (1,117
    )Deferred income taxes
    
    
    8,229
    
    
    
    (1,609
    )Equity-based compensation
    
    
    866
    
    
    
    (803
    )Other
    
    
    (4
    )
    
    
    (256
    )Changes in assets and liabilities:Restricted cash
    
    
    235
    
    
    
    5,236Accounts receivable
    
    
    (75,302
    )
    
    
    (138,958
    )Prepaid expenses and other current assets
    
    
    14,035
    
    
    
    (25,560
    )Accounts payable and accrued liabilities
    
    
    23,131
    
    
    
    56,382Income taxes payable
    
    
    (2,820
    )
    
    
    5,293Net cash provided by (used in) operating activities
    
    
    5,448
    
    
    
    (71,131
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    (780
    )
    
    
    (1,208
    )Purchase of computer software
    
    
    (514
    )
    
    
    (608
    )Other assets
    
    
    
    
    
    
    365Net cash used in investing activities
    
    
    (1,294
    )
    
    
    (1,451
    )Cash flows from financing activitiesPayments on long-term debt
    
    
    (34,337
    )
    
    
    (1,548
    )Purchases of
Parents common stock
    
    
    (712
    )
    
    
    Borrowings under other financing arrangements
    
    
    
    
    
    
    22,319Payments of dividends to noncontrolling interests
    
    
    (10,034
    )
    
    
    Other financing activities
    
    
    
    
    
    
    (68
    )Net cash (used in) provided by financing activities
    
    
    (45,083
    )
    
    
    20,703Net decrease in cash and cash equivalents
    
    
    (40,929
    )
    
    
    (51,879
    )Cash and cash equivalents, beginning of period
    
    
    200,222
    
    
    
    85,379Cash and cash equivalents, end of period
    
    $
    159,293
    
    
    $
    33,500Income taxes paid (net of refunds)
    
    $
    614
    
    
    $
    7,023Interest paid
    
    $
    4,599
    
    
    $
    10,866Non-cash investing activities
    
    $
    
    
    
    $
    4,265
   5




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DYNCORP
INTERNATIONAL LLC
 
 UNAUDITED
CONSOLIDATED STATEMENTS OF MEMBERS EQUITY  (Dollars in Thousands)
 Total MembersEquityAttributable toAccumulated Other
    
    
    DynCorpMembers
    
    
    Retained
    
    
    Parents
    
    
    Comprehensive
    
    
    International
    
    
    NoncontrollingUnits
    
    
    Earnings
    
    
    Common Stock
    
    
    Income (Loss)
    
    
    LLC
    
    
    Interests
    
    
    Total EquityBalance at April 3, 2009
    
    $
    331,008
    
    
    $
    179,555
    
    
    $
    (8,618
    )
    
    $
    (4,424
    )
    
    $
    497,521
    
    
    $
    10,736
    
    
    $
    508,257Comprehensive income (loss):Net income
    
    
    
    
    
    
    26,444
    
    
    
    
    
    
    
    
    
    
    
    26,444
    
    
    
    
    
    
    
    26,444Interest rate swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    566
    
    
    
    566
    
    
    
    
    
    
    
    566Currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    348
    
    
    
    
    
    
    
    348Comprehensive income
    
    
    
    
    
    
    26,444
    
    
    
    
    
    
    
    914
    
    
    
    27,358
    
    
    
    
    
    
    
    27,358Noncontrolling interest
    
    
    
    
    
    
    (5,799
    )
    
    
    
    
    
    
    
    
    
    
    (5,799
    )
    
    
    
    
    
    
    (5,799
    )Comprehensive income attributable to DynCorp International LLC
    
    
    
    
    
    
    20,645
    
    
    
    
    
    
    
    914
    
    
    
    21,559
    
    
    
    
    
    
    
    21,559Net income and comprehensive income
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,799
    
    
    
    5,799DIFZ financing, net of tax
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    112Purchases of
Parents common stock
    
    
    
    
    
    
    
    
    
    
    (712
    )
    
    
    
    
    
    
    (712
    )
    
    
    
    
    
    
    (712
    )Equity-based compensation
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191
    
    
    
    
    
    
    
    191Tax benefit associated with equity-based
compensation
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Dividends declared to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,700
    )
    
    
    (10,700
    )Balance at July 3, 2009
    
    $
    331,298
    
    
    $
    200,200
    
    
    $
    (9,330
    )
    
    $
    (3,510
    )
    
    $
    518,658
    
    
    $
    5,835
    
    
    $
    524,493
   6




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DYNCORP INTERNATIONAL LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1Basis of Presentation and Accounting Policies
 Basis of Presentation
       Principles of Consolidation
 Consolidation of
Variable Interest Entities
  Contingency Response Services LLC
    
    
    45.0
    %Babcock DynCorp Limited
    
    
    44.0
    %Partnership for Temporary Housing LLC
    
    
    40.0
    %
  7




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Global Linguist Solutions LLC
    
    
    51.0
    %DynCorp International FZ-LLC
    
    
    50.0
    %
 Noncontrolling Interests
  Property and Equipment
  Accounting Policies
 Pronouncements Implemented
 Accounting Developments
 Pronouncements Implemented
   8




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Pronouncements Not Yet Implemented
    9




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##### Table of Contents



The
 Note 2 Composition of Certain Financial Statement Captions
  Prepaid expenses and other current assets 
 July 3,
    
    
    April 3,2009
    
    
    2009Prepaid expenses
    
    $
    53,959
    
    
    $
    61,570Inventories
    
    
    11,332
    
    
    
    10,840Work-in-process
    
    
    32,606
    
    
    
    33,885Joint Venture Receivables
    
    
    3,746
    
    
    
    2,491Other current assets
    
    
    8,382
    
    
    
    15,428Total
    
    $
    110,025
    
    
    $
    124,214
  Other assets, net 
 July 3,
    
    
    April 3,2009
    
    
    2009Deferred financing costs, net
    
    $
    12,665
    
    
    $
    13,828Investment in affiliates
    
    
    10,111
    
    
    
    8,982Palm promissory notes, long-term portion
    
    
    6,808
    
    
    
    6,631Other
    
    
    2,381
    
    
    
    2,627Total
    
    $
    31,965
    
    
    $
    32,068
  Accrued payroll and employee costs 
 July 3,
    
    
    April 3,2009
    
    
    2009Wages, compensation and other benefits (1)
    
    $
    90,752
    
    
    $
    108,879Accrued vacation
    
    
    26,670
    
    
    
    26,329Accrued contributions to employee benefit plans
    
    
    3,078
    
    
    
    2,785Total
    
    $
    120,500
    
    
    $
    137,993
 (1)
    
    Includes RSUs accounted for as liability awards presented in Note 9. Other accrued liabilities 
 July 3,
    
    
    April 3,2009
    
    
    2009Deferred revenue
    
    $
    30,514
    
    
    $
    30,739Insurance expense
    
    
    30,190
    
    
    
    28,061Interest expense and short-term swap liability
    
    
    21,113
    
    
    
    11,688Contract losses
    
    
    5,730
    
    
    
    11,730Legal matters
    
    
    18,507
    
    
    
    16,993Other
    
    
    11,327
    
    
    
    12,379Total
    
    $
    117,381
    
    
    $
    111,590
  10




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Note 3Goodwill and Other Intangible Assets
   (Dollars in thousands)
    
    ISS
    
    LCM
    
    MTSS
    
    TotalGoodwill balance as of April 3, 2009
    
    $
    300,094
    
    
    $
    39,935
    
    
    $
    80,151
    
    
    $
    420,180
  (Dollars in thousands)
    
    GSDS
    
    GPSS
    
    GLS
    
    TotalGoodwill balance as of July 3, 2009
    
    $
    209,073
    
    
    $
    211,107
    
    
    $
    
    $
    420,180
  July 3, 2009WeightedAverageUseful Life
    
    
    Gross
    
    
    Accumulated(Amounts in thousands, except years)
    
    (Years)
    
    
    Carrying Value
    
    
    Amortization
    
    
    NetFinite-lived intangible assets:Customer-related intangible assets
    
    
    8.5
    
    
    $
    290,716
    
    
    $
    (163,793
    )
    
    $
    126,923Other
    
    
    5.4
    
    
    
    15,865
    
    
    
    (9,025
    )
    
    
    6,840$
    306,581
    
    
    $
    (172,818
    )
    
    $
    133,763Indefinite-lived intangible assets  Tradename
    
    
    
    
    
    $
    18,318
    
    
    $
    
    
    
    $
    18,318
 April 3, 2009WeightedAverageUseful Life
    
    
    Gross
    
    
    Accumulated(Amounts in thousands, except years)
    
    (Years)
    
    
    Carrying Value
    
    
    Amortization
    
    
    NetFinite-lived intangible assets:Customer-related intangible assets
    
    
    8.5
    
    
    $
    290,716
    
    
    $
    (155,142
    )
    
    $
    135,574Other
    
    
    5.5
    
    
    
    15,351
    
    
    
    (8,206
    )
    
    
    7,145$
    306,067
    
    
    $
    (163,348
    )
    
    $
    142,719Indefinite-lived intangible assets  Tradename
    
    
    
    
    
    $
    18,318
    
    
    $
    
    
    
    $
    18,318
   11




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AmortizationExpense(Dollars in thousands)Nine month period ended April 2, 2010
    
    $
    28,255Estimate for fiscal year 2011
    
    
    33,618Estimate for fiscal year 2012
    
    
    22,986Estimate for fiscal year 2013
    
    
    19,308Estimate for fiscal year 2014
    
    
    8,184Thereafter
    
    
    21,412
 Note 4 Income Taxes
  Fiscal Quarter EndedJuly 3,
    
    
    July 4,2009
    
    
    2008(Dollars in thousands)Current portion:Federal
    
    $
    3,162
    
    
    $
    9,589State
    
    
    393
    
    
    
    807Foreign
    
    
    843
    
    
    
    2,5394,398
    
    
    
    12,935Deferred portion:Federal
    
    
    7,959
    
    
    
    (3,496
    )State
    
    
    266
    
    
    
    (117
    )Foreign
    
    
    4
    
    
    
    (6
    )8,229
    
    
    
    (3,619
    )Provision for income taxes
    
    $
    12,627
    
    
    $
    9,316
  July 3,
    
    
    April 3,2009
    
    
    2009(Dollars in thousands)Current deferred tax liabilities
    
    $
    (9,615
    )
    
    $
    (8,278
    )Non-current deferred tax assets
    
    
    8,430
    
    
    
    12,788Deferred tax (liabilities)/assets, net
    
    $
    (1,185
    )
    
    $
    4,510
       12




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Note 5 Accounts Receivable
  (Dollars in thousands)
    
    July 3, 2009
    
    
    April 3, 2009Billed, net
    
    $
    272,344
    
    
    $
    220,501Unbilled
    
    
    367,126
    
    
    
    343,931Total
    
    $
    639,470
    
    
    $
    564,432
  Note 6Long-Term Debt
  July 3,
    
    
    April 3,2009
    
    
    2009(Dollars in thousands)Term loans
    
    $
    176,637
    
    
    $
    200,0009.5% Senior subordinated notes(1)
    
    
    389,746
    
    
    
    399,912566,383
    
    
    
    599,912Less current portion of long-term debt
    
    
    
    
    
    
    (30,540
    )Total long-term debt
    
    $
    566,383
    
    
    $
    569,372
 (1)
    
    This includes the impact of the discount which had a carrying value of ($0.9)
million ($1.0) million of July 3, 2009 and April 3, 2009, respectively. Long-Term Debt
 Senior Secured Credit Facility
    13




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9.5% Senior Subordinated Notes
   Note 7 Interest Rate Derivatives
  Fixed
    
    VariableNotional
    
    Interest
    
    Interest RateDate Entered
    
    Amount
    
    Rate Paid*
    
    Received
    
    Expiration DateApril 2007
    
    $
    168,620
    
    
    
    4.975
    %
    
    3-month LIBOR
    
    May 2010April 2007
    
    $
    31,380
    
    
    
    4.975
    %
    
    3-month LIBOR
    
    May 2010
 *
    
    Plus applicable margin (2.5% at July 3, 2009).    Fair Value at
    
    
    Fair Value atDerivatives designated as hedges under SFAS No. 133
    
    Balance Sheet Location
    
    July 3, 2009
    
    
    April 3, 2009Interest Rate Swaps
    
    Other accrued liabilities
    
    $
    5,565
    
    
    $
    5,259Interest Rate Swaps
    
    Other long-term liabilities
    
    
    
    
    
    
    957Total
    
    $
    5,565
    
    
    $
    6,216
 Fair Value at
    
    
    Fair Value atDerivatives not designated as hedges under SFAS No. 133
    
    Balance Sheet Location
    
    July 3, 2009
    
    
    April 3, 2009Interest Rate Swaps
    
    Other accrued liabilities
    
    $
    1,028
    
    
    $
    893Interest Rate Swaps
    
    Other long-term liabilities
    
    
    
    
    
    
    182Total
    
    $
    1,028
    
    
    $
    1,075Total Derivatives
    
    
    
    
    
    $
    6,593
    
    
    $
    7,291
  14




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GAINS (LOSSES) RECOGNIZEDGains (Losses)
    
    
    GAINS (LOSSES) RECLASSIFIED FROM
    
    
    IN INCOME ON DERIVATIVESDerivatives Designated as
    
    Recognized in OCI
    
    
    ACCUMULATED OCI INTO INCOME
    
    
    (INEFFECTIVE PORTION)Cash Flow Hedging
    
    on Derivatives
    
    
    (EFFECTIVE PORTION)
    
    
    Line ItemInstruments under SFAS
    
    (Effective Portion)
    
    
    Line Item in Statements
    
    
    
    
    
    
    in StatementsNo. 133
    
    Quarter ended July 3, 2009
    
    
    of Income
    
    
    Amount
    
    
    of Income
    
    
    AmountInterest rate
derivatives
    
    $
    (5,319
    )
    
    Interest expense
    
    $
    (1,898
    )
    
    Other (loss)/income, net
    
    $
    Total
    
    $
    (5,319
    )
    
    
    
    
    
    $
    (1,898
    )
    
    
    
    
    
    $
    
  GAINS (LOSSES) RECOGNIZEDGains (Losses)
    
    
    GAINS (LOSSES) RECLASSIFIED FROM
    
    
    IN INCOME ON DERIVATIVESDerivatives Designated as
    
    Recognized in OCI
    
    
    ACCUMULATED OCI INTO INCOME
    
    
    (INEFFECTIVE PORTION)Cash Flow Hedging
    
    on Derivatives
    
    
    (EFFECTIVE PORTION)
    
    
    Line ItemInstruments under SFAS
    
    (Effective Portion)
    
    
    Line Item in Statements
    
    
    
    
    
    
    in StatementsNo. 133
    
    Quarter ended July 4, 2008
    
    
    of Income
    
    
    Amount
    
    
    of Incomes
    
    
    AmountInterest rate
derivatives
    
    $
    (5,627
    )
    
    Other (loss)/income, net
    
    $
    (1,812
    )
    
    Interest expense
    
    $
    308Total
    
    $
    (5,627
    )
    
    
    
    
    
    $
    (1,812
    )
    
    
    
    
    
    $
    308
  AMOUNT OF GAIN OR(LOSS) RECOGNIZED INDerivatives not Designated
    
    INCOME ON DERIVATEas Hedging Instruments
    
    Line Item in Statements
    
    
    July 3, 2009
    
    
    July 4, 2008under SFAS No. 133
    
    of Income
    
    
    Amount
    
    
    AmountInterest rate derivatives
    
    Other (loss)/ income, net
    
    $
    (188
    )
    
    $
    (404
    )Total
    
    
    
    
    
    $
    (188
    )
    
    $
    (404
    )
   15




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##### Table of Contents



Note 8Commitments and Contingencies
 Commitments
  General Legal Matters
  Pending litigation and claims
     16




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##### Table of Contents



U.S. Government Investigations
    U.S. Government Audits
    17




---



##### Table of Contents



Contract Matters
  Note 9Equity-Based Compensation
  Class B Equity
   % Interest in
    
    
    Grant DateDIV Holding
    
    
    Fair ValueBalance April 3, 2009
    
    
    4.71
    %
    
    
    9,669First quarter fiscal year 2010 grants
    
    
    0.00
    %
    
    
    First quarter fiscal year 2010 forfeitures
    
    
    (0.03
    %)
    
    
    (37
    )Balance July 3, 2009
    
    
    4.68
    %
    
    $
    9,632April 3, 2009 vested
    
    
    3.69
    %
    
    $
    6,950First quarter fiscal year 2010 vesting
    
    
    0.04
    %
    
    
    174July 3, 2009 vested
    
    
    3.73
    %
    
    $
    7,124April 3, 2009 nonvested
    
    
    1.02
    %
    
    $
    2,718July 3, 2009 nonvested
    
    
    0.95
    %
    
    $
    2,508
  Nine month period ending April 2, 2010
    
    $
    438Fiscal year ending April 1, 2011
    
    
    229Fiscal year ending March 30, 2012 and thereafter
    
    
    62Total
    
    $
    729
  18




---



##### Table of Contents



Restricted Stock Units
    WeightedOutstanding
    
    
    AverageRestricted
    
    
    Grant DateStock Units
    
    
    Fair ValueOutstanding, April 3, 2009
    
    
    345,895
    
    
    $
    16.71Units granted
    
    
    12,500
    
    
    
    13.86Units forfeited
    
    
    (40,300
    )
    
    
    16.32Units vested and settled(1)
    
    
    
    
    
    
    Outstanding, July 3, 2009
    
    
    318,095
    
    
    $
    16.65
 (1)
    
    During the first quarter ended July 3, 2009, 37,600 RSU awards vested but were not
settled as of July 3, 2009.  Nine month period ended April 2, 2010
    
    $
    1,208Fiscal year ended April 1, 2011
    
    
    1,037Fiscal year ended March 30, 2012 and thereafter
    
    
    413Total
    
    $
    2,658
 Note 10Consolidating Financial Statements of Subsidiary Guarantors
   19




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##### Table of Contents



20




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##### Table of Contents



DynCorp International LLC and Subsidiaries
 Unaudited
Condensed Consolidating Statement of Operations Information
For the Fiscal Quarter Ended July 3, 2009
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Elimination
    
    
    Consolidated(Dollars in thousands)Revenue
    
    $
    540,372
    
    
    $
    244,806
    
    
    $
    100,245
    
    
    $
    (100,246
    )
    
    $
    785,177Cost of services
    
    
    (470,138
    )
    
    
    (229,966
    )
    
    
    (99,235
    )
    
    
    100,246
    
    
    
    (699,093
    )Selling, general and administrative expenses
    
    
    (21,719
    )
    
    
    (1,586
    )
    
    
    (133
    )
    
    
    
    
    
    
    (23,438
    )Depreciation and amortization expense
    
    
    (10,128
    )
    
    
    (1
    )
    
    
    (16
    )
    
    
    
    
    
    
    (10,145
    )Operating income
    
    
    38,387
    
    
    
    13,253
    
    
    
    861
    
    
    
    
    
    
    
    52,501Interest expense
    
    
    (14,162
    )
    
    
    (448
    )
    
    
    
    
    
    
    
    
    
    
    (14,610
    )Earnings from affiliates
    
    
    1,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054Equity in income of subsidiaries
    
    
    5,049
    
    
    
    24
    
    
    
    
    
    
    
    (5,073
    )
    
    
    Interest income
    
    
    (113
    )
    
    
    448
    
    
    
    4
    
    
    
    
    
    
    
    339Other, net
    
    
    (125
    )
    
    
    (15
    )
    
    
    (73
    )
    
    
    
    
    
    
    (213
    )Income before income taxes
    
    
    30,090
    
    
    
    13,262
    
    
    
    792
    
    
    
    (5,073
    )
    
    
    39,071Provision for income taxes
    
    
    (9,445
    )
    
    
    (2,860
    )
    
    
    (322
    )
    
    
    
    
    
    
    (12,627
    )Net income
    
    
    20,645
    
    
    
    10,402
    
    
    
    470
    
    
    
    (5,073
    )
    
    
    26,444Noncontrolling interests
    
    
    
    
    
    
    (5,135
    )
    
    
    (664
    )
    
    
    
    
    
    
    (5,799
    )Net income attributable to DynCorp
International LLC
    
    $
    20,645
    
    
    $
    5,267
    
    
    $
    (194
    )
    
    $
    (5,073
    )
    
    $
    20,645
  21




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##### Table of Contents



DynCorp International LLC and Subsidiaries
 Unaudited Condensed Consolidating Statement of Operations Information
For the Fiscal Quarter Ended July 4, 2008
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Revenue
    
    $
    542,958
    
    
    $
    173,836
    
    
    $
    96,688
    
    
    $
    (96,688
    )
    
    $
    716,794Cost of services
    
    
    (474,553
    )
    
    
    (166,119
    )
    
    
    (94,405
    )
    
    
    96,688
    
    
    
    (638,389
    )Selling, general and administrative expenses
    
    
    (22,126
    )
    
    
    (5,499
    )
    
    
    (226
    )
    
    
    
    
    
    
    (27,851
    )Depreciation and amortization expense
    
    
    (10,525
    )
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    (10,560
    )Operating income
    
    
    35,754
    
    
    
    2,218
    
    
    
    2,022
    
    
    
    
    
    
    
    39,994Interest expense
    
    
    (14,215
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,215
    )Earnings from affiliates
    
    
    1,117
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,117Equity in income of subsidiaries
    
    
    3,367
    
    
    
    (106
    )
    
    
    
    
    
    
    (3,261
    )
    
    
    Interest income
    
    
    331
    
    
    
    6
    
    
    
    7
    
    
    
    
    
    
    
    344Other, net
    
    
    600
    
    
    
    110
    
    
    
    (5
    )
    
    
    
    
    
    
    705Income before income taxes
    
    
    26,954
    
    
    
    2,228
    
    
    
    2,024
    
    
    
    (3,261
    )
    
    
    27,945Provision for income taxes
    
    
    (8,974
    )
    
    
    
    
    
    
    (342
    )
    
    
    
    
    
    
    (9,316
    )Net income
    
    
    17,980
    
    
    
    2,228
    
    
    
    1,682
    
    
    
    (3,261
    )
    
    
    18,629Noncontrolling interests
    
    
    
    
    
    
    (649
    )
    
    
    
    
    
    
    
    
    
    
    (649
    )Net income attributable to DynCorp
International LLC
    
    $
    17,980
    
    
    $
    1,579
    
    
    $
    1,682
    
    
    $
    (3,261
    )
    
    $
    17,980
  22




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##### Table of Contents



DynCorp International LLC and Subsidiaries
 Unaudited Condensed Consolidating Balance Sheet Information
July 3, 2009
 Subsidiary
    
    
    SubsidiaryLLC
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Elimination
    
    
    Consolidated(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    151,447
    
    
    $
    1,949
    
    
    $
    5,897
    
    
    $
    
    
    
    $
    159,293Restricted cash
    
    
    5,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,700Accounts receivable, net
    
    
    452,325
    
    
    
    184,940
    
    
    
    2,205
    
    
    
    
    
    
    
    639,470Prepaid expenses and other current assets
    
    
    69,266
    
    
    
    39,392
    
    
    
    1,367
    
    
    
    
    
    
    
    110,025Total current assets
    
    
    678,738
    
    
    
    226,281
    
    
    
    9,469
    
    
    
    
    
    
    
    914,488Property and equipment, net
    
    
    14,897
    
    
    
    3,250
    
    
    
    334
    
    
    
    
    
    
    
    18,481Goodwill
    
    
    398,559
    
    
    
    21,621
    
    
    
    
    
    
    
    
    
    
    
    420,180Tradename
    
    
    18,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,318Other intangibles, net
    
    
    119,878
    
    
    
    13,885
    
    
    
    
    
    
    
    
    
    
    
    133,763Investment in subsidiaries
    
    
    75,031
    
    
    
    614
    
    
    
    
    
    
    
    (75,645
    )
    
    
    Other assets, net
    
    
    40,301
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    40,395Intercompany receivables
    
    
    45,672
    
    
    
    
    
    
    
    59,069
    
    
    
    (104,741
    )
    
    
    Total assets
    
    $
    1,391,394
    
    
    $
    265,745
    
    
    $
    68,872
    
    
    $
    (180,386
    )
    
    $
    1,545,625LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable
    
    
    101,761
    
    
    
    92,676
    
    
    
    1,761
    
    
    
    
    
    
    
    196,198Accrued payroll and employee costs
    
    
    48,459
    
    
    
    27,445
    
    
    
    44,596
    
    
    
    
    
    
    
    120,500Other accrued liabilities
    
    
    63,440
    
    
    
    43,893
    
    
    
    10,048
    
    
    
    
    
    
    
    117,381Income taxes payable and deferred income taxes
    
    
    14,169
    
    
    
    23
    
    
    
    860
    
    
    
    
    
    
    
    15,052Total current liabilities
    
    
    227,829
    
    
    
    164,037
    
    
    
    57,265
    
    
    
    
    
    
    
    449,131Long-term debt, less current portion
    
    
    566,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    566,383Other long-term liabilities
    
    
    5,618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,618Intercompany payables
    
    
    67,071
    
    
    
    37,670
    
    
    
    
    
    
    
    (104,741
    )
    
    
    Total equity
    
    
    524,493
    
    
    
    64,038
    
    
    
    11,607
    
    
    
    (75,645
    )
    
    
    524,493Total liabilities and members equity
    
    $
    1,391,394
    
    
    $
    265,745
    
    
    $
    68,872
    
    
    $
    (180,386
    )
    
    $
    1,545,625
  23




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##### Table of Contents



DynCorp International LLC and Subsidiaries
 Unaudited
Condensed Consolidating Balance Sheet Information
April 3, 2009
 Subsidiary
    
    
    SubsidiaryLLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    192,968
    
    
    $
    2,534
    
    
    $
    4,720
    
    
    $
    
    
    
    $
    200,222Restricted cash
    
    
    5,935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,935Accounts receivable, net
    
    
    389,715
    
    
    
    172,900
    
    
    
    1,817
    
    
    
    
    
    
    
    564,432Prepaid expenses and other current assets
    
    
    112,024
    
    
    
    10,952
    
    
    
    1,238
    
    
    
    
    
    
    
    124,214Total current assets
    
    
    700,642
    
    
    
    186,386
    
    
    
    7,775
    
    
    
    
    
    
    
    894,803Property and equipment, net
    
    
    14,582
    
    
    
    3,400
    
    
    
    356
    
    
    
    
    
    
    
    18,338Goodwill
    
    
    398,559
    
    
    
    21,621
    
    
    
    
    
    
    
    
    
    
    
    420,180Tradename
    
    
    18,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,318Other intangibles, net
    
    
    128,833
    
    
    
    13,886
    
    
    
    
    
    
    
    
    
    
    
    142,719Investment in subsidiaries
    
    
    64,380
    
    
    
    589
    
    
    
    
    
    
    
    (64,969
    )
    
    
    Other assets, net
    
    
    44,762
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    44,856Intercompany receivables
    
    
    48,786
    
    
    
    
    
    
    
    43,663
    
    
    
    (92,449
    )
    
    
    Total assets
    
    $
    1,418,862
    
    
    $
    225,976
    
    
    $
    51,794
    
    
    $
    (157,418
    )
    
    $
    1,539,214LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    30,540
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,540Accounts payable
    
    
    96,574
    
    
    
    63,132
    
    
    
    713
    
    
    
    
    
    
    
    160,419Accrued payroll and employee costs
    
    
    69,220
    
    
    
    32,965
    
    
    
    35,808
    
    
    
    
    
    
    
    137,993Other accrued liabilities
    
    
    94,333
    
    
    
    14,711
    
    
    
    2,546
    
    
    
    
    
    
    
    111,590Income taxes
payable and deferred income taxes
    
    
    13,615
    
    
    
    
    
    
    
    649
    
    
    
    
    
    
    
    14,264Total current liabilities
    
    
    304,282
    
    
    
    110,808
    
    
    
    39,716
    
    
    
    
    
    
    
    454,806Long-term debt, less current portion
    
    
    569,372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    569,372Other long-term liabilities
    
    
    6,744
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    6,779Intercompany payables
    
    
    30,207
    
    
    
    62,242
    
    
    
    
    
    
    
    (92,449
    )
    
    
    Total equity
    
    
    508,257
    
    
    
    52,891
    
    
    
    12,078
    
    
    
    (64,969
    )
    
    
    508,257Total liabilities and members equity
    
    $
    1,418,862
    
    
    $
    225,976
    
    
    $
    51,794
    
    
    $
    (157,418
    )
    
    $
    1,539,214
  24




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##### Table of Contents



DynCorp International LLC and Subsidiaries
 Unaudited Condensed Consolidating Statement of Cash Flow Information
For the Fiscal Quarter Ended July 3, 2009
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Net cash
provided by (used in) operating activities
    
    $
    (45,156
    )
    
    $
    34,021
    
    
    $
    16,583
    
    
    $
    
    
    
    $
    5,448Cash flows from investing activities:Purchase of property and equipment
    
    
    (1,294
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,294
    )Other investing cash flows
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (1,294
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,294
    )Cash flows from financing activities:Net transfers from (to) Parent
    
    
    39,978
    
    
    
    (24,572
    )
    
    
    (15,406
    )
    
    
    
    
    
    
    Payments on long term debt
    
    
    (34,337
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,337
    )Other financing activities
    
    
    (712
    )
    
    
    (10,034
    )
    
    
    
    
    
    
    
    
    
    
    (10,746
    )Net cash used in financing activities
    
    
    4,929
    
    
    
    (34,606
    )
    
    
    (15,406
    )
    
    
    
    
    
    
    (45,083
    )Net decrease in cash and cash equivalents
    
    
    (41,521
    )
    
    
    (585
    )
    
    
    1,177
    
    
    
    
    
    
    
    (40,929
    )Cash and cash equivalents, beginning of period
    
    
    192,968
    
    
    
    2,534
    
    
    
    4,720
    
    
    
    
    
    
    
    200,222Cash and cash equivalents, end of period
    
    $
    151,447
    
    
    $
    1,949
    
    
    $
    5,897
    
    
    $
    
    
    
    $
    159,293
 Unaudited Condensed Consolidating Statement of Cash Flow Information
For the Fiscal Quarter Ended July 4, 2008
 Subsidiary
    
    
    SubsidiaryParent
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    Consolidated(Dollars in thousands)Net cash
provided by (used in) operating activities
    
    $
    (32,823
    )
    
    $
    (50,962
    )
    
    $
    12,654
    
    
    $
    
    
    
    $
    (71,131
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (1,208
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,208
    )Other investing cash flows
    
    
    (243
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (243
    )Net cash used in investing activities
    
    
    (1,451
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,451
    )Cash flows from financing activities:Net transfers from (to) Parent
    
    
    (40,890
    )
    
    
    50,139
    
    
    
    (9,249
    )
    
    
    
    
    
    
    Payments on long term debt
    
    
    (1,548
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,548
    )Other financing activities
    
    
    22,251
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,251Net cash used in financing activities
    
    
    (20,187
    )
    
    
    50,139
    
    
    
    (9,249
    )
    
    
    
    
    
    
    20,703Net decrease in cash and cash equivalents
    
    
    (54,461
    )
    
    
    (823
    )
    
    
    3,405
    
    
    
    
    
    
    
    (51,879
    )Cash and cash equivalents, beginning of period
    
    
    79,484
    
    
    
    3,835
    
    
    
    2,060
    
    
    
    
    
    
    
    85,379Cash and
cash equivalents, end of period
    
    $
    25,023
    
    
    $
    3,012
    
    
    $
    5,465
    
    
    $
    
    
    
    $
    33,500
 Note 11  Related Parties, Joint Ventures and Variable Interest Entities
 Management Fee
  Joint Ventures
   25




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##### Table of Contents



Variable Interest Entities
    Note 12Collaborative Arrangement
  Note 13Segment Information
   Global Stabilization and Development Solutions, or GSDS
 Global Platform Support Solutions, or GPSS
 Global Linguist Solutions, or GLS
  26




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##### Table of Contents



Fiscal Quarter EndedJuly 3, 2009
    
    
    July 4, 2008RevenueGlobal Stabilization and Development Solutions
    
    $
    284,085
    
    
    $
    269,554Global Platform Support Solutions
    
    
    303,648
    
    
    
    329,736Global Linguist Solutions
    
    
    198,354
    
    
    
    118,422Other/Elimination
    
    
    (910
    )
    
    
    (918
    )Total revenue
    
    $
    785,177
    
    
    $
    716,794Operating Income
    
    $
    15,874
    
    
    $
    22,971Global Stabilization and Development SolutionsGlobal Platform Support Solutions
    
    
    25,910
    
    
    
    15,742Global Linguist Solutions
    
    
    10,717
    
    
    
    1,281Total operating income
    
    $
    52,501
    
    
    $
    39,994Depreciation and amortization
    
    $
    4,940
    
    
    $
    5,176Global Stabilization and Development SolutionsGlobal Platform Support Solutions
    
    
    5,009
    
    
    
    5,238Global Linguist Solutions
    
    
    196
    
    
    
    146Total depreciation and amortization
    
    $
    10,145
    
    
    $
    10,560
 As ofJuly 3, 2009
    
    
    April 3, 2009AssetsGlobal Stabilization and Development Solutions
    
    $
    648,382
    
    
    $
    594,207Global Platform Support Solutions
    
    
    513,705
    
    
    
    510,583Global Linguist Solutions
    
    
    161,073
    
    
    
    152,090Other/Elimination (1)
    
    
    222,465
    
    
    
    282,334Total assets
    
    $
    1,545,625
    
    
    $
    1,539,214
 (1)
    
    Assets primarily include cash, deferred income taxes, and deferred debt issuance cost. Note 14Fair Value of Financial Assets and Liabilities
  
    
    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.
  27




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##### Table of Contents



Fair
Value Measurements at Reporting Date UsingBook value of
    
    
    Quoted Prices infinancial
    
    
    Active Markets
    
    
    Significant Other
    
    
    Significantassets/(liabilities)
    
    
    for Identical
    
    
    Observable Inputs
    
    
    Unobservable(amounts in thousands)
    
    as of July 3, 2009
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)AssetsCash equivalents(1)
    
    $
    164,993
    
    
    $
    164,993
    
    
    $
    
    
    
    $
    Total assets measured at fair value
    
    $
    164,993
    
    
    $
    164,993
    
    
    $
    
    
    
    $
    LiabilitiesInterest rate derivatives
    
    $
    6,593
    
    
    $
    
    
    
    $
    6,593
    
    
    $
    Total liabilities measured at fair value
    
    $
    6,593
    
    
    $
    
    
    
    $
    6,593
    
    
    $
    
 (1)
    
    Includes cash and cash equivalents and restricted cash Note 15Subsequent Events
  
    
    In July 2009 we completed the repurchase of an additional $14.5 million of face value
of our senior subordinated notes for $14.3 million, including applicable fees. The total
amount of both our Parents common stock and senior subordinated notes repurchased for the
fiscal year totaled approximately $25 million, which is the allowable repurchase basket per
our current authorization as more fully described in Note 6.
 
    
    In July 2009 we obtained a consent from our lenders under our senior secured credit
facility to allow us to expand our capability to purchase capital assets by an additional
$52 million during fiscal year 2010. The purpose of obtaining this consent was to enable us
to acquire certain capital assets in support of a new program requiring the purchase of
certain capital assets, including helicopters.
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   28




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##### Table of Contents



COMPANY OVERVIEW
  SBAs & Service Offerings
  Global Stabilization and Development Solutions
  Security & Training
 
    
    CivPol This SBA provides international policing and police training, judicial
support, immigration support and base operations.
    
    Security & Training  This SBA provides senior advisors and mentors to foreign
governmental agencies. In addition, it provides security and personal protection for
diplomats and governmental senior officials.
 Contingency Support and Operations
 
    
    LOGCAP IV  This SBA supports U.S. military operations and maintenance support,
including but not limited to: construction services, facilities management, electrical
power, water, sewage and waste management, laundry operations, food services and
transportation motor pool operations.
    
    Contingency Support & Operations  This SBA provides peace-keeping logistics
support, humanitarian relief, weapons removal and abatement, worldwide contingency
planning and other rapid response services. In addition, it offers inventory
procurement and tracking services, property control, data entry and mobile repair
services. Furthermore, this SBA provides facility and equipment maintenance and control
and custodial and administrative services.
 Infrastructure
 
    
    Infrastructure  This SBA provides civil, electrical, environmental and mechanical
engineering and construction management services.
 Global Platform Support Solutions
   29




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##### Table of Contents



Aviation
 
    
    Aviation Life Cycle Support  Provides worldwide support of U.S. Army, Air Force
and Navy fixed wing assets. Aircraft are deployed throughout the U.S., Europe, Asia,
South America and the Middle East. This includes flight line and depot level
maintenance consisting of scheduled and unscheduled events. Specific functions include
repair, overhaul and procurement of components, and procurement of consumable materials
and transportation of materials to and from the operating sites. In addition, the team
is responsible for obsolescence engineering, quality control, inventory management,
avionics upgrades and recovery of downed aircraft.
    
    Domestic Aviation Operations and Support  Provides aircraft fleet maintenance and
modification services, ground vehicle maintenance and modification services, pilot and
maintenance training, logistics support, air traffic control services, base and depot
operations, program management and engineering services. Additionally, this SBA
provides aerial firefighting services. These services are provided in the U.S.
    
    Field Service Operations  Provides worldwide maintenance, modification, repair,
and logistics support on aircraft, weapons systems, and related support equipment to
the DoD and other U.S. government agencies. Contract Field Teams (CFT) is the most
significant program in our Field Service Operations SBA. Our Company and its
predecessors have provided CFT services for over 58 years. This program deploys highly
mobile, quick-response field teams to customer locations to supplement a customers
workforce.
    
    International Aviation Operations and Support  Provides aircraft fleet maintenance
and modification services, ground vehicle maintenance and modification services, pilot
and maintenance training, logistics support, air traffic control services, air
transportation, base and depot operations, program management and engineering services.
These services are provided internationally.
    
    INL Air Wing  Conducts foreign assistance programs to reduce the flow of
international narcotics.
 Land Systems
 
    
    Land Systems  This SBA provides maintenance, operations, support, life extension,
engineering, marine services and program management services primarily for ground
vehicles and docked ships. This includes the Mine Resistant Ambush Protected Vehicles
Logistics Support (MRAP) contract.
 Global Linguist Solutions
 Global Linguist Solutions
 CURRENT OPERATING CONDITIONS AND OUTLOOK
 External Factors
   30




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##### Table of Contents




    
    The continued use of contractors to augment non-combat forces during conflict
operations, including personnel support, base operations and logistics, platform
support and maintenance, and contingency operations due to increased military
operational tempo, equipment service life extensions and economic pressures on the DoD
budget;
    
    Increased use of contractor support in post-conflict rebuilding efforts, including
military logistics and equipment reset support, infrastructure development, training
and mentoring, and capacity building;
    
    Increased outsourcing by foreign militaries of maintenance, supply support,
facilities management and construction management-related services; and
    
    The shift from single award to more multiple award indefinite order indefinite
quantity (IDIQ) contracts, which may offer us an opportunity to increase revenue
under these contracts by competing for task orders with the other contract awardees.
  Current Economic Conditions
    31




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##### Table of Contents



Internal Factors
  Purpose
 TM
 Objective
  Strategy
  Focus Areas
  CONTRACT TYPES
  
    
    Fixed-Price Type Contracts:In a fixed-price contract, the price is not subject to
adjustment based on costs incurred, which can favorably or adversely impact our
profitability depending upon our execution in performing the contracted service.
Fixed-price types received by us include firm fixed-price, fixed-price with economic
adjustment, and fixed-price incentive.
    
    Time-and-Materials Type Contracts:A time-and-materials type contract provides for
acquiring supplies or services on the basis of direct labor hours at fixed hourly/daily
rates plus materials at cost.
    
    Cost-Reimbursement Type Contracts:Cost-reimbursement type contracts provide for
payment of allowable incurred costs, to the extent prescribed in the contract, plus a
fixed-fee, award-fee or incentive-fee. Award-fees or incentive-fees are generally based
upon various objective and subjective criteria, such as aircraft mission capability rates
and meeting cost targets.
   32




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##### Table of Contents



Fiscal Quarter EndedJuly 3,
    
    
    July 4,2009
    
    
    2008Fixed Price
    
    
    26
    %
    
    
    31
    %Time-and-Materials
    
    
    21
    %
    
    
    26
    %Cost-Reimbursement
    
    
    53
    %
    
    
    43
    %100
    %
    
    
    100
    %
  BACKLOG
    July 3, 2009
    
    
    April 3, 2009Funded Backlog
    
    $
    1,506
    
    
    $
    1,431Unfunded Backlog
    
    
    5,182
    
    
    
    4,867Total Backlog
    
    $
    6,688
    
    
    $
    6,298
  ESTIMATED REMAINING CONTRACT VALUE
   33




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##### Table of Contents



RESULTS OF OPERATIONS  Fiscal Quarters Ended July 3, 2009 and July 4, 2008
  Consolidated
  Fiscal Quarter Ended(Dollars in thousands)
    
    July 3, 2009
    
    
    July 4, 2008Revenue
    
    $
    785,177
    
    
    
    100.0
    %
    
    $
    716,794
    
    
    
    100.0
    %Cost of services
    
    
    (699,093
    )
    
    
    (89.0
    %)
    
    
    (638,389
    )
    
    
    (89.1
    %)Selling, general and administrative expenses
    
    
    (23,438
    )
    
    
    (3.0
    %)
    
    
    (27,851
    )
    
    
    (3.9
    %)Depreciation and amortization expense
    
    
    (10,145
    )
    
    
    (1.3
    %)
    
    
    (10,560
    )
    
    
    (1.5
    %)Operating income
    
    
    52,501
    
    
    
    6.7
    %
    
    
    39,994
    
    
    
    5.6
    %Interest expense
    
    
    (14,610
    )
    
    
    (1.9
    )%
    
    
    (14,215
    )
    
    
    (2.0
    %)Earnings from affiliates
    
    
    1,054
    
    
    
    0.1
    %
    
    
    1,117
    
    
    
    0.2
    %Interest income
    
    
    339
    
    
    
    0.0
    %
    
    
    344
    
    
    
    0.0
    %Other (loss)/income, net
    
    
    (213
    )
    
    
    (0.0
    )%
    
    
    705
    
    
    
    0.1
    %Income before taxes
    
    
    39,071
    
    
    
    5.0
    %
    
    
    27,945
    
    
    
    3.9
    %Provision for income taxes
    
    
    (12,627
    )
    
    
    (1.6
    %)
    
    
    (9,316
    )
    
    
    (1.3
    %)Net Income
    
    
    26,444
    
    
    
    3.4
    %
    
    
    18,629
    
    
    
    2.6
    %Noncontrolling interests
    
    
    (5,799
    )
    
    
    (0.7
    %)
    
    
    (649
    )
    
    
    (0.1
    %)Net income attributable to DynCorp International LLC
    
    $
    20,645
    
    
    
    2.6
    %
    
    $
    17,980
    
    
    
    2.5
    %
 Revenue 
 Cost of services 
 Selling, general and administrative expenses (SG&A) 
  34




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##### Table of Contents



Depreciation and amortization 
 Interest expense 
 Income tax expense
 Results by Segment
  For the Fiscal Quarter Ended(Dollars in thousands)
    
    July 3, 2009
    
    
    July 4, 2008RevenueGlobal Stabilization and Development Solutions
    
    $
    284,085
    
    
    
    36.2
    %
    
    $
    269,554
    
    
    
    37.6
    %Global Platform Support Solutions
    
    
    303,648
    
    
    
    38.6
    %
    
    
    329,736
    
    
    
    46.0
    %Global Linguist Solutions
    
    
    198,354
    
    
    
    25.3
    %
    
    
    118,422
    
    
    
    16.5
    %Other/elimination
    
    
    (910
    )
    
    
    (0.1
    %)
    
    
    (918
    )
    
    
    (0.1
    %)Consolidated
    
    $
    785,177
    
    
    
    100.0
    %
    
    $
    716,794
    
    
    
    100.0
    %Operating IncomeGlobal Stabilization and Development Solutions
    
    $
    15,874
    
    
    
    30.2
    %
    
    $
    22,971
    
    
    
    57.4
    %Global Platform Support Solutions
    
    
    25,910
    
    
    
    49.4
    %
    
    
    15,742
    
    
    
    39.4
    %Global Linguist Solutions
    
    
    10,717
    
    
    
    20.4
    %
    
    
    1,281
    
    
    
    3.2
    %Consolidated
    
    $
    52,501
    
    
    
    100.0
    %
    
    $
    39,994
    
    
    
    100.0
    %
 Global Stabilization and Development Solutions
 Revenue 
    35




---



##### Table of Contents



Operating Income 
 Global Platform Support Solutions
 Revenue 
   Operating Income 
 Global Linguist Solutions
   36




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
     Cash Flow Analysis
 Fiscal Quarter Ended(Dollars in thousands)
    
    July 3, 2009
    
    
    July 4, 2008Net Cash provided by (used in) operating activities
    
    $
    5,448
    
    
    $
    (71,131
    )Net Cash used in investing activities
    
    
    (1,294
    )
    
    
    (1,451
    )Net Cash (used in) provided by financing activities
    
    
    (45,083
    )
    
    
    20,703
    37




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##### Table of Contents



Financing
     Debt Covenants and Other Matters
  OFF BALANCE SHEET ARRANGEMENTS
  
    
    Any obligation under certain guarantee contracts;
    
    A retained or contingent interest in assets transferred to an unconsolidated entity
or similar arrangement that serves as credit, liquidity or market risk support to that
entity for such assets;
    
    Any obligation under certain derivative instruments; and
    
    Any obligation arising out of a material variable interest held by us in an
unconsolidated entity that provides financing, liquidity, market risk or credit
risk support to us, or engages in leasing, hedging or research and development services
with us.
   38




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    ACCOUNTING DEVELOPMENTS
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Controls
  
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
   39




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##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5.
    
    OTHER INFORMATION
   40




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
  ExhibitNumber
    
    Description31.1*
    
    Certification of Chief Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2*
    
    Certification of Chief Financial
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1*
    
    Certification of Chief Executive
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2*
    
    Certification of Chief Financial
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 *
    
    Filed herewith. 
 SIGNATURES
  DYNCORP INTERNATIONAL LLC/s/ Michael J. ThorneMichael J. ThorneSenior Vice President and Chief Financial OfficerDate: August 6, 2009
  41