##### 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 December 28, 2007
 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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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Disclosure Regarding Forward-Looking Information




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##### 



DYNCORP INTERNATIONAL LLC
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Statements of Income  Three Months Ended December 28, 2007 andDecember 29, 2006 (unaudited)
    
    
    1Condensed Consolidated Statements of Income  Nine Months Ended December 28, 2007 andDecember 29, 2006 (unaudited)
    
    
    2Condensed Consolidated Balance Sheets  December 28, 2007 and March 30, 2007 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows  Nine Months Ended December 28, 2007 andDecember 29, 2006 (unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    5Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    30Item 1A.
    
    Risk Factors
    
    
    30Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3.
    
    Defaults Upon Senior Securities
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    30Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 DYNCORP INTERNATIONAL LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  (Dollars in thousands)
 For the Three Months EndedDec. 28, 2007
    
    
    Dec. 29, 2006(unaudited)Revenue
    
    $
    523,071
    
    
    $
    517,539Cost of services
    
    
    (452,341
    )
    
    
    (449,680
    )Selling, general and administrative expenses
    
    
    (28,995
    )
    
    
    (24,949
    )Depreciation and amortization expense
    
    
    (10,910
    )
    
    
    (10,656
    )Operating income
    
    
    30,825
    
    
    
    32,254Interest expense
    
    
    (14,052
    )
    
    
    (14,554
    )Net earnings from affiliates
    
    
    1,253
    
    
    
    1,000Interest income
    
    
    522
    
    
    
    534Other income, net
    
    
    380
    
    
    
    Income before income taxes
    
    
    18,928
    
    
    
    19,234Provision for income taxes
    
    
    (6,968
    )
    
    
    (7,018
    )Net income
    
    $
    11,960
    
    
    $
    12,216
   1




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DYNCORP INTERNATIONAL LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  (Dollars in thousands)
 For the Nine Months EndedDec. 28, 2007
    
    
    Dec. 29, 2006(unaudited)Revenue
    
    $
    1,566,853
    
    
    $
    1,529,944Cost of services
    
    
    (1,358,062
    )
    
    
    (1,343,447
    )Selling, general and administrative expenses
    
    
    (79,916
    )
    
    
    (82,906
    )Depreciation and amortization expense
    
    
    (31,901
    )
    
    
    (33,005
    )Operating income
    
    
    96,974
    
    
    
    70,586Interest expense
    
    
    (42,247
    )
    
    
    (44,057
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (3,484
    )Net earnings from affiliates
    
    
    3,320
    
    
    
    1,323Interest income
    
    
    2,202
    
    
    
    1,094Other expense, net
    
    
    (162
    )
    
    
    Income before income taxes
    
    
    60,087
    
    
    
    25,462Provision for income taxes
    
    
    (21,916
    )
    
    
    (9,355
    )Net income
    
    $
    38,171
    
    
    $
    16,107
   2




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DYNCORP INTERNATIONAL LLC
CONDENSED CONSOLIDATED BALANCE SHEETS  (Dollars in thousands)
 As ofDec. 28, 2007
    
    
    March 30, 2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,581
    
    
    $
    102,455Restricted cash
    
    
    10,091
    
    
    
    20,224Accounts receivable, net of allowances of $925 and $3,428
    
    
    583,859
    
    
    
    461,950Prepaid expenses and other current assets
    
    
    92,800
    
    
    
    69,487Deferred income taxes
    
    
    13,765
    
    
    
    12,864Total current assets
    
    
    714,096
    
    
    
    666,980Property and equipment, net
    
    
    12,800
    
    
    
    12,646Goodwill
    
    
    420,180
    
    
    
    420,180Tradename
    
    
    18,318
    
    
    
    18,318Other intangibles, net
    
    
    185,305
    
    
    
    214,364Deferred income taxes
    
    
    16,671
    
    
    
    13,459Other assets, net
    
    
    16,993
    
    
    
    16,954Total assets
    
    $
    1,384,363
    
    
    $
    1,362,901LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Short-term debt, including current maturities of long-term debt
    
    $
    16,596
    
    
    $
    37,850Accounts payable
    
    
    136,403
    
    
    
    127,282Accrued payroll and employee costs
    
    
    77,608
    
    
    
    88,929Other accrued liabilities
    
    
    120,617
    
    
    
    116,308Income taxes payable
    
    
    12,202
    
    
    
    13,682Total current liabilities
    
    
    363,426
    
    
    
    384,051Long-term debt, less current portion
    
    
    590,840
    
    
    
    593,144Other long-term liabilities
    
    
    13,089
    
    
    
    6,032Commitments and contingenciesMembers equity:Members units, 100 outstanding
    
    
    320,131
    
    
    
    316,633Retained earnings
    
    
    100,002
    
    
    
    63,205Accumulated other comprehensive loss
    
    
    (3,125
    )
    
    
    (164
    )Total members equity
    
    
    417,008
    
    
    
    379,674Total liabilities and members equity
    
    $
    1,384,363
    
    
    $
    1,362,901
   3




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DYNCORP INTERNATIONAL LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Dollars in thousands)
 For the Nine Months EndedDec. 28, 2007
    
    
    Dec. 29, 2006(unaudited)Cash flows from operating activitiesNet income
    
    $
    38,171
    
    
    $
    16,107Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    32,924
    
    
    
    34,654Loss on early extinguishment of debt
    
    
    
    
    
    
    2,657Amortization of deferred loan costs
    
    
    2,261
    
    
    
    3,154Recovery of losses on accounts receivable
    
    
    (1,127
    )
    
    
    (4,679
    )Net earnings from affiliates, net of dividends received
    
    
    (668
    )
    
    
    (951
    )Deferred income taxes
    
    
    313
    
    
    
    (8,116
    )Equity-based compensation
    
    
    3,360
    
    
    
    1,471Excess tax benefits from equity-based compensation
    
    
    (138
    )
    
    
    Changes in assets and liabilities:Restricted cash
    
    
    10,133
    
    
    
    Accounts receivable
    
    
    (120,018
    )
    
    
    (3,754
    )Prepaid expenses and other current assets
    
    
    (22,546
    )
    
    
    (167
    )Accounts payable and accrued liabilities
    
    
    11,832
    
    
    
    12,008Income taxes payable
    
    
    (3,753
    )
    
    
    100Net cash (used) provided by operating activities
    
    
    (49,256
    )
    
    
    52,484Cash flows from investing activitiesPurchase of property and equipment
    
    
    (2,822
    )
    
    
    (3,679
    )Purchase of computer software
    
    
    (996
    )
    
    
    (2,069
    )Other investing activities
    
    
    (3,423
    )
    
    
    374Net cash used by investing activities
    
    
    (7,241
    )
    
    
    (5,374
    )Cash flows from financing activitiesNet transfers from parent company
    
    
    
    
    
    
    17,907Payments on long-term debt
    
    
    (37,058
    )
    
    
    (29,694
    )Borrowings under revolving line of credit
    
    
    13,500
    
    
    
    Premium paid on redemption of senior subordinated notes
    
    
    
    
    
    
    (2,657
    )Payment of deferred financing costs
    
    
    
    
    
    
    (640
    )Excess tax benefits from equity-based compensation
    
    
    138
    
    
    
    Borrowings under other financing arrangements
    
    
    7,423
    
    
    
    2,737Payments under other financing arrangements
    
    
    (16,380
    )
    
    
    Net cash used by financing activities
    
    
    (32,377
    )
    
    
    (12,347
    )Net (decrease) increase in cash and cash equivalents
    
    
    (88,874
    )
    
    
    34,763Cash and cash equivalents, beginning of period
    
    
    102,455
    
    
    
    20,573Cash and cash equivalents, end of period
    
    $
    13,581
    
    
    $
    55,336Income taxes paid (net of refunds)
    
    $
    21,949
    
    
    $
    17,588Interest paid
    
    $
    33,231
    
    
    $
    28,241Non-cash investing activities
    
    $
    
    
    
    $
    3,834
   4




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DYNCORP INTERNATIONAL LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
 Note 1  Basis of Presentation and Accounting Policies
 Basis of Presentation
      Income Taxes, Deferred Taxes, Tax Valuation Allowances and Tax Reserves
  Principles of Consolidation
 Consolidation of Variable Interest Entities
  5




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DynEgypt LLC
    
    
    50.0
    %Dyn Puerto Rico Corporation
    
    
    49.9
    %Contingency Response Services LLC
    
    
    45.0
    %Babcock DynCorp Limited
    
    
    44.0
    %Partnership for Temporary Housing LLC
    
    
    40.0
    %DCP Contingency Services LLC
    
    
    40.0
    %
   Other Accounting Policies
  Accounting Developments
 Pronouncements Implemented
    Pronouncements Not Yet Implemented
   6




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##### Table of Contents



Note 2  Other Intangible Assets
  December 28, 2007WeightedAverage
    
    
    GrossUseful Life
    
    
    Carrying
    
    
    Accumulated(Years)
    
    
    Value
    
    
    Amortization
    
    
    NetFinite-lived intangible assets:Customer-related intangible assets
    
    
    8.5
    
    
    $
    290,716
    
    
    $
    (110,817
    )
    
    $
    179,899Other
    
    
    4.3
    
    
    
    13,596
    
    
    
    (8,190
    )
    
    
    5,406$
    304,312
    
    
    $
    (119,007
    )
    
    $
    185,305$
    18,318
    
    
    $
    
    
    
    $
    18,318
 March 30, 2007WeightedAverage
    
    
    GrossUseful Life
    
    
    Carrying
    
    
    Accumulated(Years)
    
    
    Value
    
    
    Amortization
    
    
    NetFinite-lived intangible assets:Customer-related intangible assets
    
    
    8.5
    
    
    $
    290,381
    
    
    $
    (82,233
    )
    
    $
    208,148Other
    
    
    4.2
    
    
    
    12,599
    
    
    
    (6,383
    )
    
    
    6,216$
    302,980
    
    
    $
    (88,616
    )
    
    $
    214,364Indefinite-lived intangible assets  Tradename
    
    
    
    
    
    $
    18,318
    
    
    $
    
    
    
    $
    18,318
   7




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Note 3  Income Taxes
       Note 4  Accounts Receivable
  (Dollars in thousands)
    
    Dec. 28, 2007
    
    
    March 30, 2007Billed
    
    $
    292,156
    
    
    $
    227,942Unbilled
    
    
    291,703
    
    
    
    232,543Other receivables
    
    
    
    
    
    
    1,465Total
    
    $
    583,859
    
    
    $
    461,950
  Note 5  Long-Term Debt
  (Dollars in thousands)
    
    Dec. 28, 2007
    
    
    March 30, 2007Revolving line of credit
    
    $
    13,500
    
    
    $
    Term loans
    
    
    301,904
    
    
    
    338,9629.5% Senior subordinated notes
    
    
    292,032
    
    
    
    292,032607,436
    
    
    
    630,994Less current portion of long-term debt
    
    
    (16,596
    )
    
    
    (37,850
    )Total long-term debt
    
    $
    590,840
    
    
    $
    593,144
  8




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Long-term Debt
   Note 6  Commitments and Contingencies
 Commitments
  Contingencies
 General Legal Matters
  Pending Litigation and Claims
   9




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U.S. ex rel. Longest v. DynCorp and DynCorp
International LLC
  U.S. Government Investigations
   U.S. Government Audits
    10




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Note 7  Members Equity
  Accumulated OtherMembers
    
    
    Retained
    
    
    Comprehensive (Loss)Units
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance at March 30, 2007
    
    $
    316,633
    
    
    $
    63,205
    
    
    $
    (164
    )
    
    $
    379,674Adjustment for the adoption of FIN No. 48
    
    
    
    
    
    
    (1,374
    )
    
    
    
    
    
    
    (1,374
    )Comprehensive income:Net income
    
    
    
    
    
    
    38,171
    
    
    
    
    
    
    
    38,171Interest rate hedging activity, net of tax
    
    
    
    
    
    
    
    
    
    
    (3,011
    )
    
    
    (3,011
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Comprehensive income
    
    
    
    
    
    
    38,171
    
    
    
    (2,961
    )
    
    
    35,210Equity-based compensation
    
    
    3,360
    
    
    
    
    
    
    
    
    
    
    
    3,360Net tax benefits from equity-based
compensation
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    138Balance at December 28, 2007
    
    $
    320,131
    
    
    $
    100,002
    
    
    $
    (3,125
    )
    
    $
    417,008
 Note 8  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 2010September 2007
    
    $
    75,000
    
    
    
    4.910
    %
    
    3-month LIBOR
    
    September 2008
 
 *
    
    plus applicable margin (2.00% at December 28, 2007).  Note 9  Equity-Based Compensation
 Class B Equity
 Equity-Based Compensation
   Three month period ended March 28, 2008
    
    $
    784Fiscal year ended April 3, 2009
    
    
    2,398Fiscal year ended April 2, 2010 and thereafter
    
    
    1,937Total
    
    $
    5,119
  11




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2007 Omnibus Equity Incentive Plan
    WeightedOutstanding
    
    
    AverageRestricted
    
    
    Grant DateStock Units
    
    
    Fair ValueOutstanding, March 30, 2007
    
    
    
    
    
    $
    Units granted
    
    
    147,150
    
    
    
    21.19Units cancelled
    
    
    
    
    
    
    Units vested
    
    
    
    
    
    
    Outstanding, December 28, 2007
    
    
    147,150
    
    
    $
    21.19
    Three month period ended March 28, 2008
    
    $
    601Fiscal year ended April 3, 2009
    
    
    1,910Fiscal year ended April 2, 2010 and thereafter
    
    
    979Total
    
    $
    3,490
  12




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Note 10  Segment Information
   Three Months Ended
    
    
    Nine Months EndedDec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006RevenueGovernment Services
    
    $
    343,592
    
    
    $
    342,205
    
    
    $
    1,026,764
    
    
    $
    1,018,208Maintenance and Technical Support Services
    
    
    179,479
    
    
    
    175,334
    
    
    
    540,089
    
    
    
    511,736Total reportable segments
    
    
    523,071
    
    
    
    517,539
    
    
    
    1,566,853
    
    
    
    1,529,944Corporate activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    523,071
    
    
    $
    517,539
    
    
    $
    1,566,853
    
    
    $
    1,529,944Operating Income (Loss)Government Services
    
    $
    25,460
    
    
    $
    33,468
    
    
    $
    82,076
    
    
    $
    70,251Maintenance and Technical Support Services
    
    
    6,462
    
    
    
    (742
    )
    
    
    18,258
    
    
    
    1,806Total reportable segments
    
    
    31,922
    
    
    
    32,726
    
    
    
    100,334
    
    
    
    72,057Net unallocated corporate expenses(a)
    
    
    (1,097
    )
    
    
    (472
    )
    
    
    (3,360
    )
    
    
    (1,471
    )$
    30,825
    
    
    $
    32,254
    
    
    $
    96,974
    
    
    $
    70,586Depreciation and amortizationGovernment Services
    
    $
    7,942
    
    
    $
    7,900
    
    
    $
    23,173
    
    
    $
    24,490Maintenance and Technical Support Services
    
    
    3,350
    
    
    
    3,239
    
    
    
    9,751
    
    
    
    10,164Total reportable segments
    
    
    11,292
    
    
    
    11,139
    
    
    
    32,924
    
    
    
    34,654Corporate activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,292
    
    
    $
    11,139
    
    
    $
    32,924
    
    
    $
    34,654
 
 (a)
    
    Represents equity-based compensation as discussed in Note 9.  13




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Note 11  Consolidating Financial Statements of Subsidiary Guarantors
   1.
    
    The Companys consolidating balance sheets as of December 28, 2007 and March 30,
2007, the consolidating statements of operations information for the three months ended
December 28, 2007 and December 29, 2006, the consolidating statements of operations
information for the nine months ended December 28, 2007 and December 29, 2006 and the
consolidating statements of cash flows for the nine months ended December 28, 2007 and
December 29, 2006.2.
    
    DynCorp International LLC (the DI LLC), the combined Subsidiary Guarantors and
the combined Subsidiary Non-Guarantors account for their investments in subsidiaries
using the equity method of accounting; therefore, the DI LLC column reflects the equity
income (loss) of its Subsidiary Guarantors and Subsidiary Non-Guarantors, which are also
separately reflected in the stand-alone Subsidiary Guarantors and Subsidiary
Non-Guarantors column. Additionally, the Subsidiary Guarantors column reflects the
equity income (loss) of its Subsidiary Non-Guarantors, which are also separately
reflected in the stand-alone Subsidiary Non-Guarantors column.3.
    
    Elimination entries necessary to consolidate DI LLC and all of its subsidiaries.
  14




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DynCorp International LLC and Subsidiaries
Condensed Consolidating Statement of Operations Information
For the Three Months Ended December 28, 2007
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    468,086
    
    
    $
    54,985
    
    
    $
    79,000
    
    
    $
    (79,000
    )
    
    $
    523,071Cost of services
    
    
    (402,324
    )
    
    
    (52,040
    )
    
    
    (76,977
    )
    
    
    79,000
    
    
    
    (452,341
    )Selling, general and administrative expenses
    
    
    (25,873
    )
    
    
    (2,486
    )
    
    
    (636
    )
    
    
    
    
    
    
    (28,995
    )Depreciation and amortization expense
    
    
    (10,857
    )
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    (10,910
    )Operating income
    
    
    29,032
    
    
    
    459
    
    
    
    1,334
    
    
    
    
    
    
    
    30,825Interest expense
    
    
    (14,052
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,052
    )Net earnings from affiliates
    
    
    1,253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,253Equity in income from subsidiaries
    
    
    1,466
    
    
    
    125
    
    
    
    
    
    
    
    (1,591
    )
    
    
    Interest income
    
    
    489
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    522Other income, net
    
    
    380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    380Income before income taxes
    
    
    18,568
    
    
    
    617
    
    
    
    1,334
    
    
    
    (1,591
    )
    
    
    18,928Provision for income taxes
    
    
    (6,608
    )
    
    
    (296
    )
    
    
    (64
    )
    
    
    
    
    
    
    (6,968
    )Net income
    
    $
    11,960
    
    
    $
    321
    
    
    $
    1,270
    
    
    $
    (1,591
    )
    
    $
    11,960
 DynCorp International LLC and Subsidiaries
Condensed Consolidating Statement of Operations Information
For the Three Months Ended December 29, 2006
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    466,905
    
    
    $
    50,634
    
    
    $
    88,996
    
    
    $
    (88,996
    )
    
    $
    517,539Cost of services
    
    
    (402,804
    )
    
    
    (46,654
    )
    
    
    (89,218
    )
    
    
    88,996
    
    
    
    (449,680
    )Selling, general and administrative expenses
    
    
    (22,974
    )
    
    
    (2,002
    )
    
    
    27
    
    
    
    
    
    
    
    (24,949
    )Depreciation and amortization expense
    
    
    (10,632
    )
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    (10,656
    )Operating income
    
    
    30,495
    
    
    
    1,978
    
    
    
    (219
    )
    
    
    
    
    
    
    32,254Interest expense
    
    
    (14,554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,554
    )Net earnings from affiliates
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Equity in income of subsidiaries
    
    
    1,433
    
    
    
    103
    
    
    
    
    
    
    
    (1,536
    )
    
    
    Interest income
    
    
    533
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    534Income before income taxes
    
    
    18,907
    
    
    
    2,082
    
    
    
    (219
    )
    
    
    (1,536
    )
    
    
    19,234Provision for income taxes
    
    
    (6,691
    )
    
    
    (278
    )
    
    
    (49
    )
    
    
    
    
    
    
    (7,018
    )Net income (loss)
    
    $
    12,216
    
    
    $
    1,804
    
    
    $
    (268
    )
    
    $
    (1,536
    )
    
    $
    12,216
  15




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##### Table of Contents



DynCorp International LLC and Subsidiaries
Condensed Consolidating Statement of Operations Information
For the Nine Months Ended December 28, 2007
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    1,375,276
    
    
    $
    191,577
    
    
    $
    243,694
    
    
    $
    (243,694
    )
    
    $
    1,566,853Cost of services
    
    
    (1,185,687
    )
    
    
    (178,103
    )
    
    
    (237,966
    )
    
    
    243,694
    
    
    
    (1,358,062
    )Selling, general and administrative expenses
    
    
    (70,416
    )
    
    
    (7,949
    )
    
    
    (1,551
    )
    
    
    
    
    
    
    (79,916
    )Depreciation and amortization expense
    
    
    (31,603
    )
    
    
    
    
    
    
    (298
    )
    
    
    
    
    
    
    (31,901
    )Operating income
    
    
    87,570
    
    
    
    5,525
    
    
    
    3,879
    
    
    
    
    
    
    
    96,974Interest expense
    
    
    (42,247
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,247
    )Net earnings from affiliates
    
    
    3,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,320Equity in income from subsidiaries
    
    
    7,628
    
    
    
    136
    
    
    
    
    
    
    
    (7,764
    )
    
    
    Interest income
    
    
    2,149
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    2,202Other expense, net
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )Income before income taxes
    
    
    58,258
    
    
    
    5,714
    
    
    
    3,879
    
    
    
    (7,764
    )
    
    
    60,087Provision for income taxes
    
    
    (20,087
    )
    
    
    (1,587
    )
    
    
    (242
    )
    
    
    
    
    
    
    (21,916
    )Net income
    
    $
    38,171
    
    
    $
    4,127
    
    
    $
    3,637
    
    
    $
    (7,764
    )
    
    $
    38,171
 DynCorp International LLC and Subsidiaries
Condensed Consolidating Statement of Operations Information
For the Nine Months Ended December 29, 2006
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    1,354,672
    
    
    $
    175,272
    
    
    $
    218,191
    
    
    $
    (218,191
    )
    
    $
    1,529,944Cost of services
    
    
    (1,181,349
    )
    
    
    (162,472
    )
    
    
    (217,817
    )
    
    
    218,191
    
    
    
    (1,343,447
    )Selling, general and administrative expenses
    
    
    (77,590
    )
    
    
    (5,287
    )
    
    
    (29
    )
    
    
    
    
    
    
    (82,906
    )Depreciation and amortization expense
    
    
    (32,930
    )
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (33,005
    )Operating income
    
    
    62,803
    
    
    
    7,513
    
    
    
    270
    
    
    
    
    
    
    
    70,586Interest expense
    
    
    (44,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,057
    )Loss on debt extinguishment
    
    
    (3,484
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,484
    )Net earnings from affiliates
    
    
    1,323
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,323Interest income
    
    
    1,085
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    1,094Equity in income of subsidiaries
    
    
    7,142
    
    
    
    237
    
    
    
    
    
    
    
    (7,379
    )
    
    
    Income before income taxes
    
    
    24,812
    
    
    
    7,759
    
    
    
    270
    
    
    
    (7,379
    )
    
    
    25,462Provision for income taxes
    
    
    (8,705
    )
    
    
    (504
    )
    
    
    (146
    )
    
    
    
    
    
    
    (9,355
    )Net income
    
    $
    16,107
    
    
    $
    7,255
    
    
    $
    124
    
    
    $
    (7,379
    )
    
    $
    16,107
  16




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##### Table of Contents



DynCorp International LLC and Subsidiaries
Condensed Consolidating Balance Sheet Information
December 28, 2007
(Unaudited)  (Dollars in thousands)
 Guarantor
    
    
    Non-GuarantorDI
LLC
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalsASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,703
    
    
    $
    2,515
    
    
    $
    2,363
    
    
    $
    
    
    
    $
    13,581Restricted cash
    
    
    
    
    
    
    10,091
    
    
    
    
    
    
    
    
    
    
    
    10,091Accounts receivable, net
    
    
    536,340
    
    
    
    47,334
    
    
    
    185
    
    
    
    
    
    
    
    583,859Prepaid expenses and other current assets
    
    
    70,178
    
    
    
    36,297
    
    
    
    90
    
    
    
    
    
    
    
    106,565Total current assets
    
    
    615,221
    
    
    
    96,237
    
    
    
    2,638
    
    
    
    
    
    
    
    714,096Property and equipment, net
    
    
    9,517
    
    
    
    3,007
    
    
    
    276
    
    
    
    
    
    
    
    12,800Goodwill
    
    
    398,559
    
    
    
    21,621
    
    
    
    
    
    
    
    
    
    
    
    420,180Tradename
    
    
    18,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,318Other intangibles, net
    
    
    171,419
    
    
    
    13,886
    
    
    
    
    
    
    
    
    
    
    
    185,305Investment in subsidiaries
    
    
    37,903
    
    
    
    802
    
    
    
    
    
    
    
    (38,705
    )
    
    
    Other assets, net
    
    
    33,640
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    33,664Intercompany receivables
    
    
    
    
    
    
    
    
    
    
    42,518
    
    
    
    (42,518
    )
    
    
    Total assets
    
    $
    1,284,577
    
    
    $
    135,577
    
    
    $
    45,432
    
    
    $
    (81,223
    )
    
    $
    1,384,363LIABILITIES
AND MEMBERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    16,596
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,596Accounts payable
    
    
    125,833
    
    
    
    10,562
    
    
    
    8
    
    
    
    
    
    
    
    136,403Accrued payroll and employee costs
    
    
    47,829
    
    
    
    9,719
    
    
    
    20,060
    
    
    
    
    
    
    
    77,608Other
accrued liabilities
    
    
    63,936
    
    
    
    39,232
    
    
    
    17,449
    
    
    
    
    
    
    
    120,617Income taxes payable
    
    
    8,935
    
    
    
    3,158
    
    
    
    109
    
    
    
    
    
    
    
    12,202Total current liabilities
    
    
    263,129
    
    
    
    62,671
    
    
    
    37,626
    
    
    
    
    
    
    
    363,426Long-term debt, less current portion
    
    
    590,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    590,840Other long-term liabilities
    
    
    9,478
    
    
    
    3,611
    
    
    
    
    
    
    
    
    
    
    
    13,089Intercompany payables
    
    
    4,122
    
    
    
    38,396
    
    
    
    
    
    
    
    (42,518
    )
    
    
    Members equity
    
    
    417,008
    
    
    
    30,899
    
    
    
    7,806
    
    
    
    (38,705
    )
    
    
    417,008Total liabilities and members equity
    
    $
    1,284,577
    
    
    $
    135,577
    
    
    $
    45,432
    
    
    $
    (81,223
    )
    
    $
    1,384,363
  17




---



##### Table of Contents



DynCorp International LLC and Subsidiaries
Condensed Consolidating Balance Sheet Information
March 30, 2007
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    95,458
    
    
    $
    5,212
    
    
    $
    1,785
    
    
    $
    
    
    
    $
    102,455Restricted cash
    
    
    
    
    
    
    20,224
    
    
    
    
    
    
    
    
    
    
    
    20,224Accounts receivable, net
    
    
    425,847
    
    
    
    35,979
    
    
    
    124
    
    
    
    
    
    
    
    461,950Prepaid expenses and other current assets
    
    
    55,404
    
    
    
    26,883
    
    
    
    64
    
    
    
    
    
    
    
    82,351Total current assets
    
    
    576,709
    
    
    
    88,298
    
    
    
    1,973
    
    
    
    
    
    
    
    666,980Property and equipment, net
    
    
    8,592
    
    
    
    3,496
    
    
    
    558
    
    
    
    
    
    
    
    12,646Goodwill
    
    
    398,559
    
    
    
    21,621
    
    
    
    
    
    
    
    
    
    
    
    420,180Tradename
    
    
    18,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,318Other intangibles, net
    
    
    200,479
    
    
    
    13,885
    
    
    
    
    
    
    
    
    
    
    
    214,364Investment in subsidiaries
    
    
    30,410
    
    
    
    529
    
    
    
    
    
    
    
    (30,939
    )
    
    
    Other assets, net
    
    
    29,863
    
    
    
    550
    
    
    
    
    
    
    
    
    
    
    
    30,413Intercompany receivables
    
    
    
    
    
    
    
    
    
    
    56,326
    
    
    
    (56,326
    )
    
    
    Total assets
    
    $
    1,262,930
    
    
    $
    128,379
    
    
    $
    58,857
    
    
    $
    (87,265
    )
    
    $
    1,362,901LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Short-term debt, including current
maturities of long-term debt
    
    $
    37,850
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    37,850Accounts payable
    
    
    118,806
    
    
    
    8,466
    
    
    
    10
    
    
    
    
    
    
    
    127,282Accrued payroll and employee costs
    
    
    53,971
    
    
    
    9,072
    
    
    
    25,886
    
    
    
    
    
    
    
    88,929Other accrued liabilities
    
    
    39,873
    
    
    
    47,755
    
    
    
    28,680
    
    
    
    
    
    
    
    116,308Income taxes payable
    
    
    11,997
    
    
    
    1,571
    
    
    
    114
    
    
    
    
    
    
    
    13,682Total current liabilities
    
    
    262,497
    
    
    
    66,864
    
    
    
    54,690
    
    
    
    
    
    
    
    384,051Long-term debt, less current portion
    
    
    593,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    593,144Other long-term liabilities
    
    
    2,412
    
    
    
    3,620
    
    
    
    
    
    
    
    
    
    
    
    6,032Intercompany payables
    
    
    25,203
    
    
    
    31,123
    
    
    
    
    
    
    
    (56,326
    )
    
    
    Members equity
    
    
    379,674
    
    
    
    26,772
    
    
    
    4,167
    
    
    
    (30,939
    )
    
    
    379,674Total liabilities and members equity
    
    $
    1,262,930
    
    
    $
    128,379
    
    
    $
    58,857
    
    
    $
    (87,265
    )
    
    $
    1,362,901
  18




---



##### Table of Contents



Dyncorp International LLC and Subsidiaries
Condensed Consolidating Statement of Cash Flow Information
For the Nine Months Ended December 28, 2007
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided (used) by operating activities
    
    $
    (26,056
    )
    
    $
    (9,970
    )
    
    $
    (13,230
    )
    
    $
    
    
    
    $
    (49,256
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (2,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,822
    )Other investing cash flows
    
    
    (4,419
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,419
    )Net cash used in investing activities
    
    
    (7,241
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,241
    )Cash flows from financing activities:Net transfers (to) from Parent
    
    
    (21,081
    )
    
    
    7,273
    
    
    
    13,808
    
    
    
    
    
    
    
    Borrowing under revolving line of credit
    
    
    13,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,500Payments on credit facility
    
    
    (37,058
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,058
    )Other financing activities
    
    
    (8,819
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,819
    )Net cash (used) provided by financing activities
    
    
    (53,458
    )
    
    
    7,273
    
    
    
    13,808
    
    
    
    
    
    
    
    (32,377
    )Net (decrease) increase in cash and cash equivalents
    
    
    (86,755
    )
    
    
    (2,697
    )
    
    
    578
    
    
    
    
    
    
    
    (88,874
    )Cash and cash equivalents, beginning of period
    
    
    95,458
    
    
    
    5,212
    
    
    
    1,785
    
    
    
    
    
    
    
    102,455Cash and cash equivalents, end of period
    
    $
    8,703
    
    
    $
    2,515
    
    
    $
    2,363
    
    
    $
    
    
    
    $
    13,581
 DynCorp International LLC and Subsidiaries
Condensed Consolidating Statement of Cash Flow Information
For the Nine Months Ended December 29, 2006
(Unaudited)  (Dollars in thousands)
 Subsidiary
    
    
    SubsidiaryDI LLC
    
    
    Guarantor
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    41,301
    
    
    $
    (18,192
    )
    
    $
    29,375
    
    
    $
    
    
    
    $
    52,484Cash flows from investing activities:Purchase of property and equipment
    
    
    (2,737
    )
    
    
    (818
    )
    
    
    (124
    )
    
    
    
    
    
    
    (3,679
    )Other investing cash flows
    
    
    (1,695
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,695
    )Net cash used in investing activities
    
    
    (4,432
    )
    
    
    (818
    )
    
    
    (124
    )
    
    
    
    
    
    
    (5,374
    )Cash flows from financing activities:Net transfers from (to) Parent
    
    
    16,680
    
    
    
    13,752
    
    
    
    (12,525
    )
    
    
    
    
    
    
    17,907Payments on credit facility
    
    
    (29,694
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,694
    )Other financing activities
    
    
    (560
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (560
    )Net cash provided (used) in financing activities
    
    
    (13,574
    )
    
    
    13,752
    
    
    
    (12,525
    )
    
    
    
    
    
    
    (12,347
    )Net increase (decrease) in cash and cash equivalents
    
    
    23,295
    
    
    
    (5,258
    )
    
    
    16,726
    
    
    
    
    
    
    
    34,763Cash and cash equivalents, beginning of period
    
    
    7,567
    
    
    
    10,749
    
    
    
    2,257
    
    
    
    
    
    
    
    20,573Cash and cash equivalents, end of period
    
    $
    30,862
    
    
    $
    5,491
    
    
    $
    18,983
    
    
    
    
    
    
    $
    55,336
  19




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 th
 COMPANY OVERVIEW
   MAINTENANCE AND TECHNICALGOVERNMENT SERVICES
    
    SUPPORT SERVICESKey Service Offerings
    
    Law Enforcement and
Security
International police
training, judicial
support, immigration
support, base
operations, security
for diplomats,
personal protection,
security system
design, installation
and operations, and
development of
security software,
smart cards and
biometricsContingency and
Logistics Operations
 Peace-keeping
support,
humanitarian relief,
de-mining, worldwide
contingency planning
and other rapid
response services,
inventory
procurement,
tracking services,
equipment
maintenance,
property control,
data entry and
mobile repair
servicesOperations
Maintenance and
Construction
Management
Facility and
equipment
maintenance,
custodial and
administrative
services, civil,
electrical,
infrastructure,
environmental and
mechanical
engineering and
construction
managementSpecialty Aviation
and Counter-drug
Operations Drug
eradication, aerial
firefighting,
counter-drug
surveillance, border
control, host nation
pilot and crew
training
    
    Aviation Services and
Operations Aircraft
fleet maintenance and
modifications, depot
augmentation, aftermarket
logistics support,
aircrew services and
training, ground
equipment maintenance and
modifications, quality
control, Federal Aviation
Administration
certification, facilities
and operations support,
aircraft scheduling and
flight planning and the
provisioning of pilots,
test pilots and flight
crewsAviation Engineering
Aircraft modification
programs manufacturing
and installation,
engineering design and
kit manufacturing and
installation, avionics
upgrades, field
installations,
cockpit/fuselage design
and configuration
management and technical
data, drawings and manual
revisionsAviation Ground Equipment
Support Ground
equipment support,
maintenance and overhaul,
modifications and
upgrades, corrosion
control, engine
rebuilding, hydraulic and
load testing and
serviceability
inspectionsGround Vehicle
Maintenance Vehicle
maintenance, overhaul and
corrosion control and
scheduling work flow
management, logistics
support and equipment
inspection
  20




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##### Table of Contents



CURRENT OPERATING CONDITIONS AND OUTLOOK
    
    
    Transformation of military forces, leading to increases in outsourcing of
non-combat functions;
    
    Increased level and frequency of overseas deployment and peace-keeping operations
for the DoS, DoD and United Nations;
    
    Growth in U.S. military budget driven by increased operations and maintenance
spending;
    
    Increased maintenance, overhaul and upgrade needs to support aging military
platforms;
    
    Increased reliance on private contractors to perform life-cycle asset management
functions ranging from organizational to depot level maintenance;
    
    Increased opportunities to support foreign governments in providing a wide
spectrum of maintenance, supply support, facilities management and construction
management-related services; and
    
    Shift to more multiple award Indefinite Delivery, Indefinite Quantity (IDIQ)
contracts.
 Recent Developments
 Global Linguist Solutions LLC
    21




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##### Table of Contents



Contract Structure
  BACKLOG
    Dec. 28, 2007
    
    
    March 30, 2007GS:Funded Backlog
    
    $
    693
    
    
    $
    883Unfunded Backlog
    
    
    4,235
    
    
    
    3,848Total GS Backlog
    
    $
    4,928
    
    
    $
    4,731MTSS:Funded Backlog
    
    $
    439
    
    
    $
    519Unfunded Backlog
    
    
    906
    
    
    
    882Total MTSS Backlog
    
    $
    1,345
    
    
    $
    1,401Total Consolidated:Funded Backlog
    
    $
    1,132
    
    
    $
    1,402Unfunded Backlog
    
    
    5,141
    
    
    
    4,730Total Consolidated Backlog
    
    $
    6,273
    
    
    $
    6,132
  22




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##### Table of Contents



ESTIMATED REMAINING CONTRACT VALUE
  Dec. 28, 2007
    
    
    March 30, 2007GS Estimated Remaining Contract Value
    
    $
    6,954
    
    
    $
    7,591MTSS Estimated Remaining Contract Value
    
    
    1,381
    
    
    
    1,400Total Estimated Remaining Contract Value
    
    $
    8,335
    
    
    $
    8,991
 CONSOLIDATED RESULTS OF OPERATIONS
  Three Months Ended
    
    
    Nine Months EndedDec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006Revenue
    
    $
    523,071
    
    
    $
    517,539
    
    
    $
    1,566,853
    
    
    $
    1,529,944Cost of services
    
    
    (452,341
    )
    
    
    (449,680
    )
    
    
    (1,358,062
    )
    
    
    (1,343,447
    )Selling, general and administrative expenses
    
    
    (28,995
    )
    
    
    (24,949
    )
    
    
    (79,916
    )
    
    
    (82,906
    )Depreciation and amortization expense
    
    
    (10,910
    )
    
    
    (10,656
    )
    
    
    (31,901
    )
    
    
    (33,005
    )Operating income
    
    
    30,825
    
    
    
    32,254
    
    
    
    96,974
    
    
    
    70,586Interest expense
    
    
    (14,052
    )
    
    
    (14,554
    )
    
    
    (42,247
    )
    
    
    (44,057
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,484
    )Net earnings from affiliates
    
    
    1,253
    
    
    
    1,000
    
    
    
    3,320
    
    
    
    1,323Interest income
    
    
    522
    
    
    
    534
    
    
    
    2,202
    
    
    
    1,094Other income (expense), net
    
    
    380
    
    
    
    
    
    
    
    (162
    )
    
    
    Income before taxes
    
    
    18,928
    
    
    
    19,234
    
    
    
    60,087
    
    
    
    25,462Provision for income taxes
    
    
    (6,968
    )
    
    
    (7,018
    )
    
    
    (21,916
    )
    
    
    (9,355
    )Net income
    
    $
    11,960
    
    
    $
    12,216
    
    
    $
    38,171
    
    
    $
    16,107
 Three Months Ended
    
    
    Nine Months Ended% of Revenue
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of services
    
    
    (86.5
    %)
    
    
    (86.9
    %)
    
    
    (86.7
    %)
    
    
    (87.8
    %)Selling, general and administrative
expenses
    
    
    (5.5
    %)
    
    
    (4.8
    %)
    
    
    (5.1
    %)
    
    
    (5.4
    %)Depreciation and amortization expense
    
    
    (2.1
    %)
    
    
    (2.1
    %)
    
    
    (2.0
    %)
    
    
    (2.2
    %)Operating income
    
    
    5.9
    %
    
    
    6.2
    %
    
    
    6.2
    %
    
    
    4.6
    %Interest expense
    
    
    (2.7
    %)
    
    
    (2.8
    %)
    
    
    (2.7
    %)
    
    
    (2.9
    %)Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    %)Net earnings from affiliates
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.1
    %Interest income
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.1
    %Other income (expense), net
    
    
    0.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    Income before taxes
    
    
    3.6
    %
    
    
    3.7
    %
    
    
    3.8
    %
    
    
    1.7
    %Provision for income taxes (as a
percentage
of income before income tax)
    
    
    (36.8
    %)
    
    
    (36.5
    %)
    
    
    (36.5
    %)
    
    
    (36.7
    %)Net income
    
    
    2.3
    %
    
    
    2.4
    %
    
    
    2.4
    %
    
    
    1.1
    %
 Revenue:
  23




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##### Table of Contents



Operating Income:
  Interest expense:
 Loss on debt extinguishment:
 RESULTS OF OPERATIONS BY REPORTABLE SEGMENT
  Government Services
 Three Months Ended
    
    
    Nine Months EndedIncrease/Dec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    (Decrease)
    
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    IncreaseRevenue
    
    $
    343,592
    
    
    $
    342,205
    
    
    $
    1,387
    
    
    $
    1,026,764
    
    
    $
    1,018,208
    
    
    $
    8,556Operating income
    
    $
    25,460
    
    
    $
    33,468
    
    
    $
    (8,008
    )
    
    $
    82,076
    
    
    $
    70,251
    
    
    $
    11,825
 Three Months Ended December 28, 2007 Compared To Three Months Ended December 29, 2006
 Revenues 
 
    
    increased aviation support services of drug eradication activities in Afghanistan and
South America and aerial firefighting services in California in the Specialty Aviation and
Counter-Drug Operations strategic business unit  $18.3 million;
    
    peacekeeping activities in Africa, including the purchase and delivery of heavy
equipment for the customer in the Contingency Logistics Operations strategic business unit
  $16.7 million; and
    
    new construction contracts in the Operations Maintenance and Construction Management
strategic business unit  $1.8 million.
  24




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##### Table of Contents




    
    the conclusion of construction and camp support task orders in Iraq in the Law
Enforcement and Security strategic business unit  $27.1 million; and
    
    non-recurring services provided to the U.S. Federal Emergency Management Agency after
Hurricane Katrina and conclusion of other task orders in the Contingency Logistics
Operations strategic business unit  $8.3 million.
 Operating Income 
 
    
    non-fee bearing unscheduled maintenance of aircraft in the Specialty Aviation and
Counter-Drug Operations strategic business unit  $4.3 million;
    
    the conclusion of various fixed-price task order in the Contingency Logistics
Operations strategic business unit  $3.4 million; and
    
    the conclusion of construction task orders in the Operations Maintenance and
Construction Management strategic business unit  $1.2 million.
  
    
    lower corporate expense allocation  $0.9 million.
 Nine Months Ended December 28, 2007 Compared To Nine Months Ended December 29, 2006
 Revenues 
 
    
    increased aviation support services of drug eradication activities in South America and
Afghanistan and aerial firefighting services in California in the Specialty Aviation and
Counter-Drug Operations strategic business unit  $43.1 million; and
    
    peacekeeping activities in Africa, including the purchase and delivery of heavy
equipment for the customer in the Contingency Logistics Operations strategic business unit
  $17.5 million.
  
    
    the conclusion of construction camp support task orders in Iraq and conclusion of
protective services task orders in the Law Enforcement and Security strategic business unit
  $29.5 million; and
    
    non-recurring services provided to the U.S. Federal Emergency Management Agency after
Hurricane Katrina and the conclusion of other task orders in the Contingency Logistics
Operations strategic business unit   $22.5 million.
 Operating Income 
 
    
    improved contract performance and non-recurring write-offs due to contract losses that
occurred in the prior year in the Law Enforcement and Security strategic business unit -
$33.9 million; and
    
    lower corporate expense allocation, primarily due to one-time costs incurred in the
prior year related to severance expenses for certain former executives and bonus
compensation associated with the Parents initial public offering  $7.6 million.
  
    
    charges related to severance and non-fee bearing unscheduled maintenance of aircraft in
the Specialty Aviation and Counter-Drug Operations strategic business unit   $11.8
million;
    
    the conclusion of fixed-price construction and camp support services task orders
performed in the prior fiscal year in the Contingency Logistics Operations strategic
business unit  $9.5 million; and
 
    
    the conclusion of construction task order in the Operations Maintenance and
Construction Management strategic business unit  $8.4 million.
  25




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##### Table of Contents



Maintenance & Technical Support Services
 Three Months Ended
    
    
    Nine Months EndedDec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    Increase
    
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006
    
    
    IncreaseRevenue
    
    $
    179,479
    
    
    $
    175,334
    
    
    $
    4,145
    
    
    $
    540,089
    
    
    $
    511,736
    
    
    $
    28,353Operating income (loss)
    
    $
    6,462
    
    
    $
    (742
    )
    
    $
    7,204
    
    
    $
    18,258
    
    
    $
    1,806
    
    
    $
    16,452
 Three Months Ended December 28, 2007 Compared To Three Months Ended December 29, 2006
 Revenues 
 
    
    the variability of time between overhauls on engines and propellers performed under the
Life Cycle Contractor Support (LCCS) program in the Contract Logistics Support service
line  $2.9 million; and
    
    net new business growth, primarily related to work performed for the U.S. Armys Threat
System Management Office, in the Aviation and Maintenance service line  $11.4 million.
  
    
    a temporary decrease in personnel and level of services provided under the Field
Service Operations service line  $10.2 million.
 Operating Income 
 
    
    improved operating performance on services provided to the U.S. Army under the LCCS
program and Commercial Support Services (CSS) program in the Contract Logistics Support
service line  $3.8 million;
    
    net new business growth, primarily related to work performed for the U.S. Armys Threat
System Management Office, in the Aviation and Maintenance service line  $4.0 million; and
    
    lower corporate expense allocation  $0.6 million.
  
    
    a temporary decrease in personnel and level of services provided under the Field
Service Operations service line  $1.2 million.
 Nine Months Ended December 28, 2007 Compared To Nine Months Ended December 29, 2006
 Revenues 
 
    
    the variability of time between overhauls on engines and propellers performed under the
LCCS program and new business growth, primarily related to a new contract under which we
provide logistic support services to the U.S. Air Force C-21 fleet, in the Contract
Logistics Support service line  $23.4 million; and
    
    net new business growth, primarily related to work performed for the U.S. Armys Threat
System Management Office, in the Aviation and Maintenance service
line  $27.8 million.
  26




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##### Table of Contents




    
    a temporary decrease in personnel and level of services provided under the Field
Service Operations service line  $22.8 million.
 Operating Income 
 
    
    improved operating performance on services provided to the U.S. Army under the LCCS
program and CSS program in the Contract Logistics Support service
line   $10.0 million;
    
    net new business growth, primarily related to work performed for the U.S. Armys Threat
System Management Office, in the Aviation and Maintenance service line  $6.9 million; and
    
    lower corporate expense allocation, primarily due to one-time costs incurred in the
prior year related to severance expenses for certain former executives and bonus
compensation associated with the Parents initial public
offering- $4.0 million.
  
    
    a temporary decrease in personnel and level of services provided under the Field
Service Operations service line  $4.4 million.
 LIQUIDITY AND CAPITAL RESOURCES
  Cash Flow Analysis
 Nine Months Ended(in thousands)
    
    Dec. 28, 2007
    
    
    Dec. 29, 2006Net cash (used) provided by operating activities
    
    $
    (49,256
    )
    
    $
    52,484Net cash used by investing activities
    
    $
    (7,241
    )
    
    $
    (5,374
    )Net cash used by financing activities
    
    $
    (32,377
    )
    
    $
    (12,347
    )
    27




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##### Table of Contents



Financing
       Debt Covenants and Other Matters
  OFF BALANCE SHEET ARRANGEMENTS
  ACCOUNTING DEVELOPMENTS
   28




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##### Table of Contents



CRITICAL ACCOUNTING ESTIMATES
  
    
    Revenue Recognition and Cost Estimation on Long-Term Contracts;
    
    Allowance for Doubtful Accounts;
    
    Property and Equipment;
    
    Impairment of Long-Lived Assets, including Amortized Intangibles;
    
    Indefinite Lived Assets;
    
    Income Taxes;
    
    Equity-Based Compensation;
    
    Fair Values of Financial Instruments; and
    
    Currency Translation.
  
 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
   29




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 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
  
 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.  30




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##### Table of Contents



SIGNATURES
  DYNCORP INTERNATIONAL LLCDate: February 6, 2008/s/ MICHAEL J. THORNEName:
    
    Michael J. ThorneTitle:
    
    Senior Vice President and Chief Financial Officer
  31




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##### Table of Contents



EXHIBIT INDEX
 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.  32