SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X] Annual Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act
    Of 1934

For the fiscal year ended December 30, 1999 or

[   ]  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:  1-3879

                                     DynCorp
         (Exact name of registrant as specified in its charter)

     Delaware                                                  36-2408747
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

 11710 Plaza America Drive, Reston, Virginia                   20190
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:  (703) 261-5000

Former address:  2000 Edmund Halley Drive, Reston, Virginia  20191

Securities registered pursuant to Section 12(b) of the Act:

   Title of each class             Name of each exchange on which registered
        None                                           None

Securities registered pursuant to Section 12(g) of the Act:
                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant. The registrant's voting stock is not publicly traded; therefore,
the aggregate market value of approximately 7% of outstanding  voting stock held
by nonaffiliates is not available.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest  practicable  date.  10,413,708  shares of common
stock having a par value of $0.10 per share were outstanding March 28, 2000.


<PAGE>



                                TABLE OF CONTENTS

                                      1999

                                    FORM 10-K

          Item                                                      Page

       Part I

    1. Business                                                     1-3
    2. Properties                                                   3
    3. Legal Proceedings                                            3
    4. Submission of Matters to a Vote of Security Holders          3

       Part II

    5. Market for the Registrant's Common Stock and Related
       Stockholder Matters                                          3-5
    6. Selected Financial Data                                      5-6
    7. Management's Discussion and Analysis of Financial
         Condition and Results of Operations                        6-14
    8. Financial Statements and Supplementary Data
       Report of Independent Public Accountants                     15
       Financial Statements
         Consolidated Balance Sheets
           Assets                                                   16
           Liabilities and Stockholders' Equity                     17
         Consolidated Statements of Operations                      18
         Consolidated Statements of Cash Flows                      19
         Consolidated Statements of Stockholders' Equity            20
         Notes to Consolidated Financial Statements                 21-37
    9. Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosures                       37

       Part III

    10.Directors and Executive Officers of the Registrant           38-40
    11.Executive Compensation                                       40-43
    12.Security Ownership of Certain Beneficial Owners and
       Management                                                   43-44
    13.Certain Relationships and Related Transactions               44

       Part IV

    14.Exhibits, Financial Statement Schedules, and Reports on
       Form 8-K                                                     45-48


<PAGE>

                                     PART I

ITEM 1. BUSINESS

General Information

DynCorp and  subsidiaries  (collectively  the  "Company")  provides  diversified
management, technical and professional services  primarily  to  U.S.  Government
customers  throughout   the  United  States  and  internationally.  The  Company
provides services to various branches of  the  Department  of  Defense,  Energy,
State,  Justice,  and  Agriculture, the  Drug  Enforcement Agency, the National
Institute of  Health,  the  Defense  Information  Systems  Agency, the  National
Aeronautics and Space Administration and various other  U.S.,  state  and  local
government agencies, commercial  clients  and  foreign  governments.  Generally,
these services are provided under both prime contracts and  subcontracts,  which
may be fixed-price,  time-and-material or  cost-type contracts depending on  the
work  requirements and other individual circumstances.  These services encompass
a wide range of management, technical and professional  services  covering  the
following areas:

       DynCorp Information and Enterprise Technology ("DI&ET"), based in Reston,
       Virginia,   designs,  develops,  supports  and  integrates  software  and
       hardware systems to provide  customers with  comprehensive  solutions for
       information management and engineering needs. DI&ET provides a wide range
       of information  technology  solutions  including  information  technology
       ("IT")  lifecycle  support,  electronic  records  and  media  management,
       network  and  communications  engineering,  seat  management,   metrology
       engineering,   operational   outsourcing,   healthcare   information  and
       technology services and security and intelligence programs.  Revenues for
       fiscal  years ended 1999,  1998,  and 1997 were  $635.9  million,  $633.1
       million, and $553.3 million, respectively.

       DynCorp Technical Services ("DTS"),  based in Fort Worth, Texas, delivers
       a myriad of specialized  technical  services including aviation services,
       base  operations,   range  technical  services,   contingency   services,
       international  program,  space and re-entry  system  services,  logistics
       support  services,  personal  and physical  security  services and marine
       services.  These services are provided to the U.S.  Government as well as
       the United Nations and other foreign  organizations at various  locations
       throughout the world depending on the customer's  requirements.  Revenues
       for 1999, 1998, and 1997 were $695.5 million,  $600.6 million, and $592.6
       million, respectively.

       DynCorp  Information Systems LLC ("DIS"),  based in Chantilly,  Virginia,
       provides a broad  range of  integrated  telecommunications  services  and
       information  technology solutions in the areas of professional  services,
       business systems integration, information infrastructure solutions and IT
       operations  and  support.  DIS  is  DynCorp's   full-service   voice/data
       integrator  and has an established  business base in the Federal  defense
       and  civil  markets.  DIS was  acquired  on  December  10,  1999 from GTE
       Corporation.  Revenue for the twenty days ended  December 30,  1999,  was
       $13.9 million and was included in the Company's  consolidated  results of
       operations.  Full year revenues,  which are not included in the Company's
       results of operations except for the portion representing the twenty days
       ended  December 30, 1999,  as noted above,  were $221.6  million,  $233.6
       million, and $209.4 million, for 1999, 1998 and 1997, respectively.


<PAGE>

Industry Segments

For business segment  reporting,  DI&ET, DTS and DIS each constitute  reportable
business segments.

Backlog

The  Company's  backlog of  business,  which  includes  awards  under both prime
contracts and  subcontracts,  as well as the estimated  value of option years on
government  contracts,  was $4.4  billion at  December  30,  1999,  compared  to
December 31, 1998 backlog of $4.1 billion,  a net increase of $0.3 billion.  The
increase resulted primarily from the acquisition of GTE Information Systems LLC.
The backlog at December 30, 1999 consisted of $2.2 billion for DTS, $1.7 billion
for DI&ET,  and $0.5  billion for DIS  compared to December  31, 1998 backlog of
$2.0  billion  for DTS and $2.1  billion  for  DI&ET.  Of the total  backlog  at
December 30, 1999, $3.0 billion is expected to produce  revenues after 2000: DTS
$1.5 billion, DI&ET $1.2 billion, and DIS $0.3 billion.

Contracts with the U.S. Government are generally written for periods of three to
five years with a few Federal contracts awarded with options up to eight and ten
years. Because of appropriation  limitations in the Federal budget process, firm
funding is usually  made for only one year at a time,  and, in some  cases,  for
periods  of less  than one  year,  with the  remainder  of the  years  under the
contract expressed as a series of one-year options. The Company's experience has
been that the Government generally exercises these options.  Amounts included in
backlog  are based on the  contract's  total  awarded  value  and the  Company's
estimates  regarding the amount of the award that will ultimately  result in the
recognition of revenue.  These  estimates are based on the Company's  experience
with similar awards and similar customers.  Estimates are reviewed  periodically
and appropriate  adjustments are made to the amounts  included in backlog and in
unexercised  contract  options.  Historically,  these  adjustments have not been
significant. In 1999, 98.9% of the Company's prime contract revenue was from the
U.S. Government, 54.1% attributable to the Department of Defense.

During 1998, the Company was awarded significant indefinite delivery, indefinite
quantity ("IDIQ") contracts with GSA and NASA to provide  comprehensive  desktop
computer,  server and intra-center  communication  support. These contracts were
multiple  awards and have  estimated  values in the  billions  of  dollars.  The
Company's  backlog at  December  30,  1999 does not  include any value for these
contracts, except for one  contract  under  GSA, because  the  Company  has  not
received any contract tasks and cannot reasonably estimate the  future  revenues
from these contracts.

Competition

The markets  that the Company  services are highly  competitive.  In each of its
business areas, the Company's  competition is quite  fragmented,  with no single
competitor  holding a  significant  market  position.  The  Company  experiences
vigorous competition from industrial firms, university laboratories,  non-profit
institutions,  and U.S. Government agencies.  Many of the Company's  competitors
are large,  diversified firms with substantially greater financial resources and
larger technical staffs than the Company has available. Government agencies also
compete  with and are  potential  competitors  of the Company  because  they can
utilize their internal resources to perform certain types of services that might
otherwise be performed by the Company.  A majority of the Company's  revenues is
derived from contracts with the U.S.  Government and its prime contractors,  and
such  contracts are awarded on the basis of  negotiations  or  competitive  bids
where price is a significant factor.

Foreign Operations

The Company  currently  provides  services in foreign  countries under contracts
with the U.S. Government,  the United Nations, and other foreign customers. None
of these foreign  operations is material to the Company's  financial position or
results of operations.

The risks associated with the Company's foreign  operations  relating to foreign
currency  fluctuation and political and economic conditions in foreign countries
have not been significant.

Incorporation

The  Company  was  incorporated  in  Delaware  in 1946.  With more  than  19,000
employees worldwide,  the Company is one of the largest employee-owned companies
in the United States.

Employees

At December 30, 1999, the Company  employed 17,713 full-time and 1,554 part-time
employees.  Approximately  3,163  employees  were located  outside of the United
States.  Of  the  Company's  U.S.  employees,  3,671  were  covered  by  various
collective bargaining agreements with labor unions.

At year-end,  the Company had approximately 497 vacant positions,  a majority of
which was for IT  professionals.  The scarcity of IT  professionals  is a common
predicament  within the  industry.  The Company is actively  recruiting  to fill
these vacancies  utilizing  extensive  advertising,  participation in job fairs,
sign-on bonuses, and other recruitment incentives.

Forward Looking Statements

Certain  matters  discussed  or  incorporated  by  reference  in this report are
forward-looking  statements  within the meaning of the federal  securities laws.
Although  the  Company  believes  that  the   expectations   reflected  in  such
forward-looking  statements are based upon reasonable assumptions,  there can be
no assurance that its  expectations  will be achieved.  Factors that could cause
actual  results to differ  materially  from the Company's  current  expectations
include the early  termination  of, or failure of a customer to exercise  option
periods under, a significant contract;  the inability of the Company to generate
actual customer orders under indefinite delivery, indefinite quantity contracts;
technological  change;  the  inability of the Company to manage its growth or to
execute its internal performance plan; the inability of the Company to integrate
the  operations  of  acquisitions;  the  inability of the Company to attract and
retain  the  technical  and other  personnel  required  to perform  its  various
contracts;  general economic conditions;  and other risks discussed elsewhere in
this report and in other filings of the Company with the Securities and Exchange
Commission.

ITEM 2. PROPERTIES

The Company is primarily a service-oriented  company and, as such, the ownership
or  leasing  of  real  property  is an  activity  that  is  not  material  to an
understanding  of  the  Company's   operations.   The  Company  leases  numerous
commercial  facilities used in connection with the various services  rendered to
its customers.  None of the properties is unique.  In the opinion of management,
the facilities employed by the Company are adequate for the present needs of the
business.

On February 29, 2000, the Company sold an office building located in Alexandria,
Virginia  to a third party for $10.5  million,  and  simultaneously  closed on a
lease of that property from the new owner. The Company used a portion of the net
proceeds to payoff the mortgage on the property.

ITEM 3. LEGAL PROCEEDINGS

This item is  incorporated  herein by reference  to Note 20 to the  Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted to a vote of security holders during the fourth
quarter of 1999.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

 DynCorp's  common  stock is not  publicly  traded.  However,  the  Company  has
 established  an  Internal  Market to provide  liquidity  for its  stockholders.
 Shares  available for trading in the Internal  Market are registered  under the
 Securities Act of 1933. The Internal Market generally  permits  stockholders to
 sell shares of common  stock which have been  registered  for such sale on four
 predetermined days each year, subject to purchase demand.

 Sales of common stock on the Internal Market are made at established prices for
 the common  stock  determined  pursuant to the formula  and  valuation  process
 described below (the "Formula  Price") to active employees and directors of the
 Company,  subject to state securities  regulations,  and to the trustees of the
 Savings and  Retirement  Plan ("SARP") and the Employee  Stock  Ownership  Plan
 ("ESOP"),  as well as the  administrator  of the Employee  Stock  Purchase Plan
 ("ESPP"),  who may purchase shares of common stock for their respective  trusts
 and plans.

 If the  aggregate  purchase  orders  exceed the number of shares  available for
 sale,  the Company may, but is not obligated to, sell shares of common stock on
 the Internal Market.  Further, the following  prospective  purchasers will have
 priority, in the order listed:

    - the administrator of the ESPP;
    - the trustee of the SARP;
    - eligible employees and directors, on a pro rata basis; and
    - the trustees of the ESOP.

 If the aggregate  number of shares  offered for sale on the Internal  Market is
 greater than the aggregate  number of shares sought to be purchased,  offers by
 stockholders  to sell 500 shares or less, or up to the first 500 shares if more
 than 500 shares are offered,  will be accepted first.  If,  however,  there are
 insufficient  purchase orders to support the primary  allocation of 500 shares,
 then the purchase  orders will be allocated  equally  among all of the proposed
 sellers up to the first 500 shares offered for sale by each seller. Thereafter,
 a similar  procedure  will be applied to the next 10,000 shares offered by each
 remaining  seller,  and offers to sell in excess of 10,500  shares will then be
 accepted on a pro-rata basis. The Company may, but is not required to, purchase
 shares  offered for sale in the  Internal  Market,  to the extent the number of
 shares  offered  exceeds the number sought to be purchased.  All sellers on the
 Internal  Market (other than the Company and its  retirement  plans) will pay a
 commission equal to one percent of the proceeds from such sales.  Purchasers on
 the Internal Market pay no commission.

 The market price of the common stock is  established  pursuant to the valuation
 process  described  below,  which uses the formula set forth below to determine
 the Formula Price at which the Common Stock trades in the Internal Market.  The
 Formula Price is reviewed on a quarterly  basis,  generally in conjunction with
 Internal Market trade dates.

 The Formula  Price per share of common  stock is the product of seven times the
 operating  cash  flow  ("CF"),  where  operating  cash flow is  represented  by
 earnings before interest,  taxes,  depreciation and amortization of the Company
 for the four fiscal  quarters  immediately  preceding the date on which a price
 revision is made,  multiplied by a market factor  ("Market  Factor" denoted MF)
 plus the non-operating  assets at disposition value (net of disposition  costs)
 ("NOA"),  minus the sum of interest  bearing debt  adjusted to market and other
 outstanding securities senior to common stock ("IBD"), the whole divided by the
 number  of  shares of  common  stock  outstanding  at the date on which a price
 revision is made, on a fully diluted basis assuming exercise of all outstanding
 options and shares deferred under a former  restricted stock plan ("ESO").  The
 Market Factor is a numeric factor which  reflects  existing  securities  market
 conditions  relevant to the  valuation of such stock.  The Formula Price of the
 common stock, expressed as an equation, is as follows:

                                     [(CFx7)MF+NOA-IBD]
                                     ------------------
                  Formula Price =            ESO

 The Board of Directors  believes that the valuation  process and Formula result
 in a fair  price  for the  common  stock  within  a broad  range  of  financial
 criteria.  Other than quarterly review and possible  modification of the Market
 Factor,  the Board of Directors  will not change the Formula  unless (i) in the
 good faith  exercise of its fiduciary  duties and after  consultation  with its
 professional  advisors,  the Board of Directors  determines that the formula no
 longer  results in a stock price  which  reasonably  reflects  the value of the
 Company on a per share basis,  or (ii) a change in the Formula or the method of
 valuing the common stock is required under applicable law.

 The  following  table sets forth the Formula Price for the common stock and the
 Market  Factor by quarter  since the  adoption  of the  Formula by the Board of
 Directors in August 1995.

    Quarter Ended                   Formula Price ($)       Market Factor
    -------------                   -----------------       -------------
    December 31, 1995                   14.50                    2.14
    March 28, 1996                      14.50                    2.14
    June 27, 1996                       15.00                    1.36
    September 26, 1996                  16.75                    1.15
    December 31, 1996                   19.00                    1.15
    March 27, 1997                      20.00                    1.27
    June 26, 1997                       20.00                    1.27
    September 25, 1997                  20.00                    1.27
    December 31, 1997                   20.00                    1.23
    April 2, 1998                       21.00                    1.29
    July 2, 1998                        22.50                    1.33
    October 1, 1998                     23.25                    1.30
    December 31, 1998                   20.00                    1.16
    April 1, 1999                       23.50                    1.21
    July 1, 1999                        24.50                    1.21
    September 30, 1999                  24.00                    1.08
    December 30, 1999                   23.50                    1.11

 The price at December 30, 1999 is based on third quarter data and has not been
 revised to reflect the current valuation.  The ESOP valuation price was $22.75.

 Prior to August  1995,  the market  value of the common  stock was  established
 periodically  by the Board of  Directors  for purposes of  repurchases  under a
 former stockholders agreement. Based on the Board's review of valuations set by
 the ESOP Trust, the price per share by quarter was as follows:

                March 30, 1995                        $14.90
                June 29, 1995                         $14.90
                September 28, 1995                    $14.90

There were  approximately 722 record holders of DynCorp common stock at December
30, 1999. The DynCorp  Employee Stock Ownership Plan Trust owns 7,451,989 shares
on behalf of  approximately  33,000 current and former employees of the Company.
In addition,  the Company's  Savings and Retirement  Plan holds 763,758  shares.
Cash dividends have not been paid on the common stock since 1988.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents summary selected historical  financial data derived
from the audited  Consolidated  Financial  Statements of the Company for each of
the five  years  presented.  During  these  periods,  the  Company  paid no cash
dividends  on its Common  Stock.  The  following  information  should be read in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" and the audited Consolidated Financial Statements and
related notes  thereto,  included  elsewhere in this Annual Report on Form 10-K.
(Dollars  in  thousands,  except per share  data.)  Reference  to "note" are the
footnotes to the audited consolidated financial statements.
<TABLE>
<CAPTION>

                                                                     Fiscal Year Ended

                                                  Dec 30         Dec 31       Dec 31          Dec 31    Dec 31
                                                  1999 (a)       1998(b)      1997(c)        1996(d)    1995(e)
                                                  --------       -------      -------        -------    -------
<S>                                               <C>          <C>         <C>           <C>            <C>

Statement of Operations Data:
Revenues                                          $1,345,281   $1,233,707  $1,145,937    $1,021,453     $908,725
Cost of services                                  $1,280,239   $1,173,151  $1,096,246    $  970,163     $871,317
Corporate general and administrative              $   21,741   $  18,630   $   17,785    $   18,241     $ 18,705
Interest expense                                  $   18,943   $  14,144   $   12,432    $   10,220     $ 14,856
Earnings from continuing operations
  before extraordinary item and certain
  other expenses (f)                              $    9,487   $  15,585   $   15,579    $   12,774    $  12,974
Earnings from continuing operations
  before extraordinary item (g)                   $    7,590   $  15,055   $    7,422    $   11,949    $   5,274
Net earnings                                      $    5,989   $  15,055   $    7,422    $   14,629    $   2,368
Common stockholders' share of net  earnings       $    5,895   $  15,055   $    7,422    $   12,345    $     453
EBITDA (h)                                        $   42,112   $  45,226   $   29,274    $   34,948    $  17,841
Earnings per share from continuing
  operations before extraordinary
  item for common stockholders
    Basic                                         $     0.75   $    1.47   $     0.83    $    1.14     $    0.40
    Diluted                                       $     0.73   $    1.43   $     0.70    $    0.82     $    0.29
Common stockholders' share of net earnings
    Basic                                         $     0.59   $    1.47   $     0.83    $    1.46     $    0.05
    Diluted                                       $     0.57   $    1.43   $     0.70    $    1.05     $    0.04
Balance Sheet Data:
Total assets                                      $  639,673   $  379,238  $  390,122    $ 368,752     $ 375,490
Long-term debt excluding current maturities       $  334,944   $  152,121  $  152,239    $ 103,555     $ 104,112
Redeemable common stock                           $  189,116   $  183,861  $  154,840    $ 139,322     $ 135,894
</TABLE>

[FN]

(a)     1999 includes  reversal of $2,000  reserve for  favorable  resolution of
        contract compliance issues,  $4,387 for the replacement of core systems,
        DIS in-process R&D write-off $6,400,  settlement of a suit with a former
        electrical  subcontractor $2,200 (see Notes 13 and 20(a)), and write-off
        of cost in excess of net  assets  acquired  of  consolidated  subsidiary
        $1,234.

(b)     1998  includes  reversal of $670  reserve for asbestos  litigation  (see
        Notes 13 and 20(a)), $1,177 accrual for subcontractor suit (see Notes 13
        and 20(a)),  reversal of $2,500 reserve for contract  compliance issues,
        and $2,159 expense for the replacement of core systems.

(c)     1997 includes  $7,800  accrual of costs  related to asbestos  litigation
        (see  Notes 13 and  20(a)),  $2,488  reversal  of income  tax  valuation
        allowance  and  $2,055  reversal  of  accrued  interest  related  to IRS
        examinations and potential disallowance of deductions (see Note 14).

(d)     1996 includes  $3,299  accrual for  supplemental  pension and other fees
        payable to  retiring  officers  and a member of the Board of  Directors,
        $1,286  write-off  of  cost  in  excess  of net  assets  acquired  of an
        unconsolidated  subsidiary,  $1,250 credit for a revised estimate of the
        ESOP Put Premium and $4,067 reversal of income tax valuation allowance.

(e)     1995 includes $7,707 reversal of income tax valuation allowance,  $4,362
        accrued  for  losses  and  reserves  related  to the  Company's  Mexican
        operation,  $2,400  accrual  of legal fees  related to the  defense of a
        lawsuit  filed by a  subcontractor  of a former  electrical  contracting
        subsidiary  and $5,300  accrued for  uninsured  costs  related to claims
        against a former  subsidiary  for  alleged  use of  asbestos  containing
        products.

(f)     Certain  other  expenses  include costs and expenses  associated  with
        divested  businesses of $1,897 in 1999,  $530 in 1998, $8,157 in 1997,
        $825 in 1996, and $7,700 in 1995, (see Note 13).

(g)     The  extraordinary loss, net of income taxes, in 1999 and 1995 of $1,601
        and $2,886, respectively, resulted from the early extinguishment of
        debt.

(h)  EBITDA as  defined by  management  consists  of  earnings  from  continuing
     operations   before   extraordinary   item  and  before  interest,   taxes,
     depreciation and amortization. EBITDA represents a measure of the Company's
     ability to  generate  cash flow and does not  represent  net income or cash
     flow from  operating,  investing  and  financing  activities  as defined by
     generally accepted accounting principles ("GAAP").  EBITDA is not a measure
     of  performance  or  financial  condition  under GAAP,  but is presented to
     provide  additional  information  about the Company to the  reader.  EBITDA
     should be  considered  in  addition  to, but not as a  substitute  for,  or
     superior to, measures of financial  performance reported in accordance with
     GAAP.  EBITDA has been  adjusted  for the  amortization  of  deferred  debt
     expense and debt issuance discount which are included in "interest expense"
     in the Consolidated  Statements of Operations and included in "depreciation
     and   amortization"   in  the   Consolidated   Statements  of  Cash  Flows.
     Amortization  of deferred  debt  expense was $1,211 in 1999,  $721 in 1998,
     $706 in 1997, $829 in 1996, and $743 in 1995. Amortization of debt issuance
     discount was $39 in 1999, $36 in 1998 and $26 in 1997.
</FN>

 <PAGE>



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

General

The following  discussion  and analysis  provides  information  that  management
believes  is  relevant  to  an  assessment  and  understanding  of  DynCorp  and
subsidiaries' (collectively, the Company) consolidated results of operations and
financial  condition  for the fiscal  years  ended  1999,  1998,  and 1997.  The
discussion should be read in conjunction with the Company's audited consolidated
financial statements and accompanying notes.

Overview

The  Company  provides  diversified  management,   technical,  and  professional
services primarily to U.S. Government customers throughout the United States and
internationally.  The  Company's  customers  include  various  branches  of  the
Department of Defense and the  Department  of Energy,  NASA,  the  Department of
State,  the  Department  of  Justice,  and various  other U.S.,  state and local
government agencies, commercial clients and foreign governments.

Effective  January 1, 1999, the Company  realigned its three Strategic  Business
Segments into two focused  sectors.  The Company's  Information  and Engineering
Technology  Unit and most of its  Enterprise  Management  Unit were  combined to
become  DynCorp  Information  and  Enterprise  Technology  ("DI&ET").  Aerospace
Technology  and the remaining  parts of Enterprise  Management  were combined to
become DynCorp Technical  Services ("DTS").  The purpose of this realignment was
to provide focus and clarity to the Company's  businesses and enable the Company
to  better  serve  its  customers  by  concentrating   technical   services  and
information   technology   competencies  in  individual   single  business  unit
structures.  Business segment information for 1998 and 1997 has been restated to
give effect to this change.

On December 10, 1999, the Company  completed its  acquisition of GTE Information
Systems LLC, a subsidiary of GTE Corporation.  On December 13, 1999, the name of
the Company  was changed to DynCorp  Information  Systems LLC  ("DIS").  It will
operate as a separate subsidiary of the Company. The acquisition was accounted
for as a purchase; accordingly, operating results for DIS have been included
from the date of acquisition.

Revenue and Operating Profit

In 1999,  revenue increased by $111.6 million,  or 9.0%, from 1998 compared to a
$87.8  million,  or 7.7% increase in 1998 revenue over 1997.  Operating  profit,
defined  as  the  excess  of  revenues  over  operating   expenses  and  certain
nonoperating expenses, increased by $5.4 million, or 9.4%, from 1998 compared to
a $9.1  million,  or 18.7%  increase in 1998  operating  profit  from 1997.  The
operating  profit was $63.1 million,  $57.7 million,  and $48.6 million in 1999,
1998, and 1997, respectively.

DTS revenue and operating  profit showed  continued growth for the twelve months
ended December 30, 1999. Revenues were $695.5 million in 1999 compared to $600.6
million  in 1998,  an  increase  of $94.9  million  or 15.8%.  Operating  profit
increased  by $5.0 million to $31.5  million,  or 18.8%,  from $26.5  million in
1998. The DTS business unit had increased tasking on State Department  contracts
providing  support  services to Kosovo and  East Timor, increased  services on a
contract in support of the government's drug eradication program, and  increased
services in Qatar.  The increase in both revenue and  operating profit  resulted
in part from a contract for the providing of technical and support  services  to
the United States Air Force at Columbus AFB.  The 1999 revenue includes  a  full
year's revenue from  this  contract, which  became  operational  in  the  fourth
quarter of 1998.  Also contributing to the increase in revenue were increases in
the purchase of reimbursable materials for the customer at Fort Rucker. Slightly
offsetting  these  revenue  increases   were  lower  revenues  on  certain  base
operations support contracts.

The DTS business  unit  increased  backlog by 10.0% over 1998 to $2.2 billion at
December 30, 1999,  primarily due to expansion of several  contracts,  including
the  aforementioned  State  Department  contracts,  and the  winning  of several
contracts in  recompetition.   Management  believes  the DTS business area  will
continue to grow in 2000.  However,  the nature of the procurement  process  and
the  volume  of  the  Company's  business,  portions  of  which  are  subject to
recompetition  annually,  can  have  a dramatic impact on revenues and operating
profit.  Additionally, the U.S. Government has the right to  terminate contracts
for  convenience  or may  reduce  the  volume of  services ordered.

DTS  revenues  increased  1.4% to $600.6  million in 1998 as  compared to $592.6
million in 1997.  Operating profit increased by 15.3% from $23.0 million in 1997
to $26.5 million in 1998. The increase in both revenues and operating profit was
attributable to new contract wins and growth in several existing contracts.  The
DTS business unit was awarded a new contract with the United  Nations to provide
support  services  in  Angola,  new  Department  of  State  contracts  providing
protective  services in Kosovo,  Bosnia,  and Haiti,  and a contract with Kuwait
providing repair and maintenance on military  aircrafts.  A new contract,  which
became  operational  in the fourth  quarter,  for the providing of technical and
support  services  to the  United  States  Air Force at  Columbus  AFB,  and the
addition  of the  operations  of two more  ships in the  marine  services  area,
contributed  to DTS's growth in 1998  revenues.  Increased  services on existing
contracts and the  development and  installation of a new information  system at
Fort Rucker also  contributed to the twelve months revenue  increase.  Partially
offsetting  these  increases in revenues  were reduced  business  volumes due to
several contract completions.

DI&ET  revenues were $635.9  million in 1999, a 0.4% increase over 1998 revenues
of $633.1 million. The revenue increase  was  due in  part  to the start-up of a
contract with the U.S. Postal Service, which was  awarded in  1998,  but  became
operational in 1999, and a sub-contract from the Department  of  Commerce Census
Cenus 2000 that was also awarded in 1998 but became  operational in 1999.  DI&ET
health information technology services' revenues increased due  to  a  full year
impact of FMAS, a medical outcome  measurement  and  data  abstraction  services
company acquired in 1998,  and growth in a joint  venture for vaccine technology
services to  the  Department  of  Defense.  Also  contributing  to  the  revenue
increases were higher volumes  of state and local  contract  business, increased
tasking on several indefinite delivery/indefinite  quantity  ("IDIQ") contracts,
and new business with the customer at the Norco location.  Partially  offsetting
these increases in revenue was the loss in recompetition of significant portions
of  the  work scope of an enterprise contract at the Department of Energy  Rocky
Flats location. In the twelve  months of  1998, Rocky  Flats' revenue  was $71.0
million.

DI&ET's operating profit decreased  slightly to $30.6 million from $31.1 million
in 1998, a 1.8% decrease.  The operating profit decrease resulted from losses on
two  state  government  contracts,  a write-off  associated  with  a vaccine lab
business  that  was divested during 1999, and the loss of a contract at  the DOE
Rocky Flats location.  Rocky Flats operating profit for the twelve  months ended
December 31, 1998  was  $4.3 million.  Partially offsetting these  decreases  in
operating  profit  were  increases due to the start-up of the contracts with the
U.S. Postal Service  and the sub-contract from the Department of Commerce Census
2000, the higher volumes in health information technology services, and improved
profitability  on  previously  awarded  IDIQ  contracts.   Also  offsetting  the
decreases  in  DI&ET's  operating  profit was the receipt of  an  award fee on a
contract  that  was  greater than accrued (expected), and  operating  profits on
contracts in 1999 which reflected losses in 1998.

DI&ET's  revenues  were  $633.1  million  in 1998,  a 14.4%  increase  over 1997
revenues of $553.3 million. Operating profit increased $5.6 million, or 21.7% to
$31.1  million  from $25.6  million  in 1997.  The  increases  in  revenues  and
operating  profit were  attributable  to new IDIQ contract tasks and sole source
contracts with the Department of Defense,  Environmental  Protection Agency, and
the Health Care Finance Administration. Increased volume on a subcontract to the
U. S. Postal Service,  new state contract  business,  and increased  tasking and
level of effort on  several  existing  contracts  also  contributed  to  DI&ET's
revenue and operating profit increases.

Management believes DI&ET's revenues will continue to show small growth in 2000.
However,  much of the growth will be dependent upon DI&ET's success in servicing
new orders under its IDIQ contracts.  Additionally,  the U.S. Government has the
right to  terminate  contracts  for  convenience  or may  reduce  the  volume of
services ordered.

DIS, which was acquired on December 10, 1999, from GTE Corporation,  had revenue
of $13.9 million in the twenty-day  period ended December 30, 1999. Managemenent
expects the revenue for 2000 to be greater than the prior year revenue. However,
there are no assurances because the  nature of the procurement  process and  the
volume  of  the  business, which  is subject to recompetition annually, can have
a dramatic impact  on  revenues  and  operating profit.  Additionally, the U.S.
Government has the right to terminate  contracts for convenience or may reduce
the volume of services ordered.

Corporate General and Administrative

Corporate general and administrative expenses increased in 1999 by $3.1 million,
or 16.7%,  over 1998,  to $21.7  million as compared to $18.6  million and $17.8
million in 1998 and 1997,  respectively.  Corporate  general and  administrative
expense as a percentage of revenue was 1.6% in 1999,  1.5% in 1998,  and 1.6% in
1997.  The higher  expense  in 1999 was  primarily  the result of the  Company's
deployment of new financial and human resource software  packages.  The software
design and  development  stage of the  project has been  completed,  and related
costs have been capitalized as intangible  assets, as discussed below under Year
2000.  $4.4  million of expenses  for the  resystemization  effort and  expenses
incurred  related to  potential  acquisitions  were  offset by the $2.0  million
reversal of reserves for old contract  compliance issues,  which were settled in
the Company's  favor during 1999. The  comprehensive  resystemization  effort is
projected  to  add   approximately   $4.2  million  to  corporate   general  and
administrative expense in 2000.

The increase in corporate general and administrative expense in 1998 compared to
1997  resulted  from the  resystemization  effort,  which added $2.2  million to
corporate  general and  administrative  expense.  This expense and  increases in
other  expenses  were offset by the $2.5  million  reversal of reserves  for old
contract  compliance  issues,  which were settled in the Company's  favor during
1998.

Interest Expense and Interest Income

Interest  expense  for 1999 was  $18.9  million  as  compared  to $14.1  million
reported for 1998. The increase in interest  expense was  attributable to higher
average debt levels  throughout 1999, $0.5 million  interest expense  associated
with settlement of a  subcontractor  suit from a former  electrical  contracting
subsidiary,  and a $0.7  million  interest  expense  refund  received  from  the
Internal Revenue Service in 1998. The refund,  received in 1998,  decreased 1998
interest expense and therefore  increases the change in 1999 expense compared to
1998. The weighted annual levels of borrowing were approximately  $203.8 million
in 1999  compared  to $163.1  million  in 1998.  The  weighted  annual  level of
indebtedness increased due to borrowings used to fund the acquisition of DIS and
borrowings  used to fund working capital  requirements  (see working capital and
cash flow discussion).  Management  expects interest expense to increase in 2000
due to a higher level of indebtedness  resulting from  additional  borrowings of
approximately $167.5 million at the end of 1999 for the acquisition of DIS.

Interest  expense was $14.1 million in 1998, up from $12.4 million in 1997.  The
increase was due to the greater  level of  outstanding  indebtedness  throughout
1998. The average level of outstanding  indebtedness was $163.0 million in 1998,
as compared to $150.9 million in 1997.  Levels of indebtedness  increased due to
the FMAS  acquisition,  payments  to settle the  Fuller-Austin  bankruptcy,  and
increased  capital  required for growth in the  Company's  business (see working
capital and cash flow  discussion).  Offsetting the increase in interest expense
attributable  to the greater level of outstanding  indebtedness  was a refund of
$0.7 million of interest assessed in prior years by the Internal Revenue Service
on the Company's Federal income taxes.

Interest income was $1.4 million,  $1.6 million, and $2.0 million in 1999, 1998,
and 1997,  respectively.  The  fluctuations  are primarily  attributable  to the
balance of cash and  short-term  investments  throughout  any given year and the
average rates of interest. The twelve-month weighted average balance of cash and
short-term  investments  was $19.8 million in 1999,  $10.9 million in 1998,  and
$25.0 million in 1997.

Other Expense

Other  expense  increased by $7.9 million to $10.5  million in 1999  compared to
$2.7  million  and $10.3  million  in 1998 and 1997,  respectively.  The  higher
expense in 1999 resulted  from expenses of $1.7 million for the  settlement of a
suit with a former electrical  subcontractor,  write-off of $1.2 million of cost
in excess of net assets  acquired for a business  that was divested in February,
2000,  in-process R&D write-off of $6.4 million  associated with the acquisition
of DIS, and higher  amortization  of intangible  assets also associated with the
acquisition  of DIS.  The lower  expense in 1998  resulted  from the  absence of
charges such as that incurred in 1997. In 1997 the Company increased reserves by
$7.8 million for asbestos litigation resulting from a subsidiary's  agreement in
principle to settle  globally  approximately  11,000 pending  asbestos  personal
injury claims and unknown  future claims  pursuant to Section 524(g) of the U.S.
Bankruptcy  Code and a  related  contingent  settlement  agreement  between  the
Company and the  subsidiary  for the release of the Company from any  subsidiary
asbestos  liability  (see  Notes  13 and  20(a)  to the  Consolidated  Financial
Statements  and the  discussion  of  "Liquidity  and  Capital  Resources"  which
follows).

The Company  anticipates  that other expense will increase in 2000 due to higher
goodwill  and  other  intangible   amortization   expense   resulting  from  the
acquisition of DIS.

Income Taxes

The  provision  for income  taxes is based on  reported  earnings,  adjusted  to
reflect the impact of permanent differences between the book value of assets and
liabilities  recognized  for  financial  reporting  purposes  and  such  amounts
recognized for tax purposes.  In 1999,  the Company  reversed state income taxes
provided in prior years related to the  favorable  resolution of state tax audit
issues.  In 1998, the Company reversed foreign taxes provided in prior years due
to their expected utilization as foreign tax credits. Additionally, $2.5 million
of tax valuation  reserves were reversed in 1997. Based on current  projections,
management estimates tax payments, net of tax refunds, of $13.7 million in 2000.

No valuation  allowance for deferred  federal tax assets was deemed necessary at
December 30, 1999.  The Company has provided a valuation  allowance for deferred
state tax assets of $4.8 million at December 30, 1999 due to the  uncertainty of
achieving  future  earnings in either the time frame or in the particular  state
jurisdiction needed to realize the tax benefit.

Extraordinary Item

In the fourth  quarter of 1999,  the  Company  recorded  an  extraordinary  item
totaling $1.6 million  (gross  extraordinary  item of $2.5 million net of income
tax benefit of $0.9  million).  The charge was recorded in  connection  with the
early extinguishment of secured indebtedness due to refinancing of the Company's
debt in order to complete the acquisition of DIS.

Working Capital and Cash Flows

Working capital, defined as current assets less current liabilities,  was $165.2
million at December 30, 1999  compared to $90.7 million at December 31, 1998, an
increase of $74.5 million.  This increase is primarily the result of an increase
in  accounts  receivable,  attributable  to the  acquisition  of DIS,  increased
revenues as discussed above,  and slow  collections on several  contracts due to
start-up of new contracts. The ratio of current assets to current liabilities at
December 30, 1999 was 1.7  compared to 1.5 at December  31,  1998.  The increase
resulted  from the higher  accounts  receivable  balance at  December  30,  1999
compared to December 31, 1998.

For the year ended December 30, 1999,  the Company's  cash flow from  operations
was $13.8  million,  increasing  $6.1  million  from $7.8  million  cash used in
operations  in 1998.  The increase in cash flow from  operations  was  primarily
attributable to the absence in 1999 of payments related to the settlement of the
Fuller-Austin  bankruptcy  and from  the  absence  of an  increase  in  accounts
receivable  similar to that of 1998, which was caused by increased  revenues and
start-up of new contracts.  In 1998 the cash used by operations  resulted mostly
from increases in accounts  receivable due to increased revenues and start-up of
new contracts.  Also contributing to the increase in cash used by operations was
the  settlement of the  Fuller-Austin  bankruptcy,  which used $8.5 million.  In
1997,  cash  provided  by  operations  was $9.9  million.  The cash  provided by
operations was  attributable  to higher costs and expenses that did not use cash
in 1997 such as reserves established for the Fuller-Austin settlement.

Cash used in investing  activities  for the year ended December 30, 1999 totaled
$185.0  million and  included  acquisition  costs of $167.5  million and capital
expenditures of $19.8 million.  Acquisition  costs related to the acquisition of
DIS on December 10, 1999.  Capital  expenditures  included $13.9 million for the
purchase  of property  and  equipment  and $5.9  million  for new  software  for
internal  use as  part  of  the  Company's  Year  2000  plan.  The  Company  has
capitalized  a total of $11.7  million of costs related to internal use software
on its December 30, 1999 balance sheet. Investing activities used funds of $20.1
million in 1998,  principally  for the  acquisition of FMAS $10.2  million,  the
purchase  of  property  and  equipment  $4.8  million,  and the  purchase of new
software for internal use as part of the Company's  Year 2000 plan $5.6 million.
In 1997,  investing  activities used funds of $8.3 million,  attributable to the
purchase of property and equipment  $5.1 million,  and the remainder of the cash
used was mostly for funding of the  Company's  47% interest in a minority  owned
company, and a loan to the same company.

In 1999,  financing  activities  provided funds of $172.7  million.  The Company
borrowed  $223.8 million under a Senior Secured Credit  Agreement.  Of the total
borrowings  under the credit  agreement,  $125.0  million  was used for  partial
payment of the purchase price for DIS. The balance of the borrowings was used to
make an optional  redemption  of the  Company's  outstanding  7.486%  Fixed Rate
Contract Receivable  Collateralized Notes, Series 1997-1 ("the Notes"), Class A,
to  reduce   irrevocably  the  Company's   Floating  Rate  Contract   Receivable
Collateralized  Notes, Series 1997-1, Class B and to pay transactional  expenses
and for general corporate operating  purposes.  The Company issued $40.0 million
face value of its  subordinated  pay-in kind notes for $33.9  million and issued
426,217 shares of the Company's  stock for $6.1 million.  The proceeds were used
for payment of the balance of the purchase price for DIS.

Financing  activities  provided funds of $7.4 million in 1998. The proceeds from
the draw on the Class B Notes were used to fund working  capital needs. In 1997,
financing  activities  utilized  funds of $3.0  million.  The proceeds  from the
issuance  of  the 9  1/2%  Senior  Notes  and  the  7.486%  Contract  Receivable
Collateralized  Notes were used to retire the maturing 8.54% Contract Receivable
Collateralized  Notes,  to make a loan to the ESOP to fund the  purchase  of the
Class C Preferred  Stock,  to fund the  Company's  purchase of common  stock and
warrants from certain investors, and to pay transaction fees associated with the
placement  of the  Senior  Notes and  amendments  to the terms of the  Company's
revolving line of credit.

Liquidity and Capital Resources

The Company's primary source of cash and cash equivalents is from operations and
financing  activities.  The Company's principal customer is the U.S. Government.
This  provides for a  dependable  flow of cash from the  collection  of accounts
receivable. Additionally, many of the contracts with the U.S. Government provide
for progress  billings based on costs incurred.  These progress  billings reduce
the amount of cash that would  otherwise be required  during the  performance of
these contracts.

As of December 30, 1999 the Company's total debt was $343.2 million, an increase
of $182.9  million from December 31, 1998,  primarily due to borrowing of $167.5
million used to fund the acquisition of GTE Information Systems, LLC.

On December 10, 1999, the Company entered into a Senior Secured Credit Agreement
with a group of financial institutions.  Under the Credit Agreement, the Company
borrowed  $100.0  million under Term A loans  maturing  December 9, 2004, $100.0
million under Term B loans maturing  December 9, 2006, and $23.8 million under a
$90.0  million  revolving  line  of  credit.  Upon  the  closing  of the  Credit
Agreement,  the  Company  terminated  its  previous  revolving  line  of  credit
facility.

The Credit  Agreement  contains  customary  restrictions  on the  ability of the
Company to undertake  certain  activities,  such as the incurrance of additional
debt,  the payment of dividends on or the  repurchase  of the  Company's  common
stock, the merger of the Company into another company, the sale of substantially
all the Company's assets,  and the acquisition of the stock or substantially all
the assets of another  company.  The Credit  Agreement also  stipulates that the
Company must maintain certain  financial ratios,  including  specified ratios of
earnings  to  fixed  charges,  debt to  earnings,  and  accounts  receivable  to
borrowings under the Credit Agreement.  At December 30, 1999, the Company was in
compliance with these covenants.

The Term A Loans are to be  repaid in  sixteen  quarterly  installments  of $6.3
million  beginning in February 2001. The Term B Loans are to be repaid in twenty
quarterly  installments of $0.3 million starting in February 2000 and then eight
quarterly  installments  of $11.9  million  beginning in February  2005.  At the
option of the Company,  borrowings  under the Credit  Agreement bear interest at
either LIBOR or a base rate  established by the bank,  plus a margin that varies
based upon the Company's ratio of debt to earnings.

The Company is charged a commitment fee of 0.5% per annum on unused  commitments
under the revolving  line of credit.  At December 30, 1999,  $7.0 million was
outstanding under the line of credit and $75.6 million additional was available.

On December  10,  1999,  the Company  entered  into an  agreement  with  various
financial institutions for the sale of $40.0 million face value of the Company's
subordinated  pay-in-kind  notes due 2007, with an estimated fair value of $33.9
million (Senior  Subordinated  Notes), and for the sale of 426,217 shares of the
Company's  stock with an estimated  fair value of $6.1 million (see Note 7). The
Subordinated  Notes  bear  interest  at 15.0% per annum,  payable  semi-annually
in-kind.  The Company may, at its option,  prior to December  15, 2004,  pay the
interest in cash or in additional Subordinated Notes. The Subordinated Notes are
redeemable,  in whole or in part,  at the  option  of the  Company,  on or after
December  15,  2000 at a  redemption  price that  ranges  from 114.0% in 2000 to
100.0% in 2006 and  thereafter.  The  Subordinated  Notes are general  unsecured
obligations of the Company and will be  subordinated  in right of payment to all
existing and future senior debt of the Company and to the Senior Notes.

At December 31, 1998,  $87.9 million of accounts  receivable  were restricted as
collateral for the 7.486% Contract Receivable  Collateralized Notes. At December
31, 1998,  $1.5 million of cash was  restricted as collateral  for the Notes and
has been  included  in Other  Assets on the  accompanying  Consolidated  Balance
Sheet. The notes were paid off on December 10, 1999.

The Company had a $15.0 million line of credit that it utilized through December
9, 1999,  never exceeding $8.9 million in borrowings at any given point in time.
As noted above, on December 10, 1999, the Company terminated this revolving line
of credit facility.

The Company has embarked on a  comprehensive  resystemization  effort (see "Year
2000") and had expenditures in 1999 of $10.4 million,  of which $6.0 million was
capitalized   and  $4.4  million  was   expensed.   The  Company  is  projecting
expenditures  in 2000 of $4.2  million.  The  resystemization  will  necessitate
replacing some of the Company's  desktop  workstations  over the next year, at a
cost of approximately $4.0 million.

The Board of Directors has issued an enabling  resolution  that provides for the
repurchase of up to 500,000 shares of the Company's  common stock at a price not
to  exceed  the  current  market  price,  subject  to all  applicable  financial
covenants.  Management  continuously reviews alternative uses of excess cash and
debt capacity for purposes of acquisitions,  dividends, repurchase of shares and
other financial matters.

The Company anticipates contributing  approximately $14.1 million in cash to the
Employee  Stock  Ownership  Plan  ("ESOP") in 2000.  The amount of the Company's
annual  contribution  to the ESOP is determined by and within the  discretion of
the Board of Directors and may be in the form of cash,  common  stock,  or other
qualifying  securities.  In  accordance  with  ERISA  requirements  and the ESOP
documents,  in  the  event  that  an  employee  participating  in  the  ESOP  is
terminated,  retires,  dies, or becomes  disabled while employed by the Company,
the ESOP Trust or the Company is obligated to repurchase  shares of common stock
distributed to such former  employee under the ESOP ("ESOP  Participant  Puts"),
until such time as the common stock becomes "readily tradable stock," as defined
in  the  ESOP  plan  document.   (See  Note  7  to  the  Consolidated  Financial
Statements.)

To the extent the ESOP Participant Puts, debt service,  administrative expenses,
and interest expense exceed the Company's 2000  contribution,  the Company would
fund the ESOP  Participant  Puts. The Company projects these payments to be less
than $2.0 million in 2000.

On February 29, 2000, the Company sold an office building located in Alexandria,
Virginia  to a third party for $10.5  million,  and  simultaneously  closed on a
lease of that property from the new owner. The Company used a portion of the net
proceeds to payoff the mortgage on the property. The Company anticipates selling
other non-strategic assets from time to time in the future.

In conjunction with the acquisition of Technology Applications, Inc. in November
1993, the Company  issued put options on 125,714 shares of its common stock.  On
January 12, 1999, the former owner of Technology  Applications,  Inc.  exercised
the put  option  on the  125,714  shares  at a price of $24.25  per  share.  The
Company's repurchase of this common stock required cash of $3.0 million.

On December 10,  1998,  pursuant to the terms of a Global  Settlement  Agreement
among  the  Company,  its  wholly  owned  inactive   subsidiary,   Fuller-Austin
Insulation Company ("Fuller-Austin"),  a committee representing various asbestos
claimants,  and the legal  representative of unknown future asbestos  claimants,
the Company transferred and conveyed all of its interests in Fuller-Austin to an
unrelated  independent  bankruptcy  settlement  trust  ("Trust")  established in
accordance  with  Section  524(g)  of the U.S.  Bankruptcy  Code.  The Trust was
established  pursuant to a  Confirmation  Order entered  jointly on November 13,
1998  by the  United  States  District  and  Bankruptcy  Courts  in  Wilmington,
Delaware.  The  Trust  is  part  of a Plan of  Reorganization  of  Fuller-Austin
approved  in the  Confirmation  Order for the  resolution  of present and future
asbestos   personal   injury  and  other  claims   against   Fuller-Austin.   In
consideration of the transfer and certain other payments by DynCorp to the Trust
aggregating approximately $8.5 million (a portion of which was recorded in prior
years including $7.8 million  reserved by the Company in 1997 in anticipation of
the Global Settlement), both the Trust and Fuller-Austin have given DynCorp full
indemnification  with respect to all present and future  asbestos claims arising
from the operations of Fuller-Austin.  The Confirmation  Order also channels all
present and future asbestos claims related to Fuller-Austin's  operations to the
Trust. (See Note 21(a) to the Consolidated  Financial Statements for the history
of the  Fuller-Austin  asbestos  claims and other  circumstances  related to the
Global Settlement and Fuller-Austin bankruptcy filing.)

On  March  17,  1997,  the  Company  issued  $100.0  million  of 9  1/2%  Senior
Subordinated Notes ("Senior Notes") with a scheduled maturity in 2007.  Interest
is payable  semi-annually,  in arrears, on March 1 and September 1 of each year.
The  Senior  Notes are  redeemable,  in whole or in part,  at the  option of the
Company,  on or after  March 1, 2002 at a  redemption  price  which  ranges from
104.75% in 2000 to  100.00% in 2005 and  thereafter.  In  addition,  at any time
prior to March 1,  2000,  the  Company  may  redeem  up to 35% of the  aggregate
principal  amount of the Senior  Notes (at a redemption  price of 109.50%)  with
proceeds  generated from a public  offering of equity,  provided at least 65% of
the original  aggregate  amount of the Senior  Notes  remains  outstanding.  The
Senior  Notes are  general  unsecured  obligations  of the  Company  and will be
subordinated  in right of payment to all existing and future  senior debt of the
Company.

On January 23,  1997,  the Company  entered  into an  agreement  with  Capricorn
Investors,  L.P.  ("Capricorn") in which Capricorn agreed to waive its rights to
nominate  directors of the Company and also waived  certain voting rights of the
Company's then outstanding Class C Preferred Stock. In return for these waivers,
the Company  paid a fee and  authorized  Capricorn to  distribute a  substantial
portion of the shares of common stock and  warrants  and all of the  outstanding
shares of Class C Preferred  Stock to its  investors.  On February 5, 1997,  the
Employee Stock  Ownership Trust purchased from certain of these investors all of
the Company's Class C Preferred Stock. The ESOP subsequently converted the Class
C Preferred Stock into common shares and common share warrants and exercised the
related warrants.  Concurrently  with the ESOP's purchase,  the Company acquired
certain number of the  outstanding  common shares and common stock warrants held
by other Capricorn  investors.  The purchase price of these securities was $56.4
million ($19.55 per common share or warrant),  of which half, $28.2 million, was
paid in cash  ($9.3  million  and  $18.9  million,  was paid by the ESOP and the
Company,  respectively)  and short-term notes were issued for the balance (notes
issued  by the ESOP  and the  Company  were  $9.3  million  and  $18.9  million,
respectively).

The  Company  engaged  in the  aforementioned  equity  repurchases  in  order to
eliminate the potential effect of certain  preferential  voting rights given the
Class C Preferred Stock in the Company's certificate of incorporation; to reduce
the  outstanding  and fully diluted equity of the Company;  to provide  treasury
shares for future issuance to employees under the Company's various compensation
and benefit  plans  without the need for issuance of new shares;  and to provide
additional  shares for the ESOP,  which can only acquire shares by purchase from
the  Company or other  stockholders.  The ESOP's  purpose  for  engaging  in the
aforementioned   transaction  was  to  acquire  shares  for  the  allocation  to
participants'  accounts in 1997 and 1998. In addition to converting a portion of
the  Company's  total   capitalization   from  equity   capitalization  to  debt
capitalization,  the  transactions  reduced the Company's  fully diluted equity,
thus improving the Company's diluted earnings per share.

Year 2000 Readiness Disclosure

The principal "Year 2000" issue ("Y2K") risk to the Company would have come from
an extended failure of one or more of its core systems (financial,  payroll, and
human resources).  Replacement of the Company's core financial,  human resources
and payroll  systems  software  was  initiated  following  a Year 2000  analysis
conducted  in  1997  that  found  these  programs  to be  non-compliant  for the
millennium date rollover. Deployment of a new human resources and payroll system
was launched and completed  prior to the end of 1999. Due to the large number of
conversions  and the need to  convert  the core  systems of DIS,  the  financial
systems  implementation  is  now  scheduled  for  completion  in  late  2001.  A
contingency  plan was activated to install an updated  compliant  version of the
Company's current  financial  software package in all locations where conversion
to the new Enterprise  Resource  Planning package was not assured prior to 2000.
The updates were  completely  implemented  by November 30, 1999, and no failures
were reported during or after the rollover.

Total  expenditures  for the Y2K effort were  approximately  $19.5 million as of
December 30,  1999,  of which $11.6  million  represented  capitalized  software
costs.

A Year 2000  Program  Management  Plan was  developed  and a Y2K Project  Office
launched in mid-1998 to address other Y2K compliance  issues. A  multifunctional
task group oversaw  assessment and  remediation  or  replacement  efforts in the
areas of core systems, network and office automation,  and field information and
non-information  systems.  No problems  have been found  following  the rollover
other  than very  minor,  possibly  Y2K-related  aberrations  that were  quickly
addressed,  usually within minutes.  No problems have been found that materially
affected the Company's  ability to perform on its significant  contracts.  These
assessments  included  third-party service providers and other vendors on whom a
given contract might depend.

The core systems  assessment  included  initial contact in 1998 with third-party
telecommunications,   employee   benefits,   insurance,   and  other  providers.
Documentation  obtained  from these  providers  generally  stated that they were
addressing  the Y2K problem.  Follow-up  contacts to  ascertain  the progress of
these providers was also conducted in late 1999 and no problems were reported.

The Company also assessed its vulnerability  arising from payment  capability of
the various government payment offices receiving and processing  invoices from a
contract  site.  No  problems  surfaced  with  either the  Defense  Finance  and
Accounting  Service (DFAS) or the Department of Energy payment  office.  DoD and
DoE contracts represent a large portion of the Company's work.

The Company also conducted assessments on government furnished equipment ("GFE")
at contract sites. No failures affecting contract performance were experienced.

Infrastructure items that could have had Y2K compliance problems such as desktop
workstations,  network  components,  and servers,  were tested,  and repaired or
replaced.  The annual  expenditures for these components were not  significantly
above levels that could be expected in the normal course of business,  given the
Company's infrastructure replacement plan and budget.

In  summary,  the  primary Y2K  vulnerability  for the Company was the  possible
failure of core systems. This did not happen, as the resystemization  effort was
a top priority within the Company,  with dedicated teams and incentive plans for
retaining key employees throughout the project.

Assessments at the contract level were completed to the extent  possible.  These
assessments included analysis of the readiness of hardware,  software, prime and
subcontractors,   customers,  suppliers  and  vendors,  data  dependencies,  and
facilities.  These assessments added value in that there were no reported issues
on any contracts.

Many Y2K-related  actions will have long-term  benefits to the Company.  In 1999
the Company:

o    upgraded  much of the  hardware  and  software  company-wide,  bringing the
     Company  to a  higher  level  of  technology,  with the  added  benefit  of
     establishing a more "level playing field"  system-wide that in the long run
     should be easier to maintain;

o    developed  an  expertise  in  contingency  planning,  which  is  a  growing
     opportunity in government contracting;

o    became much more attuned to software  virus issues and potential  problems,
     has  increased  security  measures  accordingly  and has  been  alerted  to
     investigate other enhanced security precautions; and

o    documented its inventories of IT and non-IT equipment.

Environmental Matters

Neither the Company nor any of its  subsidiaries has been named as a Potentially
Responsible  Party (as  defined  in the  Comprehensive  Environmental  Response,
Compensation, and Liability Act) at any site. The Company has incurred costs for
the  installation and operation of a soil and water  remediation  system and for
the clean up of environmental  conditions at certain other sites (see Note 20(b)
to the  Consolidated  Financial  Statements).  The Company's  liability,  in the
aggregate,  with  respect to these  matters is not deemed to be  material to the
Company's results of operations or financial condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's  only use of  derivative  financial  instruments  is to manage its
exposures to  fluctuations  in interest rates and foreign  exchange  rates.  The
Company  does not hold or issue  derivative  financial  instruments  for trading
purposes. There were no such financial instruments held during 1999.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information with respect to this item is contained in the Company's Consolidated
Financial  Statements and Financial  Statement  Schedules  included elsewhere in
this Annual Report on Form 10-K.
<PAGE>

                    Report of Independent Public Accountants

To DynCorp:

We have  audited  the  accompanying  consolidated  balance  sheets of DynCorp (a
Delaware  corporation) and subsidiaries as of December 30, 1999 and December 31,
1998,  and the related  consolidated  statements of  operations,  cash flows and
stockholders'  equity for the year ended  December  30, 1999 and each of the two
years in the period ended December 31, 1998. These financial  statements and the
schedule referred to below are the  responsibility of the Company's  management.
Our  responsibility  is to express an opinion on these financial  statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of DynCorp and subsidiaries as of
December 30, 1999 and December 31, 1998,  and the results of its  operations and
its cash flows for the year ended December 30, 1999 and each of the two years in
the period ended  December 31, 1998, in conformity  with  accounting  principles
generally accepted in the United States.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  Schedule II,  listed in Item 14 of the
Form 10-K,  is  presented  for  purposes of complying  with the  Securities  and
Exchange  Commission's rules and is not part of the basic financial  statements.
This  schedule  has been  subjected to the  auditing  procedures  applied in our
audits of the basic financial  statements and, in our opinion,  fairly states in
all material  respects the  financial  data  required to be set forth therein in
relation to the basic financial statements taken as a whole.

Vienna, VA                                         ARTHUR ANDERSEN LLP
March 21, 2000




<PAGE>


                            DynCorp and Subsidiaries
                           Consolidated Balance Sheets
                          As of the Fiscal Years Ended
                                 (In thousands)


                                                     1999             1998
                                                     ----             ----

Assets
Current Assets:

 Cash and cash equivalents                           $  5,657        $  4,088
 Accounts receivable and contracts in
  process, net                                        357,411         258,216
 Prepaid income taxes                                   6,558           4,204
 Other current assets                                  28,582          11,794
                                                     --------        --------
      Total Current Assets                            398,208         278,302


Property and Equipment, at cost:
  Land                                                    621             621
  Buildings and leasehold improvements                 28,957          11,845
  Machinery and equipment                              32,800          33,616
                                                     --------        --------
                                                       62,378          46,082
  Accumulated depreciation and amortization           (21,583)        (27,538)
                                                     --------        --------
   Net Property and Equipment                          40,795          18,544
                                                     --------        --------
Intangible Assets, net                                149,159          58,796

Other Assets                                           51,511          23,596
                                                     --------        --------
Total Assets                                         $639,673        $379,238
                                                     ========        ========



See accompanying notes to the consolidated financial statements.


<PAGE>


                            DynCorp and Subsidiaries
                           Consolidated Balance Sheets
                          As of the Fiscal Years Ended
                      (In thousands, except share amounts)


Liabilities and Stockholders' Equity                         1999       1998
------------------------------------                         ----       ----
Current Liabilities:
 Notes payable and current portion of long-term debt      $ 8,242    $  8,145
 Accounts payable                                          85,357      66,885
 Deferred revenue and customer advances                     6,048       2,542
 Accrued income taxes                                       2,100       1,934
 Accrued expenses                                         131,274     108,117
                                                         --------    --------
   Total Current Liabilities                              233,021     187,623

Long-term Debt                                            334,944     152,121

Deferred Income Taxes                                       4,547      12,498

Other Liabilities and Deferred Credits                     51,171      15,146

Contingencies and Litigation                                    -           -

Temporary Equity:
 Redeemable common stock at redemption value
  ESOP shares, 7,350,937 and 7,082,422 shares issued
    and outstanding in 1999 and 1998, respectively,
    subject to restrictions                              182,974      180,812
  Other, 426,217 and 125,714 shares issued and
    outstanding in 1999 and 1998, respectively             6,142        3,049

Stockholders' Equity:
  Common stock,  par value ten cents per share,
   authorized 20,000,000 shares; issued 4,908,447
   shares in 1999 and 4,976,423 shares in 1998               491          498
 Paid-in surplus                                         133,338      127,216
 Accumulated other comprehensive income                       (9)         (10)
 Reclassification to temporary equity for redemption
   value                                                (188,339)    (183,140)
 Deficit                                                 (72,887)     (78,782)
 Common stock held in treasury, at cost; 2,301,262
   shares in 1999 and 2,005,728 shares 1998              (43,062)     (35,640)
 Unearned ESOP shares                                     (2,658)      (2,153)
                                                        --------     --------
Total Liabilities and Stockholders' Equity              $639,673     $379,238
                                                        ========     ========



See accompanying notes to the consolidated financial statements.


<PAGE>


                            DynCorp and Subsidiaries
                      Consolidated Statements of Operations
                           For the Fiscal Years Ended
                    (In thousands, except per share amounts)

                                                 1999         1998        1997
                                                ------       ------      ------
Revenues                                   $1,345,281   $1,233,707  $1,145,937
                                            ---------    ---------   ---------

Costs and expenses:

 Cost of services                           1,280,239    1,173,151   1,096,246
 Corporate general and administrative          21,741       18,630      17,785
 Interest expense                              18,943       14,144      12,432
 Interest income                               (1,393)      (1,600)     (2,018)
 Other expense                                 10,544        2,687      10,349
                                            ---------    ---------   ---------
  Total costs and expenses                  1,330,074    1,207,012   1,134,794
                                            ---------    ---------   ---------

Earnings from continuing operations
  before income taxes, minority
  interest, and extraordinary item             15,207       26,695      11,143
   Provision for income taxes                   4,649        9,559       2,282
                                               ------       ------      ------
Earnings from continuing operations
 before minority interest and
 extraordinary item                            10,558       17,136       8,861
   Minority interest                            2,968        2,081       1,439
                                               ------       ------      ------
Earnings from continuing operations
  before extraordinary item                     7,590       15,055       7,422
Extraordinary loss from early extinguishment
  of debt, net of income taxes                  1,601            -           -
                                               ------       ------      ------

Net earnings                                $   5,989     $ 15,055    $  7,422
                                           ==========   ==========   =========

   Accretion of Mezzanine Shares
   to redeemable value                             94            -           -
                                           ----------   ----------   ---------
Common stockholders' share of net earnings  $   5,895     $ 15,055    $  7,422
                                           ==========   ==========   =========

Net Earnings per common share:

      Basic earnings per share              $    0.59     $   1.47   $    0.83

      Diluted earnings per share            $    0.57     $   1.43   $    0.70

Weighted average number of shares
 outstanding for basic earnings per share      10,044       10,242       8,985

Weighted average number of shares
 outstanding for diluted earnings per share    10,273       10,514      10,638

See accompanying notes to the consolidated financial statements.


<PAGE>


                            DynCorp and Subsidiaries
                     Consolidated Statements of Cash Flows
                           For the Fiscal Years Ended
                                 (In thousands)

                                               1999          1998         1997
                                              ------        ------       ------
Cash Flows from Operating Activities:
 Common stockholders' share of net
  earnings                                 $  5,895     $  15,055     $  7,422
 Adjustments to reconcile net earnings
 to net cash provided (used) by operating
 activities:
  Depreciation and amortization              13,572         8,825        9,888
  Purchased in-process research and
  development                                 6,400             -            -
  Deferred income taxes                      (7,630)        1,463        4,165
  Proceeds from insurance settlement
   for asbestos claims                            -         1,462        1,488
  Change in reserve for divested business -
   Fuller-Austin                                  -       (10,797)       7,800
  Changes in reserves for divested
   business  - other                         (2,000)       (1,698)         357
  Capitalized costs incurred on existing
   contracts                                 (2,473)            -            -
  Other                                       1,781           (63)        (882)
  Change in assets and liabilities, net
   of acquisitions and dispositions:
  Increase in accounts receivable and
   contracts in process                     (37,919)      (52,416)     (15,311)
  Increase in other current assets             (326)         (963)      (1,305)
  Increase (decrease) in current
   liabilities except notes payable and
   current portion of long-term debt         36,535        31,380       (3,685)
                                           --------      --------     --------
  Cash provided (used) by operating
   activities                                13,835        (7,752)       9,937
                                           --------      --------     --------
  Cash Flows from Investing Activities:
   Sale of property and equipment               610         1,293          318
  Proceeds received from notes receivable         -             -            4
  Purchase of property and equipment        (13,878)       (4,797)      (5,110)
  Capitalized cost of new financial and
   human resource systems                    (5,969)       (5,598)           -
  Deferred income taxes from "safe harbor"
   leases                                      (481)         (257)        (309)
  Increase in investment in unconsolidated
   subsidiaries                               1,363          (302)      (2,038)
  Increase in notes receivable to equity
   investee                                       -             -         (867)
  Assets and liabilities of acquired
   business (excluding cash acquired)      (167,504)      (10,239)           -
  Other                                         884          (231)        (255)
                                           ---------     ---------    ---------
  Cash used by investing activities        (184,975)      (20,131)      (8,257)
                                           ---------     ---------    ---------
  Cash Flows from Financing Activities:

  Treasury stock purchased                   (7,208)       (6,194)        (923)
  Payment on indebtedness                  (253,491)      (20,371)    (100,208)
  Proceeds from debt issuance               428,552        28,113      149,484
  Common stock and warrants purchased
   from investors                                 -             -      (37,819)
  Proceeds from issues of redeemable
   common stock                               6,048             -            -
  Payments on ESOP loans                     10,577         5,933        5,189
  Loans to ESOP                             (11,082)            -      (13,274)
  Deferred financing expenses                     -             -       (5,080)
  Other                                        (687)         (112)        (324)
                                          ---------     ---------    ---------
    Cash provided (used) by financing
     activities                             172,709         7,369       (2,955)
                                          ---------     ----------   ---------
  Net Increase (Decrease) in Cash and
   Cash Equivalents                           1,569      (20,514)       (1,275)
  Cash and Cash Equivalents at Beginning
   of the Fiscal Year                         4,088       24,602        25,877
                                          ---------     ---------    ---------
  Cash and Cash Equivalents at End of the
   Fiscal Year                             $  5,657      $ 4,088     $  24,602
                                          =========     =========    =========
See accompanying notes to the consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>


                            DynCorp and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                           For the Fiscal Years Ended
                                 (In thousands)

                                                                                                                       Accumulated
                                                                           Adjustment for
                                                       Common              Redemption                        Unearned   Other
                                    Preferred  Common  Stock     Paid-in   Value Greater           Treasury    ESOP    Comprehensive
                                    Stock      Stock   Warrants  Surplus   than Par Value  Deficit Stock       Shares  Income
                                   -------------------------------------------------------------------------------------------------
<S>                                   <C>     <C>     <C>      <C>        <C>          <C>        <C>              <C>     <C>
Balance, December 31, 1996             $3,000  $332    $11,139  $148,234   $(138,694)   $(101,259) ($25,235)        -       -
Stock issued under Restricted
  Stock Plan                                -    13          -     (802)            -            -         -        -       -
Treasury stock issued                       -     -          -         -            -            -       233        -       -
Treasury stock purchased                    -     -          -         -            -            -     (907)        -       -
Warrants & stock options exercised          -   111    (2,683)     2,981            -            -         -        -       -
Class C Preferred Stock converted
 & warrants exercised                 (3,000)    95    (2,007)     5,119            -            -         -        -       -
Common stock purchased &
 warrants exercised                         -     -    (5,190)  (30,120)            -            -   (2,794)        -       -
Loans to ESOP                               -     -          -         -            -            -         -  (13,274)      -
Payment received on ESOP note               -     -          -         -            -            -         -    5,189       -
Net earnings                                -     -          -         -            -        7,422         -        -       -
Reclassification to Redeemable                                                                   -         -        -       -
 Common Stock                               -  (73)          -         -     (15,444)            -         -        -       -
                                       ------  ----     ------   -------    ---------     --------  --------  -------   -----
Balance, December 31, 1997                  -  $478     $1,259  $125,412   $(154,138)     $(98,837) $(28,703) $(8,085)    $ -
Employee compensation plans (option
 exercises, restricted stock plan,          -     4          -       891            -            -     (960)        -       -
 incentive bonus)
Treasury stock purchased                    -     -          -         -            -            -   (6,386)        -       -
Warrants & stock options exercised          -    35    (1,259)       903            -            -       409        -       -
Payment received on ESOP note               -     -          -         -            -            -         -    5,932       -
Reclassification to Redeemable
 Common Stock                               -  (19)          -         -     (29,002)            -         -        -       -
Translation adjustment                      -     -          -        10            -            -         -        -    (10)
Net earnings                                -     -          -         -            -       15,055         -        -       -
                                       ------  ----      -----  --------   ---------     --------- --------  -------    -----
Balance, December 31, 1998                  -  $498          -  $127,216   $(183,140)    $(78,782) $(35,640) $(2,153)   $(10)
Employee compensation plans (option
 exercises, restricted stock plan,          -     7          -       (6)            -            -     (321)        -       -
 incentive bonus)
Stock issued under Mezzanine financing      -    43          -     6,006            -            -         -        -       -
Treasury stock purchased                    -     -          -         -            -            -   (7,208)        -       -
Warrants & stock options exercised          -     -          -        28            -            -       107        -       -
Payment received on ESOP note               -     -          -         -            -            -         -   10,577       -
Loans to ESOP                               -     -          -         -            -            -         - (11,082)       -
Reclassification to Redeemable Common
 Stock                                      -  (57)          -         -       (5,105)            -         -        -       -
Accretion of mezzanine shares to
 Redeemable value                           -     -          -        94          (94)         (94)         -        -       -
Translation adjustment                      -     -          -         -            -            -         -        -       1
Net earnings                                -     -          -         -            -        5,989         -        -       -
                                          ---  ----        ---  --------   ----------    --------- --------- --------    ----
Balance, December 30, 1999                  -  $491          -  $133,338   $(188,339)    $(72,887) $(43,062) $(2,658)    $(9)
                                          ===  ====        ===  ========   ==========    ========= ========= ========    ====

See accompanying notes to the consolidated financial statements.

</TABLE>

<PAGE>

DynCorp and Subsidiaries
Notes to Consolidated Financial Statements
December 30, 1999
(Dollars in thousands, except per share amounts or where otherwise noted)

(1)   The Company and Summary of Significant Accounting Policies

Description of Business and Organization:

DynCorp, a Delaware corporation (the "Company") provides diversified management,
technical  and  professional  services  primarily to U.S.  Government  customers
throughout the United States and internationally. Organized in 1946, the Company
provides  services to various  branches of the  Departments of Defense,  Energy,
State,  Justice,  and  Agriculture,  the Drug Enforcement  Agency,  the National
Institute  of Health,  the Defense  Information  Systems  Agency,  the  National
Aeronautics  and Space  Administration  and various other U.S.,  state and local
government  agencies,  commercial  clients and foreign  governments.  Generally,
these services are provided under both prime contracts and  subcontracts,  which
may be fixed-price,  time-and-material  or cost-type  contracts depending on the
work requirements and other individual circumstances. These services encompass a
wide range of management, technical and professional services.

Principles of Consolidation:

The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries.  All significant  intercompany  transactions and balances have
been eliminated in  consolidation.  All  majority-owned  subsidiaries  have been
included  in the  financial  statements. Investments in which the Company owns a
20% to 50%  ownership  interest,  are accounted for by the equity  method  while
investments of less than 20% ownership are accounted for under the cost  method.
Outside investors' interest in the majority-owned  subsidiaries is reflected  as
minority interest.  Effective in 1999 the fiscal  year is the  52  or  53  weeks
period ending the last Thursday in December.  Previously, the Company had a
calendar year-end.

Use of Accounting Estimates:

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  ("GAAP")  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Estimates  include  accrued  liabilities  such as  incentive
compensation  awards,  which are not paid out until the following  year.  Actual
results could differ from those estimates.

Contract Accounting:

Contracts  in  process  are  stated at the lower of actual  cost  incurred  plus
accrued profits or net estimated  realizable value of incurred costs, reduced by
progress billings.  The Company records income from major fixed-price contracts,
extending    over    more    than   one    accounting    period,    using    the
percentage-of-completion method. During performance of such contracts, estimated
final contract prices and costs are periodically reviewed and revisions are made
as required. The effects of these revisions are included in the periods in which
the revisions are made. On cost-plus-fee contracts, revenue is recognized to the
extent of costs  incurred  plus a  proportionate  amount of fee  earned,  and on
time-and-material  contracts,  revenue is  recognized  to the extent of billable
rates times hours delivered plus material and other reimbursable costs incurred.
Losses on contracts are recognized when they become known. Disputes arise in the
normal  course of the  Company's  business  on  projects  where the  Company  is
contesting  with  customers  for  collection  of funds because of events such as
delays, changes in contract specifications and questions of cost allowability or
collectibility. Such disputes, whether claims or unapproved change orders in the
process  of  negotiation,  are  recorded  at the lesser of their  estimated  net
realizable  value or actual costs incurred and only when realization is probable
and can be reliably  estimated.  Claims against the Company are recognized where
loss is considered probable and reasonably determinable in amount.

Accounts Receivable:

It is the  Company's  policy to  provide  reserves  for  the  collectibility  of
accounts  receivable  when it is determined that it is probable that the Company
will not collect all  amounts due and the amount of reserve  requirement  can be
reasonably estimated.

Property and Equipment:

The Company computes  depreciation using the straight-line method. The estimated
useful  lives  used  in  computing  depreciation  are  buildings,  15-33  years;
machinery and equipment,  3-20 years; and leasehold improvements,  the lesser of
the useful  life or the term of the lease.  Depreciation  expense was $5,412 for
1999, $4,781 for 1998 and $4,881 for 1997.

Cost of property  and  equipment  sold or retired  and the  related  accumulated
depreciation  or  amortization  is  removed  from  the  accounts  in the year of
disposal,  and any gains or losses are reflected in the consolidated  statements
of operations.  Expenditures  for maintenance and repairs are charged to expense
as incurred,  and major additions and improvements  are capitalized.

Intangible Assets:

The major classes of intangible  assets as of December 30, 1999 and December 31,
1998 are summarized below (in millions):

                                    Amortization
                                      Period           1999        1998

   Goodwill.....................   10 to 40 years     $109.8      $44.9
   Capitalized Software...         8 years              10.6        5.9
   Core & developed technology...  5 years               7.6          -
   Contracts acquired............  up to 10 years        8.4        1.1
   Assembled workforce...........  7 years               6.5          -
   Patent......................    17 years              6.3        6.9
                                                      ------      -----
   Total net intangibles.......                       $149.2      $58.8

Intangible  assets are being  amortized using the  straight-line  method for the
periods  noted above.  Amortization  expense was $8,160,  $1,575,  and $1,560 in
1999, 1998, and 1997, respectively (see Note 13 ). Amortization expense for 1999
includes $1.2 million  acceleration of goodwill  amortization due to impairment.
Accumulated  amortization  of $55,755  and  $50,030  has been  recorded  through
December 30,1999 and December 31, 1998, respectively.

Long-lived  assets and  identifiable  intangibles  are reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  In performing the review for  impairment,  the
Company  estimates the future cash flows  expected to result from the use of the
asset.  If impaired,  the Company  would write down the asset to its fair market
value.  If the asset is held for sale,  the Company  reviews its fair value less
cost to sell. In 1999,  the Company  expensed  $1.7 million  related to impaired
assets including the $1.2 million noted above.

Derivative Financial Instruments:

The Company has a policy to use derivative  financial  instruments to manage its
exposures  to  fluctuations  in  interest  rates and foreign  exchange  rates as
warranted.  The Company does not hold or issue derivative financial  instruments
for trading purposes. There were no such financial instruments held during 1999.

Recently Issued Accounting Standards:

In April 1998, the American Institute of Certified Public Accountants  ("AICPA")
issued  Statement  of Position  ("SOP")  No.  98-5,  "Reporting  on the Costs of
Start-up  Activities,"  which became  effective for fiscal years beginning after
December 15, 1998. The statement provides guidance on the financial reporting of
start-up costs and organization costs and requires costs of start-up  activities
to be expensed as incurred, except for long-term contracts. The adoption of this
statement,  effective  January  1, 1999,  did not have a material  impact on the
Company's financial statements.

In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 137, which deferred the effective
date of SFAS 133.  In June 1998,  FASB  issued  SFAS No.  133,  "Accounting  for
Derivative  Instruments  and Hedging  Activities,"  which is  effective  for all
fiscal  quarters of fiscal years  beginning  after June 15,  2000.  SFAS No. 133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  Because of the Company's  minimal use of derivatives,  the
Company  does not expect  that the  adoption  of this new  standard  will have a
material impact on its results of operations, financial condition or cash flows.

Consolidated Statements of Cash Flows:

For  purposes of these  statements,  short-term  investments,  which  consist of
government  treasury  bills and time  deposits with a maturity of ninety days or
less,  are considered  cash  equivalents.  At December 30, 1999,  checks not yet
presented  for payment of $11.1 million in excess of cash balances were included
in  accounts  payable  on  the  accompanying  balance  sheet.  The  Company  had
sufficient  funds  available  to cover these  outstanding  checks when they were
presented for payment.  Cash and  short-term  investments  at December 31, 1998,
excludes $1.5 million of restricted cash which is classified as Other Assets.

Investing and financing activities include the following:

                                         1999            1998            1997
Acquisitions of businesses:
   Assets acquired                 $  212,642       $  11,185     $         -
   Liabilities assumed                (45,138)           (946)              -
   Cash acquired                           36               -               -
                                   ----------       ---------     -----------
   Net cash                        $  167,540       $  10,239     $         -
                                   ----------       ---------     -----------
Capitalized equipment leases and
 notes secured by property and
 equipment                         $        -       $       -     $       626

The Company acquired GTE Information Systems LLC in 1999 and FMAS Corporation in
1998.

Comprehensive Income:

Effective  January 1, 1998, the Company  adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income," which requires the presentation and disclosure
of comprehensive income.  Translation  adjustment of $(0.01) million is the only
component of the Company's comprehensive income for the years ended December 30,
1999 and December 31, 1998 other than net income.

Reclassifications:

Consistent with industry practice,  assets and liabilities relating to long-term
contracts  and programs are  classified  as current  although a portion of these
amounts is not expected to be realized within one year.

Certain prior year  information has been  reclassified to conform to the current
year presentation.

(2)   Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instruments for which it is practicable to estimate the
value:

Accounts  receivable  and  contracts  in process,  net,  prepaid  income  taxes,
accounts payable and accrued income taxes - The carrying amount approximates the
fair value due to the short maturity of these instruments.

Long-term debt and other  liabilities and deferred  credits - The carrying value
of  the  Company's   Senior  Secured  Credit  Agreement  and  its  15.0%  Senior
Subordinated  Notes approximated the fair value. The fair value of the Company's
Senior  Notes,  based on the current  rate as if the issue date was December 30,
1999 was $92.4  million,  as compared to a book value of $99.6  million in 1999.
The fair value of the Company's 7.486% Contract Receivable  Collateralized Notes
and the  Senior  Notes,  based on the  current  rate as if the issue  dates were
December  31,  1998 was $154.4  million,  as  compared to a book value of $149.5
million  in 1998.  For the  remaining  long-term  debt  (see  Note 4) and  other
liabilities  and deferred  credits,  the carrying amount  approximates  the fair
value.

(3)   Accounts Receivable and Contracts in Process

The  components of accounts  receivable and contracts in process were as follows
for the years ending December 30, 1999 and December 31, 1998:

                                                         1999           1998
                                                        ------         ------
    U.S. Government:
      Billed and billable                            $238,709       $158,190
      Recoverable costs and accrued profit
       on progress completed but not billed            47,885         23,374
      Retainage due upon completion of contract         2,769          2,641
                                                      -------        -------
                                                      289,363        184,205
                                                      -------        -------
    Other Customers (primarily subcontracts from
     U.S. Government prime contracts and contracts
     with state, local and quasi-government
     agencies):

      Billed and billable (less allowance for
       doubtful accounts of $3,156 in 1999
       and $1,126 in 1998)                             52,063         54,520
      Recoverable costs and accrued profit on
       progress completed but not billed               15,985         19,491
                                                     --------       --------
                                                       68,048         74,011
                                                     --------       --------
                                                     $357,411       $258,216
                                                     ========       ========

Billed and  billable  include  amounts  earned  and  contractually  billable  at
year-end but which were not billed  because  customer  invoices had not yet been
prepared at year-end. Recoverable costs and accrued profit on progress completed
but not billed is composed  primarily of amounts  recognized  as  revenues,  but
which are not contractually  billable at the balance sheet dates. It is expected
that all amounts  outstanding at December 30, 1999 will be collected  within one
year except for approximately $5,892.

(4)   Long-term Debt

At December 30, 1999 and December 31, 1998, long-term debt consisted of:

                                                       1999             1998
                                                      ------           ------
 Senior Secured Credit Agreement - Term A Loan      $100,000         $     -
 Senior Secured Credit Agreement - Term B Loan       100,000               -
 Senior Secured Credit Agreement - Revolving
  Credit Facility                                      6,970               -
 15% Senior Subordinated Notes                        33,952               -
 9 1/2% Senior Notes                                  99,584          99,546
 7.486% Contract Receivable Collateralized
  Notes, Series 1997-1, Class A                            -          50,000
 Floating Rate Contract Receivable Collateralized
  Notes, Series 1997-1, Class B                            -           7,000
 8% Mortgage payable                                   2,575           2,729
 Notes payable                                           105             991
                                                     -------         -------
                                                     343,186         160,266
 Less current portion                                  8,242           8,145
                                                    --------        --------
                                                    $334,944        $152,121

Debt maturities as of December 30, 1999, were as follows:

          2000             $        8,242
          2001                     26,180
          2002                     26,195
          2003                     28,034
          2004                     26,000
          Thereafter              228,535
                                 --------
                                 $343,186
                                 ========
On December 10, 1999, the Company entered into a Senior Secured Credit Agreement
(the  "Credit  Agreement")  with a group of  financial  institutions.  Under the
Credit  Agreement,  the  Company  borrowed  $100.0  million  under  Term A loans
maturing December 9, 2004, $100.0 million under Term B loans  maturing  December
9, 2006, and $23.8 million  under  a  $90.0  million  revolving  line  of credit
maturing December 9, 2004. Of the total borrowings under  the  Credit Agreement,
$125.0 million was used for partial  payment  of  the  purchase  price  for  GTE
Information Systems LLC. An additional $112.0 million of the borrowings was used
to make an optional redemption of Dyn Funding  Corporation's  outstanding 7.486%
Fixed Rate Contract Receivable Collateralized Notes, Series 1997-1, Class A  and
to  reduce  irrevocably  Dyn  Funding  Corporation's  Floating   Rate   Contract
Receivable Collateralized Notes, Series 1997-1, Class B. The remainder was  used
to pay transactional expenses and for general corporate operating purposes. Upon
the closing of  the  Credit  Agreement,  the  Company  terminated  its  previous
revolving line of credit facility.

The Credit Agreement stipulates that the Company must maintain certain financial
ratios,  including  specified  ratios  of  earnings  to fixed  charges,  debt to
earnings, and accounts receivable to borrowings under the Credit Agreement.

On December 10, 1999, the Company incurred an extraordinary loss of $2.5 million
($1.6  million  after tax or $0.16 for basic and diluted  earnings per share) in
connection  with the early  retirement  of the $50.0  million  7.486% Fixed Rate
Contract Receivable  Collateralized  Notes. The extraordinary loss was comprised
of the payment of a yield  maintenance  premium and the  write-off of associated
debt issuance cost.

The Term A Loans are to be  repaid in  sixteen  quarterly  installments  of $6.3
million  beginning in February 2001. The Term B Loans are to be repaid in twenty
quarterly  installments of $0.3 million starting in February 2000 and then eight
quarterly  installments  of $11.9  million  beginning in February  2005.  At the
option of the Company,  borrowings  under the Credit  Agreement bear interest at
either LIBOR or a base rate  established by the bank,  plus a margin that varies
based upon the Company's ratio of debt to earnings.

The Company is charged a commitment fee of 0.5% per annum on unused  commitments
under the revolving  line of credit.  As of December 30, 1999,  $7.0  million of
borrowings and $7.4 million of letters of credit were outstanding under the line
of credit, and the amount available was $75.6 million.

On December  10,  1999,  the Company  entered  into an  agreement  with  various
financial institutions for the sale of $40.0 million face value of the Company's
subordinated  pay-in-kind  notes due 2007, with an estimated fair value of $33.9
million  (Senior Notes), and  for  the  sale of 426,217  shares of the Company's
stock with an estimated  fair value of  $6.1 million (see Note 7). The  proceeds
were used for  payment of the  balance of the purchase price for GTE Information
Systems LLC.  The Subordinated  Notes bear  interest at 15.0% per annum, payable
semi-annually in-kind.  The Company may, at its  option, prior  to  December 15,
2004, pay  the  interest  in  cash  or  in  additional Subordinated  Notes.  The
Subordinated  Notes are redeemable, in whole or in part, at the  option  of  the
Company,  on or after  December 15, 2000 at a redemption  price that ranges from
114.0% in 2000 to  100.0% in 2006 and  thereafter.  The  Subordinated  Notes are
general  unsecured  obligations of the Company and will be subordinated in right
of payment to all  existing  and future  senior  debt of the  Company and to the
Senior Notes.

On  March  17,  1997,  the  Company  issued  $100.0  million  of 9  1/2%  Senior
Subordinated Notes ("Senior Subordinated Notes") with a  scheduled  maturity  in
2007. Interest is payable  semi-annually, in arrears, on March 1 and September 1
of each year. The  Senior  Notes are  redeemable,  in whole or in part,  at  the
option of the Company,  on or after  March 1, 2002 at a  redemption  price which
ranges from 104.8% in 2000 to 100.0% in 2005 and thereafter. In addition, at any
time prior to March 1, 2000, the Company may redeem up to 35.0% of the aggregate
principal amount of the  Senior  Notes (at a  redemption  price of 109.5%)  with
proceeds generated  from a public  offering  of equity,  provided at least 65.0%
of the original  aggregate amount of the Senior Notes remains  outstanding.  The
Senior Notes are general  unsecured  obligations  of  the  Company  and  will be
subordinated in  right of payment to all existing and future senior debt  of the
Company.

The Credit Agreement and indentures for the Senior Notes and Senior Subordinated
Notes contains customary restrictions on the ability of the Company to undertake
certain  activities,  such as the incurrance of additional  debt, the payment of
dividends on or the repurchase of the Company's  common stock, the merger of the
Company  into  another  company,  the sale of  substantially  all the  Company's
assets,  and the  acquisition  of the stock or  substantially  all the assets of
another company.

The Company acquired the Alexandria, VA headquarters of Technology Applications,
Inc. ("TAI") on November 12, 1993, in conjunction with the acquisition of TAI. A
mortgage of $3,344 bearing interest at 8.0% per annum was assumed.  Payments are
made monthly and the mortgage  matures in April 2003. On February 29, 2000,  the
Company sold the related  property for $10.5 million in cash and  simultaneously
entered into a lease agreement for the property.  The 8.0% mortgage was paid off
at this time.

Deferred debt issuance costs are being  amortized  using the effective  interest
rate  method over the term of the  related  debt.  At  December  30,  1999,  and
December 31, 1998,  unamortized  deferred debt  issuance  costs were $12,113 and
$4,924,  respectively and amortization for 1999, 1998 and 1997 was $1,211, $721,
and $706,  respectively.  Amortization  of debt issue discount was $39, $36, and
$26 in 1999, 1998 and 1997, respectively.

Cash paid for interest was $16,209 for 1999,  $13,454 for 1998,  and $13,076 for
1997.

(5)   Accrued Expenses

At December 30, 1999 and December 31, 1998,  accrued  expenses  consisted of the
following:

                                                       1999           1998
                                                       ----           ----
    Salaries and wages                            $  73,028       $ 49,566
    Insurance                                        24,147         21,419
    Interest                                          4,345          1,993
    Payroll and miscellaneous taxes                  12,051         10,836
    Accrued contingent liabilities and
     operating reserves (see Note 20)                10,105         17,999
    Other                                             7,598          6,304
                                                   --------       --------
                                                   $131,274       $108,117
                                                   ========       ========
(6)   Employee Stock Ownership Plan

In September  1988, the Company  established  an Employee  Stock  Ownership Plan
("ESOP"). The Company borrowed $100 million and loaned the proceeds, on the same
terms as the Company's  borrowings,  to the ESOP to purchase 4,123,711 shares of
common stock of the Company.  The ESOP acquired 2,797,812 additional shares from
1993 through 1996 either  through  contributions  of stock from the Company,  or
contributions of cash from the Company with which the ESOP then purchased shares
either  from the  Company,  on the  Internal  Market,  or  directly  from  other
stockholders.

At the beginning of 1997, the ESOP had considerable cash on hand. Utilizing this
cash and loans from the Company, the ESOP purchased all of the Company's Class C
Preferred Stock. The ESOP subsequently converted the Class C Preferred Stock and
exercised the related warrants,  at which time the Company issued 949,642 shares
of common stock to the ESOP. The purchase price for the Class C Preferred  Stock
was $18,566  ($19.55 per share,  after  exercise of  warrants) of which half was
paid in cash ($8,277 on hand and $1,006  loaned from the Company) and notes were
issued for the balance. The notes, and related accrued interest,  have been paid
in full as of December 30, 1999.

In 1999,  the ESOP  utilized 1999  contributions  and loans to make the required
principal and interest payments on the aforementioned  notes, pay administrative
fees,  purchase  95,735  shares of stock on the  internal  market  and  purchase
273,139  shares of stock from other  stockholders.  At December  30,  1999,  the
unpaid balance on these subsequent loans,  $2,658,  representing 101,052 shares,
was reflected as a reduction in stockholders' equity. The ESOP covers a majority
of the  employees of the Company.  Participants  in the ESOP become fully vested
after four years of service.  At December  30,  1999,  the ESOP owned  7,451,989
shares, of which most has been allocated to participants. The Company recognizes
compensation  expense each year based on the cash  contribution for the year. In
1999, 1998, and 1997, cash contributions to the ESOP were $13,220,  $12,600, and
$11,200,  respectively.  These  amounts  were  charged to Cost of  Services  and
Corporate General and Administrative Expenses.

(7)   Redeemable Common Stock

Common stock which is redeemable has been  reflected as Temporary  Equity at the
redeemable value at each balance sheet date and consists of the following:

                                    Balance at                      Balance at
                         Redeemable December 30,         Redeemable December 31,
                Shares   Value      1999        Shares   Value       1998
               -------  ------      ------     -------   ------      ------
ESOP Shares   3,313,729  $27.50    $ 91,128    3,382,340  $27.75    $  93,860
              4,037,208  $22.75      91,846    3,700,082  $23.50       86,952
              ---------            --------    ---------             --------
              7,350,937            $182,974    7,082,422             $180,812
              =========            ========    =========             ========

Other Shares    426,217  $14.41    $  6,142      125,714  $24.25    $   3,049
              =========            ========    =========            =========

ESOP Shares

In accordance with ERISA  regulations and the Employee Stock Ownership Plan (the
"Plan") documents, the ESOP Trust or the Company is obligated to purchase vested
common  stock shares from ESOP  participants  (see Note 6) at the fair value (as
determined by an independent  appraiser) until such time as the Company's common
stock is publicly  traded.  The shares initially bought by the ESOP in 1988 were
bought at a "control  price,"  reflecting the higher price that buyers typically
pay when they buy an entire company (as the ESOP and other  investors did in the
1988 LBO). A special provision in the ESOP's 1988 agreement permits participants
to receive a "control  price"  when they sell these  shares  back to the Company
under the ESOP's "put option"  provisions.  This "control price",  determined by
the  appraiser  on February  21,  2000,  was $27.50 per share as of December 30,
1999. The additional  shares obtained by the ESOP in 1994 through 1999 were at a
"minority interest price",  reflecting the lower price that buyers typically pay
when they are buying only a small piece of a company.  Participants  do not have
the right to sell these shares at the  "control  price".  The minority  interest
price  determined by the independent  appraiser on February 21, 2000, was $22.75
per share as of December 30, 1999. Participants receive their vested shares upon
retirement,  becoming disabled,  or death over a period of one to five years and
for other reasons of termination  over a period of one to ten years,  all as set
forth in the Plan documents.  The ESOP Trust purchases  participants'  shares at
the applicable price, utilizing cash available from the Company's  contributions
and loans  (see Note 6).  The  participant  can elect to  receive  stock in kind
instead  of a  participant  put.  Based on fair  values of $27.50 and $22.75 per
share as of December 30, 1999,  the  estimated  aggregate  annual  commitment to
repurchase shares from the ESOP participants upon death, disability,  retirement
and termination is as follows: $8,424 in 2000, $12,559 in 2001, $15,084 in 2002,
$17,043 in 2003, $22,649 in 2004 and $107,215 thereafter. Under the Subscription
Agreement  with the ESOP dated  September  9, 1988,  the Company is permitted to
defer put options if, under  Delaware  law, the capital of the Company  would be
impaired as a result of such repurchase.

Other Shares

On  December  10,1999,  the  Company  entered  into an  agreement  with  various
financial institutions for the sale of 426,271 shares of the Company's stock and
Senior  Subordinated  Notes (see Note 4). Under a  contemporaneous  registration
rights agreement,  the holders of these shares of stock will have a put right to
the Company  commencing  on December 10,  2003,  at a price of $40.53 per share,
unless  one of the  following  events  has  occurred  prior to such  date or the
exercise  of the put right:  (1) an initial  public  offering  of the  Company's
common stock has been  consummated;  (2) all the Company's common stock has been
sold;  (3) all the  Company's  assets  have been sold in such a manner  that the
holders have received cash payments;  or (4) the Company's common stock has been
listed on a national  securities  exchange or  authorized  for  quotation on the
Nasdaq  National  Market  System for which there is a public  market of at least
$100 million for the  Company's  common  stock.  If, at the time of the holders'
exercise of the put right the Company is unable to pay the put price  because of
financial  covenants in loan agreements or other  provisions of law, the Company
will not  honor the put at that  time,  and the put price  will  escalate  for a
period  of up to four  years,  at  which  time  the put  must  be  honored.  The
escalation rate increases  during such period until the put is honored,  and the
rate varies from an annualized factor of 22% for the first quarter after the put
is not honored up to 52% during the sixteenth quarter.

In conjunction  with the acquisition of TAI in November 1993, the Company issued
put options on 125,714  shares of common stock.  The holder  could,  at any time
commencing  on December  31, 1998 and ending on December  31,  2000,  sell these
shares to the Company at a price per share  equal to the greater of $17.50;  or,
if the stock is publicly  traded,  the market value at a specified  date; or, if
the Company's stock is not publicly  traded,  the ESOP control price at the time
of exercise.  On January 12, 1999, the holder  exercised the put option on these
shares at the applicable price of $24.25 per share.

Following are the changes in  Redeemable  Common Stock for the three years ended
December 30, 1999:

                                                 Redeemable Common Stock
                                           -------------------------------------
                                             Other          ESOP         Total
                                            ------         -----        ------
Balance, December 31, 1996                  $2,979      $136,343      $139,322
  Shares purchased on Internal Market            -           205           205
  Shares purchased by ESOP not
     collateralized by notes                     -        13,371        13,371
Adjustment of shares to fair value              38         1,904         1,942
                                            ------      --------      --------
Balance, December 31, 1997                   3,017       151,823       154,840
   Shares purchased by ESOP                      -         1,482         1,482
   Shares released from collateral               -         5,798         5,798
   ESOP diversification (a)                      -        (4,074)       (4,074)
   Adjustment of shares to fair market value    32        25,783        25,815
                                            ------      --------      --------
Balance, December 31, 1998                   3,049       180,812       183,861
   Exercise of put option                   (3,049)            -        (3,049)
   Shares purchased by the ESOP                  -         6,466         6,466
   Shares purchased on the Internal Market       -         2,319         2,319
   Shares released from collateral               -        10,577        10,577
   Shares pledged as collateral                  -       (11,082)      (11,082)
   ESOP diversification (a)                      -        (2,652)       (2,652)
   Issuance of common stock with put rights  6,048             -         6,048
   Adjustment of shares to fair value           94        (3,466)       (3,372)
                                            ------      --------      --------
Balance December 30, 1999                   $6,142      $182,974      $189,116
                                            ======      ========      ========

(a)  Under diversification rules, as defined by the Plan, ESOP participants have
     the option of receiving a  distribution  of up to 25.0% of their  aggregate
     accounts,   in  order  to  convert  Company  stock  into  another  type  of
     investment.  The option extends over a five-year period beginning after the
     participant  has reached age 55 and has ten years of  participation  in the
     ESOP. At the sixth year, the  distribution  right increases to 50.0% of the
     participant's account.

(8)   Preferred Stock, Class C

Dividends  on the Class C  Preferred  Stock  accrued at an annual rate of 18.0%,
compounded quarterly.  At December 31, 1996, cumulative dividends of $11,147 had
not been recorded or paid. In February 1997, the ESOP purchased all of the Class
C Preferred Stock, which was immediately converted into Common Stock.

(9)   Common Stock

At December  30,  1999,  Common Stock  includes  those shares  issued to outside
investors,  officers and directors, current and former employees and the Savings
and Retirement Plan ("SARP"),  as well as any ESOP or SARP shares that have been
distributed in kind to former participants in the plans.

(10)   Common Stock Warrants and Restricted Stock

The  Company   initially  issued  warrants  on  September  9,  1988  to  certain
stockholders  to purchase a maximum of  5,891,987  shares of common stock of the
Company. The warrants were recorded at their fair value of $2.43 per warrant and
warrants issued to a lender were recorded at $3.28 per warrant. Each warrant was
exercisable to obtain one share of common stock. The stockholder  could exercise
the warrant and pay in cash the exercise  price of $0.25 for one share of common
stock or sell back to the Company a sufficient number of the exercised shares to
equal the value of the  warrants  to be  exercised.  All  warrants  were  either
exercised or canceled before their September 9, 1998 expiration date. There were
no  warrants   outstanding   at  December   30,  1999  and  December  31,  1998,
respectively.

The Company had a Restricted  Stock Plan (the "Plan") under which management and
key  employees  could be awarded  shares of common stock based on the  Company's
performance. The Company initially reserved 1,023,037 shares of common stock for
issuance under the Plan.  Under the Plan,  Restricted Stock Units ("Units") were
granted to participants who were selected by the  Compensation  Committee of the
Board of Directors.  Each Unit entitled the participant  upon achievement of the
performance  goals (all as defined) to receive one share of the Company's common
stock.  Units  could not be  converted  into  shares of common  stock  until the
participant's interest in the Units had vested. Vesting occurred upon completion
of the specified periods as set forth in the Plan.

(11)   Acquisitions

On December  10,  1999,  the Company  acquired  GTE  Information  Systems LLC, a
subsidiary of GTE Corporation,  for $167.5 million in cash and has accounted for
the  acquisition  as a purchase.  The purchase  price has been  allocated to the
assets acquired and the liabilities assumed based on preliminary  estimated fair
value at the date of  acquisition.  In  addition,  $6.4  million of the purchase
price was  allocated to in-process  research,  which the Company has expensed at
the date of  acquisition.  $67.7  million of  goodwill  has been  recorded  on a
preliminary  basis based on the  allocation  of the  purchase  price and will be
amortized  over 30 years.  On  December  13,  1999,  the name of the Company was
changed  to  DynCorp  Information  Systems  LLC  ("DIS").  It will  operate as a
separate  subsidiary  of  the  Company.  Operating  results  for  DIS  have been
included from the date of acquisition.

The following  unaudited pro forma combined financial  information  presents the
historical  results  of  operations  of the  Company  and DIS,  with  pro  forma
adjustments  as if DIS had been  acquired  as of the  beginning  of the  periods
presented.  The unaudited pro forma information is not necessarily indicative of
what the results of operations  actually would have been if the  transaction had
occurred  as of  the  beginning  of  those  periods,  or of  future  results  of
operations.

                                              1999                    1998
                                             ------                  ------
Revenue                                   $1,560,971               $1,457,870
Net income                                     4,251                    3,219
Basic earnings per share                       $0.42                    $0.31
Diluted earnings per share                     $0.41                    $0.31

On February 2, 1998,  the Company  acquired a majority of the net assets of FMAS
Corporation  ("FMAS"),  a  medical  outcome  measurement  and  data  abstraction
services company headquartered in Rockville, MD, for $10.2 million in cash. FMAS
is a leading provider of proprietary outcome performance  measurement systems to
DoD treatment  facilities as well as other public and  governmental  facilities.
The acquisition has been accounted for as a purchase,  and $7.1 million of value
assigned to a pending  patent,  $0.4  million of  goodwill,  and $0.4 million of
value  assigned  to  contracts  has been  recorded  based on  allocation  of the
purchase price. These amounts will be amortized over 17 years, 15 years, and the
life of the contracts, respectively.

(12)   Savings Plan

The Company has a Savings and Retirement Plan which is intended to qualify under
section 401(k) of the Internal Revenue Code. The plan allows eligible  employees
to contribute from 1.0% to 15.0% of their income on a pretax basis. In 1996, the
Company began matching  100.0% of the first 1.0% of employee  contributions  and
25.0%  of the  next  4.0%  of  employee  contributions,  provided  the  employee
contribution  was invested in the Company's Stock Fund.  Matching  contributions
are invested in additional shares of the Company's common stock. The Company has
expensed  approximately  $1,937,  $1,624,  and $1,224,  in 1999, 1998, and 1997,
respectively, related to these matching contributions.

(13)   Other Expenses

                                                 Fiscal Years Ended
                                                   1999       1998       1997
                                                   ----       ----       ----
 Amortization of costs in excess
  of net assets acquired (see Note 1)            $2,957     $1,575     $1,560
 In-process research and development write-off    6,400          -          -
 Provision for non-recovery of receivables        1,434        900        629
 Legal and other expense accruals
  associated with business discontinued in 1995       -          -        177
 Costs associated with businesses discontinued
  in 1988 and prior years
   o Asbestos liability issues (a)                    -       (670)     7,800
   o Subcontractor suit (b)                       1,700      1,177          -
   o Environmental costs (see Note 20(b))             -         23        180
 Miscellaneous (c)                               (1,947)      (318)         3
                                                -------     ------    -------
  Total Other                                   $10,544     $2,687    $10,349
                                                =======     ======    =======

(a) In connection with the global settlement that transferred  ownership of
    the   Fuller-Austin   Insulation   Company   ("Fuller-Austin")   to   a
    post-Fuller-Austin  bankruptcy  settlement  trust (the "Trust") for the
    benefit of present and future asbestos  claimants (see Note 20(a)), the
    Company reserved an additional $7.8 million in 1997 for the transfer of
    certain  property and insurance rights to the Trust, and the payment to
    the  Trust  of  certain   cash   consideration.   In  1998,  a  portion
    representing excess over future needs was reversed.

(b) Reserves for the estimated costs to resolve a lawsuit filed by a
    subcontractor of a former subsidiary (see Note 20(b)).

(c) 1999 miscellaneous consists predominately of gains on sales of certain
    assets and other miscellaneous items.

(14)   Income Taxes

As  prescribed  by SFAS No.  109,  "Accounting  for Income  Taxes",  the Company
utilizes the asset and liability  method of accounting  for income taxes.  Under
this method,  deferred  income taxes are recognized for the tax  consequences of
temporary  differences  by applying  enacted  statutory tax rates  applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of  existing  assets and  liabilities.  Valuation  allowances  are
provided if required.

Earnings  (loss)  from  continuing  operations  before  income  taxes,  minority
interest,  and  extraordinary item (see Note 4) were derived from the following:

                                              Fiscal Years Ended

                                     1999           1998               1997
                                     ----           ----               ----
  Domestic operations            $ 15,936       $ 26,909           $ 11,422
  Foreign operations                 (729)          (214)              (279)
                                 --------       --------           --------
                                 $ 15,207       $ 26,695           $ 11,143
                                 ========       ========           ========
The provision (benefit) for income taxes consisted of the following:

                                              Fiscal Years Ended

                                     1999           1998               1997
                                     ----           ----               ----
 Current:
  Federal                         $11,523        $ 7,616             $(1,926)
  Foreign                             120             22                  43
  State                               636            458                   -
                                  -------        -------             --------
                                   12,279          8,096              (1,883)
                                  -------        -------             --------

 Deferred:
  Federal                          (5,485)         2,933               6,653
  Foreign                               -         (1,470)                  -
  State                            (2,167)           298                 499
                                 ---------        ------              ------
                                   (7,652)         1,761               7,152
                                 ---------        ------              ------
 Valuation Allowance:
  Federal                               -              -              (2,488)
  State                                22           (298)               (499)
                                  -------          ------             -------
                                       22           (298)             (2,987)
                                  -------          ------             -------
                Total             $ 4,649        $ 9,559              $2,282
                                  =======        =======              ======

The components of deferred taxes are as follows:

                                                 Dec. 30,           Dec. 31,
                                                   1999               1998
                                                 --------           --------

Deferred tax liabilities:
  Employee benefits                             $ (1,933)          $ (2,223)
  Contracts revenue recognition                  (17,739)           (13,280)
  Intangible amortization                            (66)              (249)
  Depreciation and other amortization             (1,052)              (993)
  Other, net                                        (653)              (132)
                                                ---------           --------
    Total deferred tax liabilities               (21,443)           (16,877)

Deferred tax assets:
  Deferred compensation                              922               1,251
  Operating reserves and other accruals           23,518              13,138
  Increase due to federal rate change                335                 335
  Benefit of state tax on temporary
    differences and state net operating
    loss carryforwards                             5,028               2,861
                                                  ------              ------
     Total deferred tax assets                    29,803              17,585
                                                  ------              ------
 Total temporary differences
    before valuation allowances                    8,360                 708
  Valuation allowances:
    State                                         (4,758)             (4,736)
                                                  -------           ---------
     Total temporary differences
      affecting tax provision                      3,602              (4,028)
                                                  ------            ---------
  "Safe harbor" leases                            (4,632)             (5,113)
                                                 --------           ---------
Net deferred tax liability                       $(1,030)           $ (9,141)
                                                 ========           =========

No Federal  valuation  allowance  was  required for the  Company's  deferred tax
assets at December 30, 1999, and December 31, 1998.  State valuation  allowances
represent  reserves for income tax  benefits,  which are not  recognized  due to
uncertainty regarding future earnings in the applicable states. The net deferred
tax liability  includes  current  deferred tax assets of $3,517 and $3,357 as of
December 30, 1999 and December  31,  1998,  respectively,  which are included in
Other Current Assets on the consolidated balance sheets.

The  Company's  U.S.  Federal income tax returns have been  cleared with the IRS
through 1993.

Cash paid for income taxes was $4,942 for 1999,  $7,338 for 1998, and $2,676 for
1997.

The tax  provision  differs from the amounts  obtained by applying the statutory
U.S. Federal income tax rate to the earnings from continuing  operations  before
minority interest. The differences are reconciled as follows:

                                                        Fiscal Years Ended
                                                1999        1998          1997
                                               -----       -----         -----
 Expected Federal income tax provision        $5,322      $9,343      $  3,900
 Minority interest not included in tax
  provision                                     (446)       (277)          (70)
 Valuation allowance                               -           -        (2,488)
 State and local income taxes, net of
   Federal income tax benefit                 (1,637)        297             -
 Nondeductible amortization of intangibles
   and other costs                             1,173         724           726
 Foreign income tax                              120      (1,448)           43
 Foreign and fuel tax credits                    (54)        (27)          (31)
 Other, net                                      171         947           202
                                              ------      ------        ------
    Tax provision                             $4,649      $9,559        $2,282
                                              ======      ======        ======

The Company  has state net  operating  loss  carryforwards  available  to offset
future  taxable  income.  Following  are the  net  operating  losses  by year of
expiration:

                             Year of                     State Net
                          Expiration                  Operating Losses
                          ----------                  ----------------
                                1999                         $  726
                                2000                            800
                                2001                            403
                                2002                            331
                                2003                          1,019
                        Through 2013                         64,098
                                                            -------
                                                            $67,377
                                                            =======
(15)   Pension and Postretirement Benefits Plans

Multiemployer Pension Plan

Union   employees  who  are  not   participants  in  the  ESOP  are  covered  by
multiemployer  pension  plans  under  which  the  Company  pays  fixed  amounts,
generally  per hours  worked,  according to the  provisions of the various labor
contracts.  In 1999, 1998, and 1997, the Company expensed  $3,954,  $3,538,  and
$3,451,  respectively,  for these plans.  Under the Employee  Retirement  Income
Security Act of 1974 as amended by the Multiemployer Pension Plan Amendments Act
of 1980,  an  employer  is  liable  upon  withdrawal  from or  termination  of a
multiemployer  plan for its  proportionate  share of the plan's  unfunded vested
benefits liability.  Based on information  provided by the administrators of the
majority of these multiemployer plans, the Company does not believe there is any
significant amount of unfunded vested liability under these plans.

Defined Benefit Pension and Union Benefit Plans

On December 11, 1999,  the Company began  participating  in the DIS Pension Plan
for Salaried Employees,  which is a noncontributory defined benefit pension plan
sponsored by DIS, covering a majority of DIS' employees. The benefits to be paid
under this plan are  generally  based on years of  credited  service and average
final earnings.  The Company's  funding  policy,  subject to the minimum funding
requirements of employee  benefit and tax laws, is to contribute such amounts as
are determined on an actuarial basis to accumulate  funds sufficient to meet the
plan's benefit obligation to employees upon their retirement.  The assets of the
plan  consist  primarily  of  corporate  equities,   government  securities  and
corporate debt securities.

Also on December  11,  1999,  certain of the  Company's  union  employees  began
participating in the DynCorp  Information  Systems LLC Union Pension Plan, which
is a noncontributory defined benefit pension and a postretirement healthcare and
life insurance benefit plan, sponsored by DIS.

The significant weighted-average assumptions used by the Company for the pension
measurements were as follows at December 30, 1999:

         Discount rate                        7.75%
         Rate of compensation increase        5.00%
         Expected return on plan assets       9.00%

Net periodic  benefit cost for the  Company's  pension plans is $68 for the year
ended December 30, 1999. The projected benefit  obligation and fair value of the
pension plans' assets at December 30, 1999 is $44,553 and $57,604, respectively.
The net prepaid benefit cost at December 30, 1999 is therefore $13,051.

Postretirement Benefit Plan

On December 11, 1999, a majority of the Company's DIS employees  became  covered
under a postretirement  healthcare and life insurance  benefit plan sponsored by
DIS.  The  determination  of  benefit  cost for  postretirement  health  plan is
generally based on  comprehensive  hospital,  medical and surgical  benefit plan
provisions.

The   weighted-average   assumptions  used  by  the  Company  in  the  actuarial
computations for postretirement benefits were as follows at December 30, 1999:

Discount rate                          7.75%
Expected return on plan assets         6.75%

Net periodic benefit cost for the Company's  postretirement  healthcare and life
insurance  benefit plan as of December 30, 1999 is $53.  The  projected  benefit
obligation  and fair  value  of the  postretirement  benefit  plan's  assets  at
December 30, 1999 is $21,608 and $12,090,  respectively. The net accrued benefit
liability  at December 30, 1999 is therefore  $9,518.

(16)  Net Earnings Per Common Share

Basic EPS is computed by dividing common  stockholders' share of net earnings by
the  weighted  average  number of common  shares  outstanding  and  contingently
issuable  shares.  The  weighted  average  number of common  shares  outstanding
includes  issued  shares less shares held in treasury and any  unallocated  ESOP
shares.  Shares earned and vested but unissued under the  Restricted  Stock Plan
are  contingently  issuable  shares  whose  condition  for  issuance  have  been
satisfied  and as such have  been  included  in the  calculation  of basic  EPS.
Diluted EPS is computed similarly except the denominator is increased to include
the weighted average number of stock warrants and options outstanding,  assuming
the treasury stock method.

The following is a reconciliation  of shares for basic EPS to shares for diluted
EPS for the fiscal years ended:

                                                    1999       1998      1997
                                                    ----       ----      ----
Weighted average shares outstanding for
  basic EPS                                       10,044     10,242     8,985
   Effect of dilutive securities:
      Warrants                                         -        131     1,524
      Stock options                                  229        141       129
                                                  ------     ------    ------
Weighted average shares outstanding for
  diluted EPS                                     10,273     10,514    10,638
                                                  ======     ======    ======

(17)   Incentive Compensation Plans

The  Company  has  several  formal incentive compensation plans that provide for
incentive payments of cash and stock to officers  and  key  employees. Incentive
payments  under  these plans are based upon operational  performance, individual
performance or a combination thereof, as defined in the plans.

(18)   Stock Option Plan

In March 1999,  the  Company  adopted a Long-Term  Incentive  Stock Plan,  which
authorizes the grant of performance-based  stock and cash incentive compensation
in the form of stock  options,  stock  appreciation  rights,  restricted  stock,
performance grants and awards, and other stock-based grants and awards. Specific
terms relating to the grant are set by the Compensation Committee at the time of
the grant.  Stock options granted under the Plan permit  optionees to purchase a
designated  number of shares of  common  stock at an  exercise  price set by the
Committee,  which establishes vesting and exercise provisions to be set forth in
individual option agreements.  The exercise price may not be lower than the fair
market value of the shares as of the time the option is granted. Options granted
during 1999 generally vest based on cumulative profit performance of the Company
against a projected return over a four-year period.  Options,  which do not vest
during the first four  years,  will vest if, but only if, the  employee is still
employed by the Company at the earlier of the eighth anniversary of the grant or
the employee's 65th birthday. Options that are not exercised within ten years of
the grant date will expire.

The Company  adopted an  incentive  stock option plan in 1995,  whereby  options
could be granted to officers  and other key  employees  to purchase a maximum of
1,250,000  common  shares  at an option  price  not less than the most  recently
determined  fair market value as of the grant date.  The grants are  exercisable
only when vested and vest  proportionately over a period of seven or five years,
depending on the date of the grant. Options that are not exercised within ten or
seven  years  from the date of the  grant,  depending  on the date of the grant,
shall expire.  The fair value of each option grant is equal to the Formula Price
at the date of grant.

Stock option activity was as follows:

                                             1999        1998          1997
------------------------------------------------------------------------------
Outstanding January 1                   1,238,600      878,000        789,900
Granted                                   468,750      389,500        145,000
Exercised                                  (5,400)     (16,900)        (9,000)
Canceled or terminated                    (98,800)     (12,000)       (47,900)
------------------------------------------------------------------------------
Outstanding December 30, 31, and 31     1,603,150    1,238,600        878,000
Exercisable                               564,920      365,360        199,600

Average price
  Outstanding, beginning of Year           $18.69       $17.05         $16.55
     Granted                                24.38        22.13          19.48
     Exercised                              17.26        14.90          14.90
     Canceled or terminated                 19.82        16.17          16.61
     Outstanding, end of year               20.29        18.69          17.05

Weighted average grant date fair value of options was $24.38, $22.12, and $19.54
for 1999, 1998, and 1997, respectively.

The following table summarizes  information  about stock options  outstanding at
December 30, 1999:
                                                              Weighted-Average
Range of                 Number         Weighted-Average             Remaining
Prices              Outstanding           Exercise Price      Contractual Life
-------------------------------------------------------------------------------
$14.50 - 19.00          722,900                   $16.82                  3.15
 20.00 - 23.25          419,500                    21.76                  5.32
 23.50 - 24.50          460,750                    24.38                  6.57
-------------------------------------------------------------------------------
The following table summarizes  information  about stock options  exercisable at
December 30, 1999:

Range of                           Number                    Weighted-Average
Prices                        Exercisable                      Exercise Price
-------------------------------------------------------------------------------
$14.50 - 19.00                    466,720                              $16.58
 20.00 - 23.25                     98,200                               21.50
------------------------------------------------------------------------------

Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation", the Company
has elected to account for its employee  stock option plan under APB Opinion No.
25 "Accounting for Stock Issued to Employees." Accordingly, no compensation cost
has been  recognized  for this  plan.  Had  compensation  cost for the plan been
determined  based on the fair value at the grant date  consistent  with SFAS No.
123,  common  stockholders'  share of net  earnings and earnings per share would
have been as follows:

Fiscal Years Ended                   1999              1998              1997
------------------------------------------------------------------------------
Common stockholders' share of
 net earnings
 As reported                       $5,895           $15,055            $7,422
 Pro forma                          5,186            14,900             7,145
Basic earnings per share
     As reported                     0.59              1.47              0.83
     Pro forma                       0.52              1.45              0.80
Diluted earnings per share
     As reported                     0.57              1.43              0.70
     Pro forma                       0.50              1.42              0.67

The  minimum  value  is  estimated  on the date of grant  assuming  a five  year
expected life of the options,  a volatility  factor of zero, a dividend yield of
zero, and a risk-free interest rate of 5.2%, 4.6%, and 5.7%, for 1999, 1998, and
1997, respectively.

(19)   Leases

Future  minimum  lease  payments  required  under  operating  leases  that  have
remaining  noncancellable lease terms in excess of one year at December 30, 1999
are summarized below:

         Fiscal Years Ending,
         --------------------
         2000                               $   30,349
         2001                                   28,508
         2002                                   27,646
         2003                                   26,383
         2004                                   19,689
         Thereafter                             76,003
                                              --------
    Total minimum lease payments              $208,578
                                              ========
Net rent  expense for leases of $34,769,  $31,138 and $21,577 for 1999, 1998 and
1997,  respectively,  has been charged to Cost of Services and Corporate General
and Administrative Expense.

(20)   Contingencies and Litigation

The Company and its  subsidiaries  and affiliates are involved in various claims
and lawsuits,  including  contract  disputes and claims based on  allegations of
negligence and other tortious  conduct.  The Company is also potentially  liable
for certain personal  injury,  tax,  environmental,  and contract dispute issues
related to the prior  operations of divested  businesses.  In addition,  certain
subsidiary companies are potentially liable for environmental,  personal injury,
and contract and dispute claims. In most cases, the Company and its subsidiaries
have denied,  or believe they have a basis to deny liability,  and in some cases
have  offsetting  claims  against the  plaintiffs,  third  parties or  insurance
carriers.  The total amount of damages  currently  claimed by the  plaintiffs in
these  cases  is  estimated  to  be  approximately   $41.0  million   (including
compensatory  punitive  damages and  penalties).  The Company  believes that the
amount that will actually be recovered in these cases will be substantially less
than the amount  claimed.  After taking into account  available  insurance,  the
Company  believes  it is  adequately  reserved  with  respect  to the  potential
liability for such claims.  The estimates set forth above do not reflect  claims
that may have  been  incurred  but have not yet  been  filed.  The  Company  has
recorded  such  damages  and  penalties  that  are  considered  to  be  probable
recoveries against the Company or its subsidiaries.

 (a)   Certain Pre-1999 Contingent Liability

A former subsidiary,  Fuller-Austin Insulation Company ("Fuller-Austin"),  which
discontinued its industrial  insulation  business  activities in 1986,  became a
defendant  in  various  personal  injury  law  suits  that  were  filed  against
manufacturers,  distributors  and  installers of products  allegedly  containing
asbestos.  Fuller-Austin was a non-manufacturer  that installed and occasionally
distributed industrial insulation products.

Effective September 4, 1998,  Fuller-Austin filed a Plan of Reorganization  (the
"Plan") under Chapter 11 of the United  States  Bankruptcy  Code (the "Code") in
the United States Bankruptcy Court for the District of Delaware.

The  filing  of the  Plan  followed  a year of  negotiations  among a  committee
representing asbestos claimants (the "Committee"), a legal representative of the
unknown future claimants (the "Legal  Representative"),  Fuller-Austin,  and the
Company. As a consequence of these negotiations,  the Plan was developed as part
of a  pre-packaged  filing by  Fuller-Austin  under Section  524(g) of the Code.
Section 524(g) is designed to deal  specifically  with the resolution  under the
Code of obligations of debtors that have asbestos liability.

In furtherance of the Plan and the proposed global  settlement,  representatives
of Fuller-Austin,  the Company as  Fuller-Austin's  parent and sole stockholder,
the  Committee,  and the Legal  Representative  negotiated  a  separate  release
agreement under which the Company has been released from any and all present and
future liability for Fuller-Austin  asbestos liability,  in consideration of the
transfer of certain Company  property  (including all the  outstanding  stock of
Fuller-Austin)  and certain  insurance  rights to the  Fuller-Austin  settlement
trust,  and the payment to the trust of certain  cash  consideration.  The total
amount  reserved  for this purpose at December  31, 1997 was $14.0  million,  in
anticipation of the settlement under the Release Agreement.

Effective  December  10,  1998,  pursuant to the terms of a  Confirmation  Order
entered  jointly  on  November  13,  1998  by the  United  States  District  and
Bankruptcy  Courts  in  Wilmington,  Delaware,  and  the  terms  of the  Release
Agreement,  the  Company  transferred  and  conveyed  all  of its  interests  in
Fuller-Austin  (including all of  Fuller-Austin's  liabilities)  to a trust (the
"Trust") established by the Confirmation Order in accordance with Section 524(g)
of the Code.  The Trust is part of the Plan approved in the  Confirmation  Order
for the  resolution  of present and future  asbestos  personal  injury and other
claims against  Fuller-Austin.  As part of the  Confirmation  Order,  the Courts
issued an injunction channeling all future asbestos claims against Fuller-Austin
or the Company to the Trust.  The Trust has also  undertaken  to  indemnify  the
Company  against  any and all future  asbestos  and other  liability  related to
Fuller-Austin or the past ownership of Fuller-Austin by the Company.

Effective  December 11, 1998, the liabilities and assets of  Fuller-Austin  were
removed from the consolidated  financial  statements in accordance with the Plan
and  Confirmation  Order. The decreases in the balance sheet resulting from this
de-consolidation of Fuller-Austin is as follows:

Cash and cash equivalents                                   $ 8,476
Property and equipment                                      $ 1,248
Other assets                                                $44,462
Accrued liabilities                                         $ 8,464
Other liabilities and deferred credits                      $45,722

Under the terms of the Release Agreement, the Trust will continue to have access
on an  exclusive  basis to  certain  Company  insurance  aggregating  as much as
$251,500  and  issued  during  the  periods  1974  through  1986,   under  which
Fuller-Austin is an additional insured.

 (b)   General Litigation

The Company  retained  certain  potential  liability in connection with its 1989
divestiture of its major electrical  contracting  business,  Dynalectric Company
("Dynalectric").  The Company and Dynalectric were sued in 1988 in Bergen County
Superior   Court,   New  Jersey,   by  a  former   Dynalectric   joint   venture
partner/subcontractor   ("Subcontractor")   claiming   unspecified  damages  for
improper  subcontract  termination,  misappropriation of technology,  and fraud,
among other allegations. The New Jersey Court ordered the parties to arbitration
in December of 1997. Under the terms of a July 9, 1998  arbitration  award and a
decision  by the  Court  on  certain  discovery  sanctions  and  indemnification
obligations,  Dynalectric was required to pay the Subcontractor a total of $2.73
million,  of which the Company was responsible for two-thirds. The Subcontractor
filed an action to vacate the  arbitration  award and indicated its intention to
pursue other actions against Dynalectric and the Company. Effective December 27,
1999,  the  Subcontractor,   the  Company  and  Dynalectric  executed  a  mutual
settlement  finally  resolving all issues related to the original  Subcontractor
allegations  and the court and  arbitration  proceedings.  Under the  settlement
terms,  Dynalectric  was  obligated  to  pay  the  Subcontractor  $3.0  million,
two-thirds of which was ultimately paid by the Company.  The resolution of these
matters did not have a material impact on the Company's results of operations or
financial condition.

In November, 1994, the Company acquired an information technology business which
was involved in various disputes with federal and state agencies,  including two
contract  default  actions  and a qui tam  suit by a  former  employee  alleging
improper  billing of a federal  government  agency  customer.  The  Company  has
contractual  rights to  indemnification  from the former  owner of the  acquired
subsidiary  with  respect to the defense of all such claims and  litigation,  as
well as all  liability for damages when and if proven.  In October 1995,  one of
the  federal  agencies  asserted a claim  against  the  subsidiary  and gave the
Company notice that it intended to withhold  payments against the contract under
which the claim arose.  The agency withheld  approximately  $3.0 million due the
Company under one of the aforementioned  disputes. In January, 2000, pursuant to
a settlement  negotiated  by the former  subsidiary  owner,  the federal  agency
repaid the Company  approximately  $2.8 million of the offset funds. The Company
is pursuing a claim against the former  subsidiary  owner for the balance of the
offset  amount,  plus  interest  since the date of offset.  The  offset  amount,
excluding interest,  is included in accounts receivable and contracts in process
on the balance sheet as of December 30, 1999.  The Company  believes that it has
meritorious  claims for the  recovery  of these  amounts  under the terms of the
acquisition agreement indemnification provisions.

In December of 1997,  a  subsidiary  of the Company  filed an action  against an
unrelated  teaming  partner to enforce  the terms of a teaming  agreement  under
which  the  subsidiary  was to  receive a  subcontract  upon the award of a ship
operation  contract to the teaming partner.  The teaming partner filed a counter
claim against the Company's  subsidiary  alleging  approximately  $15 million of
damages  related  to the  subsidiary's  alleged  interference  with the  teaming
partner's  efforts to purchase a ship. The  subsidiary is defending  against the
counter claim and believes that it has meritorious  defenses.  The resolution of
this matter is not expected to have a material  impact on the Company's  results
of operations or financial condition.

As to environmental issues, neither the Company, nor any of its subsidiaries, is
named  a  Potentially   Responsible  Party  (as  defined  in  the  Comprehensive
Environmental  Response,  Compensation  and Liability Act (CERCLA)) at any site.
The  Company,  however,  did  undertake,  as part of the 1988  divestiture  of a
petrochemical  engineering  subsidiary,  an  obligation to install and operate a
soil and water remediation system at a subsidiary  research facility site in New
Jersey  and also is  required  to pay the costs of  continued  operation  of the
remediation system. In addition,  the Company,  pursuant to the 1995 sale of its
Commercial  Aviation  Business,  is  responsible  for the costs of  clean-up  of
environmental conditions at certain designated sites. Such costs may include the
removal  and  subsequent   replacement  of  contaminated  soil,  concrete,   and
underground  storage  tanks,  that existed  prior to the sale of the  Commercial
Aviation  Business.  The  resolution  of these matters is not expected to have a
material impact on the Company's  results of operations or financial  condition.
The Company  believes it has adequate  accruals  for any  liability it may incur
arising from the designated sites.

The Company is a party to other civil and contractual  lawsuits that have arisen
in the normal course of business for which potential liability,  including costs
of defense,  constitutes the remainder of the $41.0 million discussed above. The
estimated probable liability for these issues is approximately $18.0 million and
is  substantially  covered by  insurance.  All of the insured  claims are within
policy limits and have been tendered to and accepted by the applicable carriers.
The Company has recorded an offsetting asset (Other Assets) and liability (Other
Liabilities  and  Deferred  Credits) of $18.0  million at December  30, 1999 for
these items.

The Company has recorded its best estimate of the aggregate  liability that will
result from these  matters.  While it is not possible to predict with  certainty
the outcome of litigation and other matters  discussed  above, it is the opinion
of the Company's management,  based in part upon opinions of counsel,  insurance
in force,  and the facts currently  known,  that  liabilities in excess of those
recorded,  if any,  arising from such matters would not have a material  adverse
effect  on the  results  of  operations,  consolidated  financial  condition  or
liquidity of the Company over the  long-term.  However,  it is possible that the
timing of the  resolution  of  individual  issues could result in a  significant
impact  on the  operating  results  and/or  liquidity  for  one or  more  future
reporting periods.

The  major  portion  of  the  Company's   business  involves   contracting  with
departments and agencies of, and prime contractors to, the U.S. Government,  and
such contracts are subject to possible  termination  for the  convenience of the
government  and to audit and possible  adjustment to give effect to  unallowable
costs under cost-type  contracts or to other regulatory  requirements  affecting
both cost-type and fixed-price  contracts.  Payments received by the Company for
allowable  direct and indirect  costs are subject to  adjustment  and  repayment
after audit by  government  auditors if the  payments  exceed  allowable  costs.
Audits have been completed on the Company's incurred contract costs through 1995
with the exception of two contracts.  Reports on several  completed  audits have
not been issued pending  resolution of minor items.  The Company has included an
allowance for excess  billings and contract  losses in its financial  statements
that  it  believes  is  adequate  based  on its  interpretation  of  contracting
regulations and past experience.  There can be no assurance,  however, that this
allowance will be adequate.  The Company is aware of various costs questioned by
the government,  but cannot  determine the outcome of the audit findings at this
time. In addition,  the Company is occasionally the subject of investigations by
various   investigative   organizations,   resulting  from  employee  and  other
allegations regarding business practices.  In management's opinion, there are no
outstanding issues of this nature at December 30, 1999 that will have a material
adverse effect on the Company's  consolidated  financial  condition,  results of
operations or liquidity.

(21)   Business Segments

The Company has three reportable  segments,  DynCorp Information and  Enterprise
Technology ("DI&ET"), DynCorp Technical Services ("DTS") and DynCorp Information
Systems LLC ("DIS").  These three  reportable  segments are  strategic  business
units that  provide  distinctly  different  services to a variety of  customers.
DI&ET designs,  develops,  supports and integrates software and hardware systems
to provide customers with comprehensive solutions for information management and
engineering  needs. DTS provides  services ranging from aviation  maintenance to
multifaceted aerospace sciences, technology and avionics engineering. DIS offers
a  full  range  of  integrated   telecommunications   services  and  information
technology  solutions in the area of  professional  services,  business  systems
integration,  information  infrastructure  solutions and information  technology
operations and support.

The Company evaluates  performance based primarily on operating profit, but also
evaluates return on net assets and days sales  outstanding.  Operating profit is
the  excess  of  revenues  over  operating  expenses  and  certain  nonoperating
expenses.

The Company  derived  93%,  95% , and 97% of its  revenues  from  contracts  and
subcontracts  with the U.S.  Government in 1999,  1998,  and 1997  respectively.
Prime contracts  comprised 75% of revenue in 1999 and 72% of revenue in 1998 and
1997,  respectively.  Prime  contracts  with the  Department of Defense  ("DoD")
represented 40%, of revenue in 1999 and 1998, respectively, and 45% in  1997. In
1999,  the  Company's  second  largest  customer was the  Department  of Energy,
comprising  12% of revenue.  No other  customer  accounted  for more than 10% of
revenues in any year.

Revenue,  operating  profit,  identifiable  assets,  capital  expenditures,  and
depreciation and amortization by segment are presented below:

                                              Fiscal Years Ended
                                      1999             1998 (c)        1997 (c)
                                     ------           ---------       ---------
    Revenue
       DI&ET                    $  635,881      $   633,089      $  553,334
       DTS                         695,499          600,618         592,603
       DIS                          13,901                -               -
                                ----------       ----------      ----------
                                $1,345,281       $1,233,707      $1,145,937
                                ==========       ==========      ==========
 Operating Profit
       DI&ET                    $   30,575      $    31,138        $ 25,581
       DTS                          31,523           26,525          23,007
       DIS                             989                -               -
                                ----------      -----------        --------
                                    63,087           57,663          48,588
                                ----------      -----------        --------
 Corporate general and
   administrative                   21,741           18,630          17,785
 Interest expense                   18,943           14,144          12,432
 Interest income                    (1,393)          (1,600)         (2,018)
 Goodwill amortization (a)           2,958            1,575           1,560
 Costs associated with divested
   businesses                          286              530           8,157
 Minority interest included in
   operating profit                 (2,968)          (2,081)         (1,439)
 Acquisition costs                   8,461            1,336           2,203
 Other miscellaneous                  (148)           (1,566)        (1,235)
                                ----------       -----------       ---------
 Earnings from continuing
  operations before income
  taxes, minority interest,
  and extraordinary item        $   15,207        $  26,695        $ 11,143
                                ==========        =========        ========

                                              Fiscal Years Ended
                                      1999             1998            1997
                                    ------            -----           -----
    Identifiable Assets
       DI&ET                    $   205,798      $  193,094       $ 137,956
       DTS                          173,629         141,514         104,230
       DIS                          206,083               -               -
       Corporate (b)                 54,163          44,630         147,936
                                 ----------      ----------        --------
                                 $  639,673      $  379,238        $390,122
                                 ==========      ==========        ========

(a) 1999 includes write off of the unamortized goodwill balance of an impaired
    investment.
(b) 1997  includes  assets  related  to  probable   insurance   indemnification
    recoveries pertaining to a former subsidiary (see Note 20(a)).
(c) Data has been restated to give recognition to the 1999 composition of
    reportable segments.

                                            Fiscal Years Ended
                                   1999             1998            1997
                                   ----             ----            ----
    Capital Expenditures
    --------------------
       DI&ET                   $  8,266         $  2,064        $  2,433
       DTS                        2,519            1,129           1,820
       DIS                          872                -               -
       Corporate                  2,221            1,604             857
                               --------         --------        --------
                               $ 13,878         $  4,797        $  5,110
                               ========         ========        ========

                                                Fiscal Years Ended
                                        1999             1998            1997
                                       -----            -----           -----
    Depreciation and Amortization
    -----------------------------
       DI&ET                        $  6,641         $  5,651       $   3,775
       DTS                             2,132            1,349           2,337
       DIS                               860                -               -
       Corporate                       3,939            1,825           3,776
                                   ---------         --------         -------
                                   $  13,572         $  8,825         $ 9,888
                                   =========         ========         =======

The  equity in net  income  of  investees  accounted  for by the  equity  method
included  in  operating  profit and the amount of  investment  in equity  method
investees included in identifiable assets for each segment is presented below:

                                               Fiscal Years Ended
                                       1999             1998            1997
                                      ------           ------          ------
    Equity Investees Earnings
    -------------------------
       DTS                        $     362        $   1,563     $     1,130
                                  ---------        ---------     -----------
                                  $     362        $   1,563     $     1,130
                                  =========        =========     ===========

                                               Fiscal Years Ended
                                       1999             1998            1997
                                      -----            -----           -----
    Investment in Equity Investees
    ------------------------------
       DTS                        $   2,490        $   4,136       $   3,834
                                  ---------        ---------       ---------
                                   $  2,490         $  4,136       $   3,834
                                  =========         ========       =========

(22)  Quarterly Financial Data (Unaudited)

A summary of quarterly financial data for 1999 and 1998 is as follows:
<TABLE>

                                                          1999 Quarters                              1998 Quarters
                                               --------------------------------------      --------------------------------------
<CAPTION>

                                               First      Second    Third    Fourth(a)     First      Second     Third     Fourth(b)
                                               -----      ------    -----    ---------     -----      ------     -----     ---------
<S>                                         <C>         <C>       <C>       <C>        <C>         <C>        <C>          <C>

Revenues                                    $311,886    $321,262  $334,635  $377,498   $297,873    $303,602   $316,358     $315,874
Gross profit                                  16,517      17,442    16,114    14,969     13,937      15,675     16,297       14,647

Earnings from continuing operations
 before income taxes, minority interest
 and extraordinary item                        7,588       5,490     6,532    (4,403)     4,859       5,853     7,196        8,787

Minority interest                              1,103         205       590     1,070        420         528       485          648

Net earnings (loss)                            3,891       3,312     3,636    (4,850)     2,663       3,195     4,026        5,171

Net Earnings (loss) per common share:

 Basic earnings (loss) per share               $0.38       $0.33     $0.37    $(0.49)   $  0.27     $  0.31   $  0.39       $ 0.50
 Diluted earnings (loss) per share             $0.38       $0.32     $0.36    $(0.49)   $  0.25     $  0.30   $  0.38       $ 0.50

</TABLE>
[FN]

(a) 1999 Fourth Quarter includes:
     - In-process  research and development  write-off and  amortization of DIS
goodwill and other intangibles

(b) 1998 Fourth Quarter includes:
    - $2,500 reversal of reserve for contract compliance issues
</FN>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES

     None



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

     The directors and executive officers of the Company are:

Name                        Age  Position
----                        ---  --------
Dan R. Bannister            69   Director and Chairman of the Board
T. Eugene Blanchard         69   Director
Russell E. Dougherty        79   Director
Paul G. Kaminski            57   Director
Paul V. Lombardi            58   Director, President and Chief Executive
                                  Officer *
Dudley C. Mecum II          65   Director
David L. Reichardt          57   Director, Senior Vice President and General
                                  Counsel *
H. Brian Thompson           61   Director
Herbert S. Winokur, Jr.     56   Director and Chairman of the Executive
                                  Committee
Robert B. Alleger, Jr.      54   Vice President, Technical Services and
                                  President of the Technical Services Business
                                  Unit
John J. Fitzgerald          46   Vice President and Controller *
Patrick C. FitzPatrick      60   Senior Vice President and Chief Financial
                                  Officer *
Paul T. Graham              33   Vice President and Treasurer
H. Montgomery Hougen        64   Vice President and Secretary and Deputy
                                  General Counsel
Roxane P. Kerr              51   Senior Vice President, Human Resources and
                                  Administration *
Marshall S. Mandell         57   Senior Vice President, Corporate Development *
James P. McCoy              56   President of the Information Systems business
                                  unit *
Ruth Morrel                 45   Vice President, Law and Compliance
Henry H. Philcox            59   Vice President and Chief Information Officer
Charlene A. Wheeless        35   Vice President, Corporate Communications
Robert G. Wilson            58   Vice President and General Auditor

*    Officers  designated by an asterisk are deemed to be  "officers"  for
     purposes of Rule  16a-1(f),  as  promulgated  in Release No. 34-28869.

                                    DIRECTORS

Dan R. Bannister                                            Director since 1985

Mr. Bannister, age 69, Chairman of the Board, has served in that  capacity since
1997.  He  served  as President of the  Company  from 1984 to 1997 and  as Chief
Executive  Officer  from 1985 to 1997.  He retired as an active  employee of the
Company in 1999. He is a director of ITC Learning Corporation.  His current term
as a director expires in 2001.

T. Eugene Blanchard                                         Director since 1988

Mr. Blanchard, age 69, served  as  Senior  Vice  President  and Chief  Financial
Officer from 1979 to 1997, when he retired as an active employee of the Company.
He is the Chairman of the Company's  Employee Stock Ownership Plan Committee and
a trustee of the  Employee  Stock  Ownership  Plan  Trust.  He is a director  of
Landmark Systems Corporation. His current term as a director expires in 2000.

Russell E. Dougherty                                        Director since 1989

General Dougherty, age 79, was an attorney with the  law firm of McGuire, Woods,
Battle & Boothe  until his retirement in 1999.  He is a  retired General, United
States  Air Force, who served as Commander-in-Chief, Strategic  Air Command  and
Chief  of  Staff, Allied  Command, Europe.  From  1980 to  1986,  he  served  as
Executive  Director  of the Air Force  Association  and  Publisher  of Air Force
Magazine.  He was formerly a member of the Defense Science Board; trustee of the
Institute for Defense  Analysis;  and trustee of The Aerospace Corp. His current
term as a director expires in 2000.

Paul G. Kaminski                                            Director since 1997

Dr. Kaminski, age 57, also served as a  director  of  the  Company  from 1988 to
1994.  He is  President  and  Chief  Executive  Officer  of  Technovation,  Inc.
(consulting and investment  banking).  He served in the United States Department
of Defense as Under  Secretary of Defense for  Acquisition  and Technology  from
1994 to  1997.  He was  Chairman  and  Chief  Executive  Officer  of  Technology
Strategies & Alliances (strategic partnership  consulting) from 1993 to 1994. He
is a director of Anteon  Corporation;  Condor Systems,  Inc.;  DeCrane  Aircraft
Holdings,   Inc.;   Eagle  Picher   Technologies,   LLC;  and  General  Dynamics
Corporation. His current term as a director expires in 2001.

Paul V. Lombardi                                            Director since 1994

Mr. Lombardi, age 58, has served as President and Chief Executive  Officer since
1997. He served as Chief Operating Officer from 1995 to 1997; as  Executive Vice
President from 1994 to 1997;  as Vice President  from 1992 to 1994; as President
of the Federal Sector from 1994 to 1995;  and  as  President  of  the Government
Services Group from 1992 to 1994. He was Senior Vice President and Group General
Manager, Planning Research Corporation from 1990 to 1992. He is  a  director  of
Avid Medical Systems, Inc. His current term as a director expires in 2000.

Dudley C. Mecum II                                          Director since 1988

Mr. Mecum, age 65, is a  Managing  Director of  Capricorn  Holdings LLC (private
investment  company). He was a  partner, G. L. Ohrstrom & Co. (investment  firm)
from 1989 to 1997.  He served as Group Vice  President and  Director, Combustion
Engineering, Inc. from  1985  to  1988, and  previously as  Vice Chairman, Peat,
Marwick & Mitchell.  He is a director of CCC Information  Services  Group, Inc.;
Citigroup Inc.; Lyondell, Inc.;  Suburban  Propane  Partners  LLP; and Travelers
Property and Casualty Inc. His current term as a director  expires in 2000.

David L. Reichardt                                          Director since 1988

Mr. Reichardt, age 57, has served as Senior Vice President and  General  Counsel
of the  Company  since 1986. He served as President  of  Dynalectric  Company, a
former  subsidiary of the Company,  from 1984 to 1986 and as Vice  President and
General  Counsel of DynCorp  from 1977 to 1984.  His current  term as a director
expires in 2001.

H. Brian Thompson                                           Director since 1999

Mr. Thompson, age 61, has  served  as Chairman and  Chief  Executive  Officer of
Global  TeleSystems  Group,  Inc.  since March  1999. He was Chairman  and Chief
Executive Officer of LCI International  Inc. from 1991 to 1998 and Vice Chairman
of Qwest  Communications  International  Inc. from June to  December  1998. From
1981 to 1990, he was Executive Vice President,  MCI Communications  Corporation.
He is a director of Bell Canada  International Inc. and Williams  Communications
Group,  Inc. and a member of the  management  committee of Paging Brazil Holding
Company, LLC.  His current term as a director  expires in 2002.

Herbert S. Winokur, Jr.                                     Director since 1988

Mr. Winokur, age 56, served  as Chairman of the  Board from  1988 to 1997. He is
Chairman  and  Chief Executive  Officer of  Capricorn  Holdings,  Inc.  (private
investment  company) and Managing  General Partner of three Capricorn  Investors
limited partnerships  concentrating on investments in restructure situations. He
was  formerly  Senior  Executive  Vice  President  and  Director,  Penn  Central
Corporation.  He is a director of Azurix Corp.; CCC Information  Services Group,
Inc.; ENRON Corporation; Mrs. Fields Holdings, Inc.; and The WMF Group, Ltd. His
current term as a director expires in 2002.

                            OTHER EXECUTIVE OFFICERS

In addition to the executive  officers named above, who are also  directors, the
Company's executive officers include:

Robert B. Alleger,  Jr., age 54, Vice President, Technical Services, has  served
in that capacity since  1996 and as  President  of  DynCorp  Technical Services,
Inc. and President of the  Technical  Services business unit since January 1999.
He  served as President of the Aerospace  Technology  business  unit  from  1996
through 1998.  He was Vice President, Systems  Support Services, Lockheed Martin
Services,  Inc. from 1992 to 1996 and Vice President,  Business  Development, GE
Government Services, General Electric Company from 1989 to 1992.

John J.  Fitzgerald,  age 46, Vice President and Controller, has served in  that
capacity since 1997. He was Vice President and  Controller,  PRC, Inc. from 1992
to 1997;  Chief Financial Officer and Treasurer of American Safety Razor Company
from 1990 to 1992;  Vice President and Controller of  American  Bank  Stationery
Company  from  1988  to 1990; and  Chief  Financial  Officer  and  Treasurer  of
Physician's Pharmaceutical Services, Inc. from 1986 to 1988.

Patrick C. FitzPatrick,  age 60,  Senior  Vice  President  and  Chief  Financial
Officer,  has served in that  capacity  since 1997.  He also served as Treasurer
during  1997.  He  was  Chief  Financial  Officer,   American  Mobile  Satellite
Corporation from 1996 to 1997; Senior Vice President and Chief Financial Officer
of PRC, Inc.  from 1992 to 1996;  and  President  and Chief  Operating  Officer,
Oxford Real Estate Management Services from 1990 to 1992.

Paul T.  Graham,  age 33,  Vice  President  and  Treasurer,  has  served in that
capacity  since 1997.  He was Finance  Manager of the Company from 1992 to 1994,
Assistant  Treasurer  from 1994 to 1997,  and  Director of Finance  from 1995 to
1997.

H.  Montgomery  Hougen,  age 64, Vice President and Secretary and Deputy General
Counsel,  has served as a Vice President  since 1994 and as Corporate  Secretary
and Deputy General Counsel since 1984.

Roxane  P.  Kerr,   age  51,  Senior  Vice   President,   Human   Resources  and
Administration,  has served in that  capacity  since 1998.  She was  Director of
Human Resources, North America,  LucasVerity Plc from 1993 to 1998 and a private
human resources consultant from 1992 to 1993.
<PAGE>

Marshall S. Mandell, age 57, Senior Vice President,  Corporate Development,  has
served in that  capacity  since  1998.  He served  as Vice  President,  Business
Development  from  1994 to 1998.  He also  served  as  Acting  President  of the
Information  and  Engineering  Technology  strategic  business unit from 1997 to
1998. He served as Vice President, Business Development,  Applied Sciences Group
from 1992 to 1994. He was Senior Vice President,  Eastern  Computers,  Inc. from
1991 to 1992 and President of the Systems  Engineering  Group,  Ogden/Evaluation
Research Corporation from 1984 to 1991.

James P. McCoy, age 56, President of DynCorp Information Systems LLC, has served
in that capacity and as President of the Information Systems business unit since
December  1999.  He served as  Executive  Vice  President of the  Information  &
Enterprise  Technology  business unit from 1998 to December  1999. He was Senior
Vice  President of the  Professional  Technical  Services  business  unit of GRC
International, Inc. from 1995 to 1997.

Ruth Morrel,  age 45, Vice  President,  Law and  Compliance,  has served in that
capacity since 1994. She served as Group General Counsel from 1984 to 1994.

Henry H. Philcox,  age 59, Vice  President and Chief  Information  Officer,  has
served in that  capacity  since 1995.  He was Chief  Information  Officer of the
Internal Revenue Service from 1990 to 1995.

Charlene A. Wheeless,  age 35, Vice  President,  Corporate  Communications,  has
served in that capacity since February 2000. She served  as Director,  Corporate
Communications from 1996 to 2000 and as Manager,  Corporate  Communications from
1992 to 1995. She was Director,  Employee Communications for PRC, Inc. from 1995
to 1996.

Robert G. Wilson, age 58, Vice President and General Auditor, has served in that
capacity since 1985.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     The Company  believes that all required  persons filed all required reports
under Section 16 of the Securities Exchange Act in a timely manner.

Item 11.  Executive Compensation

     The following table sets forth  information  regarding annual and long-term
compensation  for the chief  executive  officer  and the other four most  highly
compensated  executive officers of the Company (the "named executive officers").
The table does not include  information for any fiscal year during which a named
executive officer did not hold such a position with the Company.

<TABLE>



                           SUMMARY COMPENSATION TABLE
<CAPTION>


                                                                                     Long Term
                                                                                   Compensation

                                                  Annual compensation                 Awards


                                                                      Other         Securities
                                                                      annual        underlying         All other
Name and principal position              Salary ($)     Bonus      compen-sation options/SARs (#)     compensation
             (a)                 Year       (c)        ($) (1)         ($)              (f)             ($) (2)
                                  (b)                    (d)           (e)                                (i)

<S>                              <C>        <C>           <C>               <C>            <C>                <C>

Paul V. Lombardi                 1999       370,400        78,000            --             70,000            11,940
   President & Chief             1998       342,104       185,300            --                 --            14,283
   Executive Officer             1997       332,789       160,000           177                 --             8,307

Patrick C. FitzPatrick           1999       272,170        43,300            --             30,000            14,840
   Senior Vice President &       1998       248,947       129,800            --                 --            10,896
   Chief Financial Officer       1997       241,933        90,000            --            100,000            11,060

Marshall S. Mandell              1999       224,446        36,200            --             30,000             9,191
   Senior Vice President         1998       212,724        87,300            --             40,000            10,854
   Business Development          1997       204,248        73,300           364                 --            10,155

David L. Reichardt               1999       272,170        43,300            --             30,000            14,191
   Senior Vice President &       1998       248,947       204,800            --                 --            16,706
   General Counsel               1997       245,082        90,000           244                 --            11,738

Robert B. Alleger, Jr.           1999       227,077       103,500            --             35,000            13,007
   President of the Technical    1998       191,585        88,200            --             20,000            12,788
   Services business unit        1997       184,777        81,000           141                 --             9,252
<FN>

    (1) Column (d) reflects  bonuses  earned and expensed  during year,  whether
        paid during or after such year.  Twenty  percent of executive  incentive
        plan  bonuses is  normally  paid in the form of shares of Common  Stock,
        valued at then-current market value.

    (2) Column  (i)  includes  respective  individual's  pro  rata  share of the
         Company's  contribution  to the Employee Stock  Ownership Plan ("ESOP"),
        Company-matching  contributions  to  the  Savings  and  Retirement  Plan
        ("SARP")  and the  imputed  income,  according  to IRS tax  tables,  for
        Company-paid  premiums for supplemental  executive  retirement plan life
        and term life insurance. These amounts are:

</FN>
</TABLE>

<TABLE>

<CAPTION>

                          ESOP contributions ($)           SARP contributions ($)         Imputed Income ($)

Name                      1999(1)      1998       1997      1999       1998     1997       1999       1998       1997
<S>                         <C>       <C>        <C>       <C>        <C>      <C>        <C>        <C>        <C>

Mr. Lombardi                4,320     4,435      4,356     2,886      3,000    2,850      4,735      6,848      1,101
Mr. FitzPatrick             4,320     4,435      4,356     2,500      2,338    1,267      8,020      4,122      5,437
Mr. Mandell                 4,320     4,435      4,356     2,143      2,143    2,361      2,728      4,277      3,438
Mr. Reichardt               4,320     4,435      4,356     3,125      3,125    1,269      6,746      9,146      6,112
Mr. Alleger                 4,320     4,435      4,356     4,570      2,106       --      3,937      6,247      4,896

<FN>

    (1)  Individual allocations of 1999 ESOP contributions have been estimated.
</FN>
</TABLE>

<TABLE>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>

                                                                                         Potential realizable value
                                                                                         at assumed annual rates of
                                                                                        stock price appreciation for
                                                                                                 option term
                                            Individual Grants


                       Number of       Percent of total
                       securities       options/ SARs
                       underlying         granted to       Exercise or
                      options/SARs       employees in      base price     Expiration
       Name           granted (#)        fiscal year        ($/Share)        date           5% ($)         10% ($)
       (a)                (b)                (c)               (d)            (e)            (f)             (g)
<S>                      <C>                 <C>             <C>            <C>              <C>

Mr. Lombardi             70,000              15.2%           $24.50         7/15/09          2,793,735      4,448,710
Mr. FitzPatrick          30,000               6.5%           $24.50         7/15/09          1,197,315      1,906,590
Mr. Mandell              30,000               6.5%           $24.50         7/15/09          1,197,315      1,906,590
Mr. Reichardt            30,000               6.5%           $24.50         7/15/09          1,197,315      1,906,590
Mr. Alleger              35,000               7.6%           $24.50         7/15/09          1,396,868      2,224,355

</TABLE>

<PAGE>

<TABLE>


              AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
                         AND FY-END OPTION/SAR VALUES
<CAPTION>


                                                              Number of securities
                                                             underlying unexercised          Value of unexercised
                                                             options/SARs at fiscal       in-the-money options/ SARs
                                                                  year-end (#)              at fiscal year-end ($)
                        Shares acquired
                         on exercise(#)       Value               Exercisable/                   Exercisable/
         Name                 (b)          realized ($)           Unexercisable                 Unexercisable
         (a)                                   (c)                     (d)                           (e)
<S>                            <C>              <C>               <C>           <C>             <C>           <C>

Mr. Lombardi                   --               --                86,000        114,000         599,200       284,800
Mr. FitzPatrick                --               --                40,000         90,000         160,000       240,000
Mr. Mandell                    --               --                38,000         74,500         204,000       123,500
Mr. Reichardt                  --               --                65,000         65,000         442,000       223,000
Mr. Alleger                    --               --                21,800         61,200         100,280        78,520

</TABLE>


                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     The Company has  established a Supplemental  Executive  Retirement Plan for
certain senior executives,  including the named executive officers,  whereby the
individuals (or their beneficiaries) receive payments having an aggregate amount
equal to 150% of the sum of their  final  annual  salary  rate plus their  final
target  annual  bonus,  paid over the  ten-year  period  following  their normal
retirement,  disability retirement,  and, in some cases, early retirement.  Upon
their death following such retirement,  the individuals' beneficiaries will also
receive an  additional  aggregate  lump-sum  payment  equal to  one-half  of the
foregoing  amount.  In the  event  of  their  death  prior  to  retirement,  the
individuals'  beneficiaries will receive, in lieu of the foregoing payments,  an
aggregate lump-sum payment equal to 100% of the sum of their final annual salary
rate plus their  final  target  annual  bonus.  The  Company  funds some of such
potential payments through split-dollar life insurance policies.

                          CHANGE-IN-CONTROL AGREEMENTS

     The Company has entered into  change-in-control  agreements  with the named
executive  officers  (the  "Severance  Agreements").  Each  Severance  Agreement
provides that certain benefits,  including a lump-sum payment, will be triggered
if the  executive  is  terminated  following a change in control of the Company,
unless termination occurs under certain circumstances set forth in the Severance
Agreements.  A  change  in  control  would  occur  if  the  Company  were  to be
substantially acquired by a new owner or if a majority of the Board of Directors
were replaced.  The Severance  Agreements  currently expire on December 31, 2000
but are subject to annual  automatic  renewal unless  terminated by the Board of
Directors.  The amount of such  lump-sum  payment would be 2.99 times the sum of
the executive's  annual salary and the average  incentive  compensation  for the
three prior years. Other benefits include payment of incentive  compensation not
yet paid for the prior  year and a pro rata  portion of  incentive  compensation
awards for the current year. Each Severance  Agreement also provides a reduction
if the proposed  payments exceed the amount the Company is entitled to deduct on
its federal income tax return.  The Severance  Agreements  also provide that the
Company will reimburse the  individual  for legal fees and expenses  incurred by
the executive as a result of termination.

                            COMPENSATION OF DIRECTORS

     Mr.  Bannister  receives  an annual fee of $144,000 to serve as Chairman of
the Board and member of various Board  committees  and to provide other services
to the Company.

     Other non-employee  directors of the Company receive an annual retainer fee
of $20,000 as directors and $2,750 for each  committee on which they serve.  The
chairmen of the Business  Ethics and  Compliance,  Compensation,  and  Executive
Committees  receive an additional annual fee of $2,000,  and the chairman of the
Audit Committee  receives an additional  annual fee of $3,000.  The Company also
pays non-employee directors a meeting fee of $1,000 for attendance at each Board
meeting and $500 for attendance at committee meetings.  Directors are reimbursed
for  expenses  incurred in  connection  with  attendance  at meetings  and other
Company functions.

     In 1999,  5,000  stock  options,  having  an  exercise  price  equal to the
then-current  fair market value,  were awarded to Mr. Thompson,  pursuant to the
Company's 1995 Stock Option Plan.

                   DIRECTORS AND OFFICERS LIABILITY INSURANCE

     The Company has  purchased and paid the premium for insurance in respect of
claims against its directors and officers and in respect of losses for which the
Company may be required or  permitted  by law to indemnify  such  directors  and
officers. The directors insured are the directors named herein and all directors
of the  Company's  subsidiaries.  The  officers  insured  are all  officers  and
assistant  officers of the Company and its subsidiaries.  There is no allocation
or segregation  of the premium as regards  specific  subsidiaries  or individual
directors and officers.

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     None of the  members of the  Compensation  Committee  are current or former
employees  of or have a business  or other  relationship  with the  Company.  No
executive   officer  of  the  Company  serves  on  the  board  of  directors  or
compensation  committee of any entity (other than  subsidiaries  of the Company)
whose  directors  or  executive  officers  served on the Board of  Directors  or
Compensation Committee of the Company.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     As of March 15,  2000,  the Company had  10,410,958  shares of Common Stock
outstanding,  which  constituted  all the outstanding  voting  securities of the
Company. If all shares issuable upon exercise of all vested and unvested options
and  shares  issuable  as a result of  expiration  of  deferrals  under a former
Restricted  Stock  Plan were to be issued,  the  outstanding  voting  securities
following such events (the "fully  diluted  shares") would consist of 11,998,981
shares of Common  Stock.  The  following  tables show  beneficial  ownership  of
outstanding  voting  shares as a percentage of currently  outstanding  stock and
beneficial  ownership  of issued and issuable  shares as a percentage  of common
stock on a fully diluted basis assuming all such exercises and issuances.

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The following table presents  information as of March 15, 2000,  concerning
the only beneficial owners of five percent or more of the outstanding  shares of
the Company's common stock.


         Name and address of                  Amount & nature of    Percent of
           beneficial owner                        ownership          shares

 DynCorp Employee Stock Ownership Plan Trust       7,451,989           71.6%
 c/o  DynCorp                                      Direct (1)
      11710 Plaza America Drive
      Reston, Virginia  20190

 DynCorp Saving and Retirement Plan Trust            763,758            7.3%
 c/o  DynCorp                                        Direct (1)
      11710 Plaza America Drive
      Reston, Virginia  20190


    (1)  The Trusts  hold  these  shares for the  accounts  of several  thousand
         participants  who are current or former  employees of the Company.  The
         Trustees vote the shares in accordance with instructions  received from
         participants.

<PAGE>

                        SECURITY OWNERSHIP OF MANAGEMENT

     The following  table presents  information as of March 15, 2000  concerning
the  beneficial  ownership of the Company's  common stock by directors and named
executive  officers  and all  directors  and  officers  as a group.  Shares held
indirectly  include those held on behalf of the individuals in the ESOP and SARP
Trusts.

<TABLE>

                          Amount & nature of ownership

<CAPTION>

Name and title of beneficial owner        Outstanding     Obtainable within      Total                  Percent of
                                            shares           60 days (1)                                shares (2)
<S>                                             <C>                  <C>           <C>      <C>           <C>

R. B. Alleger, Jr.                                2,239               28,400        30,639  Direct          *
President of the Technical Services               4,303                              4,303  Indirect
   business unit

D. R. Bannister                                 263,289              132,000       395,289  Direct        }3.7%
Chairman of the Board & Director                 48,290                             48,290  Indirect

T. E. Blanchard(3)                               38,426               64,900       103,326  Direct        }1.3%
Director                                         51,828                             51,828  Indirect

R. E. Dougherty                                   4,276                    0         4,276  Direct          *
Director

P. C. FitzPatrick                                 2,720               50,000        52,720  Direct          *
Senior Vice President & Chief                     4,257                              4,257  Indirect
  Financial Officer

P. G. Kaminski                                        0                7,500         7,500  Direct          *
Director

P. V. Lombardi                                   25,334              104,000       129,334  Direct        }1.1%
President, Chief Executive Officer
  & Director                                      7,750                              7,750  Indirect

M. S. Mandell                                     5,501               54,000        59,501  Direct          *
Senior Vice President, Corporate                  3,367                              3,367  Indirect
  Development

D. C. Mecum II                                    2,825                2,500         5,325  Direct          *
Director

D. L. Reichardt                                  28,738               80,000       108,738  Direct         1.0%
Senior Vice President, General                    6,425                              6,425  Indirect
   Counsel & Director

H. B. Thompson                                        0                    0             0
Director

H. S. Winokur, Jr.                               25,639                    0        25,639  Direct        }3.6%
Director                                        409,773                            409,773  Indirect

All directors and officers as a group           439,969              593,800     1,033,769  Direct        }13.5%
                                                580,434                            580,434  Indirect
</TABLE>

[FN]

     (1) Column reflects shares issuable upon exercise of options, which will be
vested as of the end of such period.

     (2) Reflects  aggregate direct and indirect shares as a percentage of fully
diluted  shares.  An asterisk  indicates that beneficial ownership is less  than
one percent of the class.

     (3) Mr. Blanchard disclaims beneficial ownership of 40,000 shares  owned by
his spouse.

</FN>

Item 13.  Certain Relationships and Related Transctions

     Mr.  Blanchard serves as Chairman of the  Administrative  Committee for the
Company's  Employee Stock  Ownership Plan and as a trustee of the Employee Stock
Ownership Plan Trust.  He is compensated at an hourly fee rate and is reimbursed
for expenses.  Total fees in the amount of $48,000 were paid to Mr. Blanchard in
1999.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Form 10-K:

1.  All financial statements.

2.  Financial statement Schedules.

 Schedule II - Valuation and  Qualifying  Accounts for the Years Ended  December
   30, 1999 and December 31, 1998 and 1997.

All other  financial  schedules not listed have been omitted since  the required
information is included in the  Consolidated  Financial  Statements or the notes
thereto, or is not applicable or required.

3.  Exhibits.

Exhibit   Description

3.1       Certificate of Incorporation, as currently in effect, consisting of
          Amended and Restated Certification of Incorporation (incorporated by
          reference to Registrant's Form 10-K/A for 1995, File No. 1-3879)

3.2       Registrant's By-laws as amended to date (incorporated  by  reference
          to Registrant's  Form S-1, File No. 1-3879)

4.1       Indenture and supplement,  dated  April 18, 1997 between Dyn Funding
          Corporation (a wholly-owned subsidiary of the Registrant) and Bankers
          Trust Company relating to Contract Receivable Collateralized Notes
          (incorporated by reference to Registrant's Post-Effective Amendment
          No. 1 on Form S-2 to Form S-1, File No. 33-59279)

4.2       Indenture,  dated March 17, 1997, between the  Registrant  and United
          States Trust Company of New York relating to the 9 1/2% Senior
          Subordinated Notes due 2007 (incorporated by reference to Registrant's
          Form S-4, File No. 333-2535)

4.3       Specimen  Common Stock  Certificate  (incorporated  by reference to
          Registrant's Form 10-K for 1988, File No. 1-3879)

4.4       Article Fourth of the Amended and Restated  Certificate of
          Incorporation (incorporated  by reference to Registrant's Form 10-K
          for 1992, File No. 1-3879)

4.5       Second Amended and Restated Credit Agreement by and among Citicorp
          North  America, Inc.,  certain lenders, and the Registrant dated May
          15, 1997 (incorporated by reference to Registrant's Form S-4, File No.
          333-2535)

4.6       Stockholders Agreement (incorporated by reference to Registrant's
          Form S-1, File No.  33-59279)

10.1      Deferred  Compensation  Plan  (incorporated  by reference to
          Registrant's  Form  10-K for  1987,  File No. 1-3879)

10.2      Management Incentive Plan (incorporated  by reference to Registrant's
          Form 10-K for 1997,  File No. 1-3879)

10.3      Executive  Incentive Plan  (incorporated by reference to Registrant's
          Form 10-K for 1997,  File No. 1-3879)

10.4      Severance  Agreements  (incorporated  by  reference to Exhibits (c)(4)
          through  (c)(12) to Schedule 14D-9 filed by Registrant January 25,
          1998)

10.5      Amendment to Severance Agreement of Paul V. Lombardi, Vice  President,
          Government Services Group and currently President and Chief Executive
          Officer (incorporated by reference to Registrant's Form 10-K for 1993,
          File No. 1-3879)

10.6      Amendment to Severance Agreement of Patrick C. FitzPatrick, Senior
          Vice President and Chief Financial Officer (incorporated by reference
         to Registrant's Form 10-K for 1996, File No. 1-3879)

10.7      Amendment to Severance Agreement of David L. Reichardt, Senior  Vice
          President  and  General   Counsel (incorporated by reference to
          Registrant's Form 10-K for 1996, File No. 1-3879)

10.8      Restricted   Stock  Plan (incorporated  by reference to Registrant's
          Form 10-K/A for 1995, File No. 1-3879)

10.9      1995 Stock Option Plan, as amended  (incorporated  by reference to
          Registrant's Form 10-K for 1997, File No. 1-3879)

21        Subsidiaries  of the  Registrant  (filed  herewith)

23        Consent of Independent Public Accountants (filed herewith)

(b)  Reports on Form 8-K

Form 8-K was filed on December 27, 1999 for the December 10, 1999 acquisition of
100% of the limited  liability  company interest of GTE Information  Systems LLC
from Contel Federal Systems,  Inc., a subsidiary of GTE  Corporation.  Item 7 of
the  Form  8-K  included  the  Purchase   Agreements,   Credit  Agreement,   and
Registration Rights Agreement.

An amendment to the  aforementioned  Form 8-K, Form 8-K/A, was filed on February
23, 2000 and included the audited  financial  statements of Information  Systems
Division as of December 31, 1998 and 1997,  together with auditors' report,  the
unaudited pro forma  combined  statements of operation  for the  nine-month  and
twelve-month   periods  ending   September  30,  1999  and  December  31,  1998,
respectively,  giving effect to the acquisition,  and the notes to the unaudited
pro forma combined financial statements.

                                   SIGNATURES

Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                             DYNCORP

March 22, 2000                          By:  /s/ P.V. Lombardi
                                            ------------------
                                              P. V. Lombardi
                                              President and Chief
                                              Executive Officer


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report is signed below by the following  persons on behalf of the Registrant and
in the capacities and on the dates indicated.

/s/ P. V. Lombardi
_____________________       President and Director           March 22, 2000
    P. V. Lombardi          (Chief Executive Officer)

/s/ P.C. FitzPatrick
_____________________       Senior Vice President -          March 22, 2000
    P. C. FitzPatrick       Chief Financial Officer

/s/ D.L. Reichardt
_____________________       Senior Vice President -          March 22, 2000
    D. L. Reichardt         General Counsel and Director

/s/ J.J. Fitzgerald
_____________________       Vice President                   March 22, 2000
    J. J. Fitzgerald        and Controller
                            (Chief Accounting Officer)
/s/ D.R. Bannister
_____________________       Director                         March 22, 2000
    D. R. Bannister

/s/ T.E. Blanchard
_____________________       Director                         March 22, 2000
    T. E. Blanchard

/s/ H.S. Winokur, Jr.
_____________________       Director                         March 22, 2000
    H. S. Winokur, Jr.

/s/ D.C. Mecum II
_____________________       Director                         March 22, 2000
    D. C. Mecum II

/s/ R.E. Dougherty
____________________        Director                         March 22, 2000
    R. E. Dougherty

/s/ P.G. Kaminski
____________________        Director                         March 22, 2000
    P. G. Kaminski

/s/ H.B. Thompson
____________________        Director                         March 22, 2000
    H. B. Thompson


DynCorp and Subsidiaries

Schedule II - Valuation and Qualifying Accounts
For the Fiscal Years Ended, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>

                                     Balance at    Charged to    Write-off of               Balance
                                     Beginning     Costs and     Uncollectible            at End of
       Description                   of Period     Expenses      Accounts       Other        Period

<S>                                   <C>         <C>              <C>         <C>          <C>

Year Ended December 30, 1999
  Allowance for doubtful accounts     $ 1,126     $  1,434         $(130)      $    726     $3,156

Year Ended December 31, 1998
  Allowance for doubtful accounts     $   476     $    900         $(234)      $   (16)     $1,126

Year Ended December 31, 1997
  Allowance for doubtful accounts     $   229     $    629         $(382)      $     -      $  476

</TABLE>