SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2000    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

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:

                                  Common Stock
                                (Title of class)

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. |X| Yes |_| 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 is based on the  Company's  March 15, 2001 internal
market price of $31.00 per share. Approximately 4.6% of outstanding voting stock
is held by nonaffiliates and has an aggregate market value of $14,952,478.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest  practicable  date.  10,435,954  shares of common
stock having a par value of $0.10 per share were outstanding March 22, 2001.

<PAGE>



                                TABLE OF CONTENTS
                                      2000
                                    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                                             3-4
    6. Selected Financial Data                                           5-6
    7. Management's Discussion and Analysis of Financial
         Condition and Results of Operations                             6-13
    8. Financial Statements and Supplementary Data
       Report of Independent Public Accountants                          14
       Financial Statements
         Consolidated Balance Sheets
           Assets                                                        15
           Liabilities and Stockholders' Equity                          16
         Consolidated Statements of Operations                           17
         Consolidated Statements of Cash Flows                           18
         Consolidated Statements of Stockholders' Equity                 19
         Notes to Consolidated Financial Statements                      20-36
    9. Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosures                            36


       Part III

    10.Directors and Executive Officers of the Registrant                37-39
    11.Executive Compensation                                            40-42
    12.Security Ownership of Certain Beneficial Owners and Management    42-43
    13.Certain Relationships and Related Transactions                    44


       Part IV

    14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K  44-45

    Signatures                                                           46

    Schedule II-Valuation and Qualifying Accounts                        47


<PAGE>

                                     PART I

ITEM 1. BUSINESS

General Information

DynCorp  and  subsidiaries  (collectively  the  "Company")  provide  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 Departments of Defense,  Energy,  State, and
Justice,  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 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  programs,  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 fiscal years ended 2000,  1999, and 1998 were $909.6 million,  $695.5
       million, and $600.6 million, respectively.

       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, government operational outsourcing, network and
       communications  engineering,  seat  management,   metrology  engineering,
       healthcare   information   and  technology   services  and  security  and
       intelligence  programs.  Revenues for fiscal years ended 2000,  1999, and
       1998  were  $671.4   million,   $635.9   million,   and  $633.1  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.  Revenues for the fiscal year ended 2000 and the twenty days
       ended  December  30,  1999,   were  $228.1  million  and  $13.9  million,
       respectively. 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 and $233.6
       million for 1999 and 1998, respectively.

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 $6.1  billion at  December  28,  2000,  compared  to
December 30, 1999 backlog of $4.4 billion,  a net increase of $1.7 billion.  The
net  increase  in backlog  was  primarily  due to two  domestic  U.S.  Air Force
aviation maintenance contracts and two international  programs with the U.S. Air
Force and U.S.  Army  awarded in 2000 to DTS.  The backlog at December  28, 2000
consisted of $3.9 billion for DTS, $1.8 billion for DI&ET,  and $0.4 billion for
DIS  compared to December  30, 1999 of $2.2  billion for DTS,  $1.7  billion for
DI&ET, and $0.5 billion for DIS. Of the total backlog at December 28, 2000, $4.6
billion is expected to produce revenues after 2001: DTS $3.0 billion, DI&ET $1.3
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

<PAGE>

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.  The  Company  derived  98%,  93%,  and  95% of its  revenues  from
contracts and  subcontracts  with the U.S.  Government in 2000,  1999,  and 1998
respectively.  Prime contracts  comprised 79% of revenue in 2000, 75% of revenue
in 1999,  and 72% of revenue in 1998.  Prime  contracts  with the  Department of
Defense  ("DoD")  represented 44% of revenue in 2000, and 40% of revenue in 1999
and 1998,  respectively.  In  2000, 1999, and 1998,  99% of the Company's  prime
contract revenue was from the U.S. Government.

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 the contracts with foreign  customers 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  20,000
employees worldwide,  the Company is one of the largest employee-owned companies
in the United States.

Employees

At December 28, 2000, the Company  employed 19,404 full-time and 1,438 part-time
employees.  Approximately  993  employees  were  located  outside  of the United
States.  Of  the  Company's  U.S.  employees,  4,223  were  covered  by  various
collective bargaining agreements with labor unions.

At year-end,  the Company had approximately 432 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

<PAGE>

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 pay off the mortgage on the property.

ITEM 3. LEGAL PROCEEDINGS

This item is  incorporated  herein by reference  to Note 18 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 2000.

                                     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 and the Capital  Accumulation  and Retirement Plan
 ("Savings Plans"),  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 trustees of the Savings Plans ; and
    - eligible employees and directors, on a pro rata basis.

 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 first to the next 10,000 shares offered by
 each  remaining  seller  and then to the next  20,000  shares  offered  by each
 remaining  seller,  and offers to sell in excess of 30,500  shares will then be
 accepted on a pro rata basis.

<PAGE>

 The foregoing procedure does not apply to "accelerated  distribution" shares to
 be sold by the  Savings  Plan  trustees.  In  February  2001,  terminated  ESOP
 participants  who were  scheduled  to receive  distributions  in 2002 and later
 years were offered the  opportunity  to accelerate  the  distribution  of those
 shares they would otherwise receive in those years.  Electing participants must
 put their  shares to the trust,  which will sell as many shares on the Internal
 Market as there are purchase orders remaining after the procedure  described in
 the foregoing paragraph is completed. The cash proceeds from such sales will be
 used to pay the put  purchase  price.  The number of  accelerated  distribution
 shares on each Internal Market trade date will be equal to the number of shares
 which the trustee can sell,  and each electing  participant  will receive a pro
 rata distribution.

 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 for the past two years.
<TABLE>
<CAPTION>
                Quarter Ended                               Formula Price ($)       Market Factor
                -------------                               -----------------       -------------
                <S>                                         <C>                     <C>

                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
                March 30, 2000                              22.75                   1.50
                June 29, 2000                               23.50                   1.39
                September 28, 2000                          22.75                   1.24
                December 28, 2000                           29.00                   0.94
</TABLE>


There were  approximately  767 and 722 record holders of DynCorp common stock at
December 28, 2000 and December 30, 1999, respectively. The Savings Plans' Trusts
owns  8,539,382  shares,  or 82% of  total  outstanding  shares,  on  behalf  of
approximately 40,000 current and former employees of the Company. Cash dividends
have not been paid on the common  stock  since  1988.  The  Company's  financing
instruments severely restrict its ability to pay cash dividends.

<PAGE>

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.)  References  to "note" are the
footnotes to the audited Consolidated Financial Statements.
<TABLE>
<CAPTION>
                                                                           Fiscal Year Ended
                                                                           -----------------
                                                     Dec 28        Dec 30        Dec 31        Dec 31        Dec 31
                                                    2000 (a)      1999 (b)      1998 (c)      1997 (d)      1996 (e)
                                                    --------      --------      --------      --------      --------
<S>                                               <C>           <C>           <C>           <C>           <C>

Statement of Operations Data:
Revenues                                          $ 1,809,109   $ 1,345,281   $ 1,233,707   $  1,145,937  $ 1,021,453
Cost of services                                  $ 1,705,257   $ 1,280,239   $ 1,173,151   $  1,096,246  $   970,163
Corporate general and administrative              $    29,350   $    21,741   $    18,630   $     17,785  $    18,241
Interest expense                                  $    41,408   $    18,943   $    14,144   $     12,432  $    10,220
Earnings from continuing operations before
    extraordinary item and certain other
    expenses (f)                                  $    10,042   $     9,487   $    15,585   $     15,579  $    12,774
Earnings from continuing operations before
    extraordinary item (g)                        $     9,894   $     7,590   $    15,055   $      7,422  $    11,949
Net earnings                                      $     9,894   $     5,989   $    15,055   $      7,422  $    14,629
Common stockholders' share of net earnings        $     8,052   $     5,895   $    15,055   $      7,422  $    12,345
EBITDA (h)                                        $    81,308   $    42,112   $    45,226   $     29,274  $    34,948
Earnings per share from continuing operations
    before extraordinary item
         Basic                                    $      0.94   $      0.75   $      1.47   $       0.83  $      1.14
         Diluted                                  $      0.92   $      0.73   $      1.43   $       0.70  $      0.82
Common stockholders' shares of net earnings
         Basic                                    $      0.77   $      0.59   $      1.47   $       0.83  $      1.46
         Diluted                                  $      0.75   $      0.57   $      1.43   $       0.70  $      1.05
Balance Sheet Data:
Total assets                                      $   644,341   $   639,673   $   379,238   $    390,122  $   368,752
Long-term debt excluding current maturities       $   283,889   $   334,944   $   152,121   $    152,239  $   103,555
Redeemable common stock                           $   246,330   $   189,116   $   183,861   $    154,840  $   139,322
<FN>

(a)     2000 includes $5,998 for the replacement of core systems, including  DIS
        systems.
(b)     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 research and development write-off $6,400,  settlement of
        a suit with a former electrical  subcontractor  $2,200, and write-off of
        cost in excess of net assets acquired of consolidated subsidiary $1,234.
(c)     1998 includes reversal of $670 reserve for asbestos litigation (see Note
        18 (a)),  $1,177  accrual  for  subcontractor  suit,  reversal of $2,500
        reserve  for  contract  compliance  issues,  and $2,159  expense for the
        replacement of core systems.
(d)     1997 includes  $7,800  accrual of costs  related to asbestos  litigation
        (see Note 18 (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 12).
(e)     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.
(f)     Certain  other  expenses  include  costs and  expenses  associated  with
        divested  businesses  of $148 in 2000,  $1,897  in  1999,  $530 in 1998,
        $8,157 in 1997, and $825 in 1996.
(g)     The extraordinary  loss, net of income taxes, in 1999 of $1,601 resulted
        from the early  extinguishment of debt.
(h)     EBITDA  as  defined  by  management  consists  of  net  earnings  before
        extraordinary   item,  income  tax  provision,   net  interest  expense,


<PAGE>

        depreciation and amortization. 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. See Item 7 for
        further discussion on EBITDA.
</FN>
</TABLE>


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 2000,  1999,  and 1998.  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 U.S.
Departments of Defense, Energy, State, and Justice, 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.

On December  10,  1999,  the Company  acquired  GTE  Information  Systems LLC, a
subsidiary  of GTE  Corporation  and  changed  its name to  DynCorp  Information
Systems  LLC.  It  operates  as  a  separate  subsidiary  of  the  Company.  The
acquisition was accounted for as a purchase; accordingly,  operating results for
DynCorp Information Systems LLC have been included from the date of acquisition.

The Company has three  Strategic  Business  Segments:  DynCorp  Information  and
Enterprise Technology ("DI&ET"),  DynCorp Technical Services ("DTS") and DynCorp
Information Systems LLC ("DIS").

Revenue and Operating Profit

In 2000, revenue increased by $463.8 million,  or 34.5%, from 1999 compared to a
$111.6 million, or 9.0%,  increase in 1999 revenue over 1998.  Operating profit,
defined  as  the  excess  of  revenues  over  operating   expenses  and  certain
nonoperating expenses,  increased by $37.5 million, or 59.4%, from 1999 compared
to a $5.4 million,  or 9.4%,  increase in 1999  operating  profit from 1998. The
operating profit was $100.6 million,  $63.1 million,  and $57.7 million in 2000,
1999, and 1998, respectively. The growth in revenue and operating profit was due
to new contract wins, increased tasking on existing contracts, and the full year
impact of DIS, which was acquired in late 1999. DIS accounted for  approximately
$214.2  million,  or 46.2%,  of the revenue  increase  and  approximately  $16.8
million, or 44.9%, of the operating profit increase from 1999.

DTS revenue and operating profit showed significant growth for the twelve months
ended December 28, 2000. Revenues were $909.6 million in 2000 compared to $695.5
million  in 1999,  an  increase  of $214.1  million or 30.8%.  Operating  profit
increased by $10.9  million to $42.4  million,  or 34.6%,  from $31.5 million in
1999. The increase in revenue resulted from stronger growth in its international
services,  logistics  support and aviation  services  businesses.  International
services  had  increased  tasking  on  State  Department   contracts   providing
protective support and police services in several countries,  increased services
on a contract  in support of the  government's  drug  eradication  program,  and
increases on an  international  logistical  support  contract  including work in
Bosnia and East  Timor.  There were  several new  military  base  contracts  for
logistics services and increases in the level of tasking on contracts  providing
repair and maintenance on military aircraft.  DTS's revenues were also increased
by the phase-in of a new contract  with the U.S.  Army in the fourth  quarter of
2000.  The increase in operating  profit  resulted from higher  revenue as noted
above. In addition,  operating profits grew faster than revenues due to improved
profit  margins in some of its  service  areas.  These  increases  in  operating
profits were offset slightly by a decrease in profits on a DTS start-up venture.

The DTS business  unit  increased  backlog by 77.3% over 1999 to $3.9 billion at
December 28, 2000,  primarily due to the award of several  significant  aviation

<PAGE>

maintenance  contracts  including two domestic U.S. Air Force bases (Andrews AFB
and Vance AFB) and two  international  programs:  one with the U.S. Army and the
other with the U.S. Air Force. They also won several key recompetes  including a
significant sole source contract with the U.S. State  Department.  Due to recent
contract wins,  management  believes the DTS business area will continue to grow
in 2001, but at a slower rate than that experienced 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.  Due to the recent  significant global contract wins, DTS will continue
to focus on an  international  strategy,  while  maintaining  and developing its
strong aviation services and infrastructure support markets.

DTS revenues  increased  $94.9 million,  or 15.8%,  to $695.5 million in 1999 as
compared to $600.6 million in 1998.  Operating profit increased by $5.0 million,
or 18.8%,  from $26.5 million in 1998 to $31.5 million in 1999. 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  to provide  technical  and support  services to the U.S.  Air Force at
Columbus Air Force Base.  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.

DI&ET  revenues were $671.4  million in 2000, an increase of $35.5  million,  or
5.6% over 1999 revenues of $635.9 million.  The revenue increases were primarily
due to increases on a  subcontract  for the  Department of Commerce for the 2000
Census, which began generating revenue in the second half of 1999, and growth of
revenues on a contract with the U.S. Postal Service,  which began  operations in
1999 and was fully  operational in 2000. Also  contributing to DI&ET's increased
revenues was growth in a joint venture for vaccine  technology  services for the
Department of Defense,  which was just starting up in 1999, increased tasking on
several General Services Administration  Indefinite Delivery Indefinite Quantity
("IDIQ") contracts, higher volumes on data abstraction and analysis contracts in
health information  technology services,  and an outsourcing contract awarded in
late 1999 with the  Department  of Housing and Urban  Development  which  became
operational in 2000.  Partially  offsetting  these increases in revenue were the
loss of a  subcontract  for the U.S.  Postal  Service  and a  contract  with the
Immigration and Naturalization Service.  Revenues on these two contracts in 1999
totaled $55.5 million.

The  subcontract  for the Department of Commerce for the 2000 Census will report
significantly  lower  revenues in the first quarter of 2001, due to the expected
wind-down of the contract.  This subcontract  reported revenues of $44.6 million
in 2000. Management expects that two new contracts awarded in 2000, one with the
Department of Defense  providing  end-to-end  personnel  security  investigation
services  and the  other  with the  General  Services  Administration  providing
battlefield  simulation  for the U.S.  Army,  will  partially  offset  this lost
revenue in 2001.

DI&ET's  operating  profit increased by $9.7 million to $40.3 million from $30.6
million in 1999, a 31.8%  increase.  The largest  increase in  operating  profit
resulted from the Department of Commerce 2000 Census subcontract, which provided
$4.7 million of the increase.  DI&ET experienced  growth in operating profits on
several General Services Administration IDIQ contracts and its joint venture for
vaccine technology services for the Department of Defense.  Also contributing to
the  increase  in  operating  profit  were  operating  losses in 1999 on certain
contracts  that did not continue in 2000.  Offsetting  the increase in operating
profit was the loss of the Immigration and  Naturalization  Service  contract in
1999, which had $3.8 million in operating profit in 1999.

DI&ET's 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 subcontract  from the Department of Commerce for the
2000 Census 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 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

<PAGE>

of 1998, Rocky Flats' revenue was $71.0 million.

Operating profit decreased slightly by $0.6 million, or 1.8% to $30.6 million in
1999 from $31.1 million in 1998.  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 subcontract  from the Department of Commerce for the
2000 Census, 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.

Management  believes  DI&ET's  revenues  will grow in 2001  similar  to the 2000
growth rate. However,  much of the growth will be dependent upon DI&ET's success
in  obtaining  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 revenues
of $228.1  million in 2000 and $13.9  million for the  twenty-day  period  ended
December 30, 1999.  Operating  profit was $17.8 million in 2000 and $1.0 million
for the twenty-day period in 1999. 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 and
$233.6 million for 1999 and 1998, respectively. A lack of new contract awards to
DIS has  resulted  in  modest  revenue  growth.  Management  believes  that DIS'
revenues will continue to grow modestly in 2001.

Cost of Services

Cost of services was 94.3%, 95.2%, and 95.1% of revenue in 2000, 1999, and 1998,
respectively.  The decrease in the cost of services  percentage  of revenue from
1999 was  attributable  to the higher  margin  DIS  business  acquired  in 1999,
partially  offset by  significant  growth in the lower margin DTS business.  DIS
cost of services were 92.4% and 92.9% of revenue in 2000 and 1999, respectively.
DTS  cost  of services  was  95.3%  and  95.5% of  revenue  in  2000  and  1999,
respectively.  Cost of services increased by $425.0 million from 1999, or 33.2%.
DIS cost of services comprised $197.8, or 46.5%, of the increase from 1999. Cost
of services increased by $107.1 million from 1998, or 9.1%.

Corporate General and Administrative

Corporate general and administrative  expense increased in 2000 by $7.6 million,
or 35.0%,  over 1999,  to $29.4  million as compared to $21.7  million and $18.6
million in 1999 and 1998,  respectively.  Corporate  general and  administrative
expense as a percentage of revenue was 1.6% in 2000 and 1999,  and 1.5% in 1998.
The higher  expense in 2000 was primarily due to increased  costs for converting
DIS to the  Company's  financial  systems and increases in the cost of corporate
operations.  Management expects corporate general and administrative costs to be
slightly less in 2001 as a result of the  completion of the conversion of DIS to
the Company's financial systems.

The increase in corporate general and administrative expense in 1999 compared to
1998 resulted from the Company's  deployment of new financial and human resource
software  packages.  During these two years, the software design and development
stage of the  project  was  completed,  and related  costs were  capitalized  as
intangible assets. Corporate general and administrative expenses were reduced in
1999 by $2.0 million and in 1998 by $2.5 million due to reversal of reserves for
old contract compliance issues, which were settled in the Company's favor during
those years.

Interest Expense and Interest Income

Interest expense for 2000 was $41.4 million, or 2.3% of revenues, as compared to
$18.9 million,  or 1.4% of revenues  reported for 1999. The increase in interest
expense  was  attributable  to higher  average  debt  levels and higher  average
interest  rates in 2000,  as compared  to 1999.  The  average  annual  levels of
borrowing were  approximately  $337.2 million in 2000 compared to $203.8 million
in 1999. The average annual levels of borrowing  and the average  interest rates
increased  in 2000 over 1999 as a result of the  acquisition  of DIS in December

<PAGE>

1999, which the Company financed through additional borrowings under higher cost
debt instruments (see working capital and cash flow discussion).

Interest  expense was $18.9 million in 1999, up from $14.1 million in 1998.  The
increase in interest  expense was  attributable  to higher  average  debt levels
throughout 1999, $0.5 million interest expense associated with the settlement of
a subcontractor suit from a former electrical contracting subsidiary, and a $0.7
million refund of interest  expense from the Internal  Revenue  Service in 1998.
The refund decreased 1998 interest expense and therefore increased the change in
1999 expense  compared to 1998.  The average  annual  levels of  borrowing  were
approximately  $203.8  million in 1999 compared to $163.1  million in 1998.  The
average annual level of indebtedness increased in 1999 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). At the end of 1999,
the Company borrowed an additional $167.5 million for the acquisition of DIS.

Interest income was $1.5 million,  $1.4 million, and $1.6 million in 2000, 1999,
and 1998,  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.  In 2000,  the  Company  received  $0.5  million in
interest  income on tax refunds due to  amendments  of prior years' tax returns.
The  twelve-month  average balance of cash and short-term  investments was $16.1
million in 2000, $19.8 million in 1999, and $10.9 million in 1998.

Amortization of Intangibles of Acquired Companies

Amortization of intangibles of acquired  companies  increased by $3.9 million to
$15.4 million in 2000  compared to $11.4 million in 1999. In 1999,  amortization
of intangibles of acquired companies increased by $8.5 million from $2.9 million
in 1998. The increase in  amortization  of intangibles of acquired  companies in
2000 resulted from the full year impact of the amortization of intangible assets
that were recorded in connection with the December 1999 acquisition of DIS. Also
contributing  to  the  increase  in  amortization  of  intangibles  of  acquired
companies was the  finalization of the purchase accounting related to the evalu-
ation of the estimated future cash flows of contracts and other assets  acquired
from GTE  Information  Systems  LLC.  Based on  these  evaluations, the  Company
increased  certain  reserves by  $70.1  million and  wrote off  $19.4 million of
assets and expenses to those reserves during 2000. These changes resulted in in-
creases to intangibles of acquired companies of $45.9 million (which accordingly
resulted  in  an  increase  in  the  amortization  of  intangibles  of  acquired
companies) and increases to deferred tax assets of $24.2 million.

The  increase in  amortization of  intangibles of  acquired  companies  in  1999
resulted  mostly  from  the  amortization  of  intangible  assets   recorded  in
connection with the acquisition of DIS.   In 1999, there was also an  in-process
research and  development  write-off of $6.4 million associated with the  acqui-
sition of DIS and a  write-off of $1.2  million of  cost in excess of net assets
acquired  for a  business  that  was  divested  in  February  2000. Amortization
costs related to the DIS intangibles in 2000 and 1999 totaled $13.5 million  and
$7.1  million  (which   includes  the  $6.4  million   write-off), respectively.

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.  Based  on  current
projections,  management  estimates income tax payments,  net of tax refunds, of
$12.8 million in 2001.

No valuation  allowance for deferred  federal tax assets was deemed necessary at
December  28, 2000 or December  30,  1999.  The Company has provided a valuation
allowance  for  deferred  state tax assets of $5.5  million and $4.8  million at
December 28, 2000 and December 30, 1999, respectively, 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

<PAGE>

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 $142.5
million at December 28, 2000 compared to $165.2  million at December 30, 1999, a
decrease of $22.7 million. The ratio of current assets to current liabilities at
December 28, 2000 was 1.6 compared to 1.7 at December 30, 1999.  The decrease is
primarily  the  result  of lower  accounts  receivable  due to  faster  customer
collections and increases in certain accrued expenses.  During 2000,  management
placed a greater  emphasis on its  receivable  collection  and cash  management.
These decreases were offset by payments of the current portions of the long-term
debt.

For the year ended December 28, 2000,  the Company's  cash flow from  operations
was $55.7 million,  increasing $41.8 million from $13.8 million cash provided by
operations  in 1999.  The  increase  resulted  primarily  from  higher  customer
collections,  partially  offset by payments on accounts  payable.  In 1999,  the
increase in cash flow from  operations  over 1998 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 in  operations  was $7.8  million and resulted
mostly from  increases  in accounts  receivable  due to  increased  revenues and
start-up of new contracts and the settlement of the Fuller-Austin bankruptcy.

Cash  provided by  investing  activities  for the year ended  December  28, 2000
totaled $8.1  million.  In February  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 pay off the  mortgage  on the
property.  In October  2000,  the Company sold various  high-end  communications
equipment  on  a  DIS   contract  to  a  third  party  for  $20.4   million  and
simultaneously closed on a lease of the equipment from the new owner. Offsetting
the cash  provided  from these sales was cash used for the  purchase of property
and equipment of approximately $21.0 million, which included approximately $11.1
million of equipment purchased in the first half of 2000 and sold in the October
2000 sale-leaseback  transaction as noted above. Management expects purchases of
equipment  and  property to be lower in 2001.  In  September  2000,  the Company
purchased  $1.6  million of certain net assets of a company  which  develops and
markets  proprietary  decision-support  software and provides related consulting
services to evaluate and profile  performance of providers engaged by healthcare
payers.  Also in  September  2000,  the Company sold $2.3 million of certain net
assets of a DTS aerospace  research and development  unit. The purchase price in
both of these transactions is subject to adjustment.

Cash used in investing  activities in 1999 totaled  $185.0  million and included
acquisition  costs of $167.5 million and capital  expenditures of $19.8 million.
Acquisition  costs were  related to the  acquisition  of DIS in  December  1999.
Capital  expenditures  included  $13.9  million for the purchase of property and
equipment  and $5.9 million for new  software for internal  use. The Company had
capitalized  a total of $11.6  million of costs related to internal use software
as of December 30, 1999.  Investing  activities  used funds of $20.1  million in
1998, principally for the acquisition of FMAS for $10.2 million, the purchase of
property  and  equipment of $4.8  million,  and the purchase of new software for
internal use of $5.6 million.

In  2000,  financing  activities  used  funds  of $56.4  million  primarily  for
voluntary prepayments on the Senior Secured Credit Agreement Term A and B Loans,
the  Revolving  Credit  Facility  and the mortgage on the  Alexandria,  Virginia
office  building that the Company sold in the first quarter of 2000. The Company
reduced its outstanding  borrowings under the Term A Loans by $30.0 million, the
Term B Loans  by  $23.1  million,  and the  Revolving  Credit  Facility  by $7.0
million.  Offsetting  these reductions in cash flows was the net receipt of $2.7
million of payments on loans from the  Employee  Stock  Ownership  Trust and the
issuance of $3.4 million of additional 15%  Subordinated  Notes for  pay-in-kind
interest.

In 1999,  financing  activities  provided funds of $172.7  million.  The Company
borrowed $223.8 million under a Senior Secured Credit Agreement.  The borrowings
were 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.  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.

<PAGE>

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  customer  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.

On December 10, 1999, the Company and its wholly owned  subsidiary,  Dyn Funding
Corporation,  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.  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  28, 2000 and December 30,
1999, the Company was in compliance with these covenants.

As of December 28, 2000 the Company's total debt was $284.0 million,  a decrease
of $59.2 million from December 30, 1999, primarily due to voluntary  prepayments
on the Term A and Term B Loans.

On December 28, 2000,  the Company  voluntarily  repaid $30.0  million of Term A
Loans,  prepaying all scheduled principal installments due in 2001 and partially
prepaying  the  scheduled  principal  installment  due in  February  2002.  As a
consequence  of  this  prepayment,  the  Term A  Loans  are to be  repaid  in an
installment  of  $1.3  million  in  February  2002  and  then  eleven  quarterly
installments  of $6.3  million  beginning  in May 2002.  On March 7,  2000,  the
Company voluntarily repaid $7.1 million of Term B Loans, prepaying all scheduled
principal payments of Term B Loans from February 2001 through December 2004, and
partially  prepaying the scheduled  principal  payment due in February  2005. On
December 28, 2000, the Company voluntarily repaid $15.0 million of Term B Loans,
prepaying the  remaining  scheduled  principal  payment due in February 2005 and
partially  prepaying  the  scheduled  principal  payment  due in May 2005.  As a
consequence  of these  prepayments,  the  Term B Loans  are to be  repaid  in an
installment of $5.7 million in May 2005 and then six quarterly  installments  of
$11.9 million beginning in August 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  28,  2000,  there  were no
borrowings  under the revolving line of credit,  and at December 30, 1999, there
were $7.0 million of borrowings. Letters of credit outstanding were $9.5 million
and $7.4 million at December 28, 2000 and December 30, 1999, respectively, under
the line of credit.  The amount  available was $80.5 million and $75.6  million,
respectively, as of December 28, 2000 and December 30, 1999.

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  ("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 to the
Consolidated  Financial  Statements).  The  Subordinated  Notes bear interest at
15.0% per annum, payable semi-annually. The Company may, at its option, prior to
December 15, 2004, pay the interest in cash or in additional Subordinated Notes.
On  December  28,  2000,  the Company  paid $3.2  million  cash  interest on the
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.

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

<PAGE>

of credit facility.

The Company has several significant  operating leases for facilities,  furniture
and equipment. Minimum lease payments over the next 11 years are estimated to be
$220.6  million,  including  $37.2  million in 2001.  Of the $37.2  million 2001
minimum lease payments,  $12.9 million related to DIS leases (including the sale
and  leaseback of various  high-end  communications  equipment as noted  above),
$10.4  million the Company  entered into under a contract  with the U.S.  Postal
Service, and $6.5 million related to the new corporate headquarters building.

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.

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.

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 estate of 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.

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 U.S. 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. Readers are cautioned
that the  Company's  definition of EBITDA may not  necessarily  be comparable to
similarly  titled  captions  used  by  other  companies  due  to  the  potential
inconsistencies  in the method of  calculation.  The  following  represents  the
Company's computation of EBITDA (in thousands):
<TABLE>
<CAPTION>

                                                                                For Fiscal Years Ended
                                                                                ----------------------
                                                                      2000            1999             1998
                                                                      ----            ----             ----
              <S>                                                  <C>              <C>             <C>


              Net earnings                                          $ 9,894          $ 5,989         $15,055
                 Depreciation and amortization                       27,494           13,572           8,825
                 Interest expense, net                               39,937           17,550          12,544
                 Income taxes                                         6,326            4,649           9,559
                 Extraordinary item, net of tax                           -            1,601               -
                 Amortization of deferred debt expense               (2,300)          (1,210)           (721)
                 Debt issue discount                                    (43)             (39)            (36)
                                                                    -------          -------         -------
              EBITDA                                                $81,308          $42,112         $45,226
                                                                    =======          =======         =======
</TABLE>


In 2000,  EBITDA  increased  by $39.2  million,  or 93.1%,  to $81.3  million as
compared to 1999. EBITDA decreased by $3.1 million, or 6.9%, to $42.1 million in
1999 over 1998.  The  increases  in EBITDA in 2000,  as  compared  to 1999,  are
primarily  attributable to higher operating profits. In 2000,  operating profits
increased  by $37.5  million,  or 59% over 1999.  DIS,  which was  purchased  in
December 1999,  accounted for  approximately  $16.8 million,  or 45.0%,  of this
increase.  1999 operating profits  increased only by $5.4 million,  or 9.4% over
1998. The above net earnings  amounts  include DIS transition  expenses of  $5.5
million and $0.1 million in 2000 and 1999,  respectively.  These expenses relate
to  administrative   and  accounting  support  provided  by  the  former  parent
corporation and affiliates of DIS, which is expected to end by the first quarter
of 2001.  Also  included in these  expenses are costs  related to  transitioning
these  services to the Company.  Management  expects future  administrative  and
accounting support services to be significantly less than the 2000 expenses.

<PAGE>

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 18(b)
to the  Consolidated  Financial  Statements).  The Company's  liability,  in the
aggregate,  with respect to these  matters is not expected to be material to the
Company's results of operations or financial condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has a policy to use derivative  financial  instruments to manage its
market risk exposures from  fluctuations  in interest rates on its floating rate
debt and foreign  exchange rates as warranted.  The Company manages its exposure
to  this  market  risk  through  the  monitoring  of  its  available   financing
alternatives  including,  in  certain  circumstances,   the  use  of  derivative
financial  instruments.  The  Company  has  managed  its  exposure to changes in
interest  rates by  effectively  capping  at 7.5% the  base  interest  rate on a
notional amount of $100.0 million of its LIBOR indexed debt until February 2002.
In December 2000, the Company  entered in a two year and 28-day swap  agreement,
wherein the Company pays  approximately  6.2% annualized  interest on a notional
amount of $35.0  million on a quarterly  basis  beginning on January 4, 2001 and
ending on January 6, 2003.  The objective of this  transaction  is to neutralize
the cash flow  variability  for the hedged  debt.  The Company  does not hold or
issue  derivative   financial   instruments  for  trading  purposes.   For  more
information  related to the Company's  floating rate debt, see Long-term Debt in
the Notes to the Consolidated Financial Statements.

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 28, 2000 and December 30,
1999, and  the  related  consolidated  statements of  operations, cash flows and
stockholders'  equity  for each of  the  two  fiscal  years  in the period ended
December 28, 2000 and the year ended December 31, 1998.  These financial  state-
ments and the schedule referred to below are the responsibility of the Company's
management.Our responsibility is to express an opinion on these financial state-
ments  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 28, 2000 and December 30, 1999,  and the results of its  operations and
its cash flows for each of the two   fiscal  years in the period ended  December
28, 2000 and the  year 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, Virginia                                    ARTHUR ANDERSEN LLP
March 7, 2001




<PAGE>


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

                                                                         December 28,     December 30,
                                                                             2000             1999
<S>                                                                         <C>             <C>


Assets
------
Current Assets:
   Cash and cash equivalents                                                $  12,954       $   5,657
   Accounts receivable and contracts in process, net                          334,354         357,411
   Prepaid income taxes                                                         1,139           6,558
   Other current assets                                                        35,268          28,582
                                                                            ---------       ---------
      Total Current Assets                                                    383,715         398,208


Property and Equipment, at cost:
   Land                                                                            22             621
   Buildings and leasehold improvements                                        13,805          28,957
   Machinery and equipment                                                     37,772          32,800
                                                                            ---------       ---------
                                                                               51,599          62,378
   Accumulated depreciation and amortization                                  (23,833)        (21,583)
                                                                            ---------       ---------
      Net Property and Equipment                                               27,766          40,795

Intangible Assets, net                                                        181,677         149,159

Deferred Income Taxes                                                          10,980               -

Other Assets                                                                   40,203          51,511
                                                                            ---------       ---------

Total Assets                                                                $ 644,341       $ 639,673
                                                                            =========       =========

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


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

<TABLE>
<CAPTION>

                                                                           December 28,         December 30,
                                                                              2000                  1999
                                                                              ----                  ----
<S>                                                                          <C>                 <C>

Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
   Notes payable and current portion of long-term debt                       $    124            $   8,242
   Accounts payable                                                            67,761               85,357
   Deferred revenue and customer advances                                       7,631                6,048
   Accrued income taxes                                                         5,904                2,100
   Accrued expenses                                                           159,819              131,274
                                                                             --------            ---------
      Total Current Liabilities                                               241,239              233,021

Long-term Debt                                                                283,889              334,944

Deferred Income Taxes                                                               -                4,547

Other Liabilities and Deferred Credits                                         90,283               51,171

Contingencies and Litigation (Note 18)
Temporary Equity:
 Redeemable common stock at redemption value
  ESOP shares, 7,504,653 and 7,350,937 shares issued
    and outstanding in 2000 and 1999, respectively,
    subject to restrictions                                                   238,346              182,974
  Other redeemable common stock, 426,217 shares issued
    and outstanding in 2000 and 1999                                            7,984                6,142

Stockholders' Equity:
  Common stock, par value ten cents per share, authorized
    20,000,000 shares; issued 4,758,897
    and 4,908,447 shares in 2000 and 1999, respectively                           476                  491
 Paid-in surplus                                                              134,638              133,338
 Accumulated other comprehensive income                                             3                   (9)
 Reclassification to temporary equity for redemption value
     greater than par value                                                  (245,540)            (188,339)
 Deficit                                                                      (64,835)             (72,887)
 Common stock held in treasury, at cost; 2,264,625
 and 2,301,262 shares in 2000 and 1999, respectively                          (42,142)             (43,062)
 Unearned ESOP shares                                                               -               (2,658)
                                                                             --------            ---------
Total Liabilities and Stockholders' Equity                                   $644,341            $ 639,673
                                                                             ========            =========

</TABLE>


The accompanying  notes are an  integral  part of these  consolidated  financial
statements.


<PAGE>
<TABLE>


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


<CAPTION>


                                                                                December 28,   December 30,   December 31,
                                                                                   2000           1999           1998
                                                                                   ----           ----           ----
<S>                                                                             <C>            <C>            <C>

Revenues                                                                        $1,809,109     $1,345,281     $1,233,707
                                                                                ----------     ----------     ----------

Costs and expenses:
      Cost of services                                                           1,705,257      1,280,239      1,173,151
      Corporate general and administrative                                          29,350         21,741         18,630
      Interest expense                                                              41,408         18,943         14,144
      Interest income                                                               (1,471)        (1,393)        (1,600)
      Amortization of intangibles of acquired companies                             15,362         11,419          2,911
      Other income                                                                    (532)          (875)          (224)
                                                                                ----------     ----------     ----------
         Total costs and expenses                                                1,789,374      1,330,074      1,207,012
                                                                                ----------     ----------     ----------

Earnings from continuing operations before income taxes,
  minority interest, and extraordinary item                                         19,735         15,207         26,695
   Provision for income taxes                                                        6,326          4,649          9,559
                                                                                ----------     ----------     ----------

Earnings from continuing operations before minority interest
     and extraordinary item                                                         13,409         10,558         17,136

   Minority interest                                                                 3,515          2,968          2,081
                                                                                ----------     ----------     ----------

Earnings from continuing operations before extraordinary item                        9,894          7,590         15,055
   Extraordinary loss from early extinguishment of debt, net of income taxes             -          1,601              -
                                                                                ----------     ----------     ----------

Net earnings                                                                    $    9,894     $    5,989     $   15,055
                                                                                ==========     ==========     ==========

  Accretion of other redeemable common stock to redemption value                     1,842             94              -
                                                                                ----------     ----------     ----------

Common stockholders' share of net earnings                                      $    8,052     $    5,895     $   15,055
                                                                                ==========     ==========     ==========

Common stockholders' share of net earnings per common share:

      Basic earnings per share                                                  $     0.77     $     0.59     $     1.47

      Diluted earnings per share                                                $     0.75     $     0.57     $     1.43

Weighted-average number of shares
       outstanding for basic earnings per share                                     10,477         10,044         10,242

Weighted-average number of shares
     outstanding for diluted earnings per share                                     10,704         10,273         10,514
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


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

                                                                                 December 28, December 30, December 31,
                                                                                     2000        1999         1998
                                                                                     ----        ----         ----
    <S>                                                                         <C>            <C>          <C>

    Cash Flows from Operating Activities:
      Common stockholders' share of net earnings                                $    8,052     $  5,895     $  15,055
      Adjustments to reconcile net earnings
       to net cash provided (used) by operating activities:
         Depreciation and amortization                                              27,494       13,572         8,825
         Accretion of other redeemable common stock to redemption value              1,842           94             -
         Purchased in-process research and development                                   -        6,400             -
         Deferred income taxes                                                     (22,230)      (7,630)        1,463
         Proceeds from insurance settlement for asbestos claims                          -            -         1,462
         Change in reserve for divested business - Fuller-Austin                         -            -       (10,797)
         Changes in reserves for divested business  - other                              -       (2,000)       (1,698)
           Capitalized costs incurred on existing contracts                              -       (2,473)           -
         Other                                                                         914        1,687           (63)
         Change in assets and liabilities, net of acquisitions and dispositions:
           Decrease (increase) in accounts receivable and contracts
             in process                                                             24,853      (37,919)      (52,416)
           Decrease (increase) in other current assets                               1,841         (326)         (963)
           Increase in current liabilities except notes payable
             and current portion of long-term debt                                  12,888       36,535        31,380
                                                                                ----------     --------     ---------
                   Cash provided (used) by operating activities                     55,654       13,835        (7,752)
                                                                                ----------     --------     ---------
    Cash Flows from Investing Activities:
      Sale of property and equipment                                                30,685          610         1,293
      Purchase of property and equipment                                           (20,960)     (13,878)       (4,797)
      Capitalized cost of new financial and human resource systems                       -       (5,969)       (5,598)
      Deferred income taxes from "safe harbor" leases                                 (597)        (481)         (257)
      (Increase) decrease in investment in unconsolidated subsidiaries              (1,230)       1,363          (302)
      Assets and liabilities of acquired business                                   (1,620)    (167,504)      (10,239)
      Proceeds from sale of business                                                 2,300            -             -
      Other                                                                           (496)         884          (231)
                                                                                ----------     --------     ---------
                Cash provided (used) by investing activities                         8,082     (184,975)      (20,131)
                                                                                ----------     --------     ---------
    Cash Flows from Financing Activities:
      Treasury stock purchased                                                           -       (7,208)       (6,194)
      Payments on indebtedness                                                    (406,618)    (253,491)      (20,371)
      Proceeds from debt issuance                                                  344,005      428,552        28,113
      Pay-in-kind interest on Subordinated Notes                                     3,397            -             -
      Proceeds from issuance of redeemable common stock                                  -        6,048             -
      Payments received on ESOT loans                                                2,958       10,577         5,932
      Loans to ESOT                                                                   (300)     (11,082)            -
      Other                                                                            119         (687)         (111)
                                                                                ----------     --------     ---------
                Cash (used) provided by financing activities                       (56,439)     172,709         7,369
                                                                                ----------     --------     ---------
    Net Increase (Decrease) in Cash and Cash Equivalents                             7,297        1,569       (20,514)
    Cash and Cash Equivalents at Beginning of the Fiscal Year                        5,657        4,088        24,602
                                                                                ----------     --------     ---------
    Cash and Cash Equivalents at End of the Fiscal Year                         $   12,954     $  5,657     $   4,088
                                                                                ==========     ========     =========
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


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

                                                                          Adjustment                                    Accumulated
                                                   Common                for Redemption                       Unearned    Other
                                       Common      Stock     Paid-in      Value Greater            Treasury     ESOP  Comprehensive
                                       Stock      Warrants   Surplus     than Par Value   Deficit   Stock      Shares     Income
                                       -----      --------   -------     --------------   -------   -----      ------     ------
  <S>                                  <C>          <C>      <C>            <C>           <C>       <C>        <C>         <C>

  Balance, December 31, 1997           $  478       $1,259   $125,412       $(154,138)    $(93,837) $(28,703)  $(8,085)    $  -
  Employee compensation plans
    (option exercises, restricted stock
    plan,incentive bonus)                   4            -        891               -            -      (960)        -        -
  Treasury stock purchased                  -            -          -               -            -    (6,386)        -        -
  Warrants and stock options
    exercised                              35       (1,259)       903               -            -       409         -        -
  Payment received on ESOT 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, incentive bonus)                  7            -         (6)              -            -      (321)        -        -
  Stock issued under mezzanine
    financing                              43            -      6,006               -            -         -         -        -
  Treasury stock purchased                  -            -          -               -            -    (7,208)        -        -
  Warrants and stock options                -            -         28               -            -       107         -        -
    exercised
  Payment received on ESOT note             -            -          -               -            -         -    10,577        -
  Loans to ESOT                             -            -          -               -            -         -   (11,082)       -
  Reclassification to redeemable
    common stock                          (57)           -          -          (5,105)           -         -         -        -
  Accretion of other redeemable
    common stock to redemption 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)
  Employee compensation plans
    (option exercises, restricted stock
    plan, incentive bonus)                  -            -       (542)              -            -       920         -        -
  Payment received on ESOT note             -            -          -               -            -         -     2,958        -
  Loans to ESOT                             -            -          -               -            -         -      (300)       -
  Reclassification to redeemable
    common stock                          (15)           -          -         (55,359)           -         -         -        -
  Accretion of other redeemable
    common stock to redemption value        -            -      1,842          (1,842)      (1,842)        -         -        -
  Translation adjustment and other          -            -          -               -            -         -         -       12
  Net earnings                              -            -          -               -        9,894         -         -
                                       ------       ------   --------       ---------     --------  --------   -------      ---
  Balance, December 28, 2000           $  476       $    -   $134,638       $(245,540)     (64,835)  (42,142)  $     -     $  3
                                       ======       ======   ========       =========     ========  ========   =======     ====


</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
                            DynCorp and Subsidiaries
                   Notes to Consolidated Financial Statements
                                December 28, 2000
    (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 U.S.  Departments of
Defense,  Energy,  State, and Justice, 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 Company's  fiscal year is the 52 or
53-week period ending the last Thursday in December. Previously, the Company had
a calendar year end.

Use of Estimates:

The  preparation  of financial  statements  in  conformity  with U.S.  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 contract losses,
litigation reserves,  and 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 fees 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 the reserve  requirement  can
be reasonably estimated.

Property and Equipment:

The Company  computes  depreciation  using  either the  straight-line  or double
declining  balance  method.   The  estimated  useful  lives  used  in  computing
depreciation are buildings,  15-33 years;  machinery and equipment,  3-15 years;
and leasehold improvements,  the lesser of the useful life or the remaining term
of the lease.  Depreciation  expense was $7,044 for 2000,  $5,412 for 1999,  and
$4,781 for 1998.

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.
<PAGE>
Intangible Assets:

The major classes of intangible assets, net of accumulated  amortization,  as of
December 28, 2000 and December 30, 1999 are summarized below (in millions):
<TABLE>
<CAPTION>
                                                           Amortization
                                                              Period                    2000                  1999
                                                              ------                    ----                  ----
        <S>                                                <C>                         <C>                   <C>
        Goodwill..................................         10 to 40 years              $154.5                $109.8
        Capitalized software......................         8 years                        9.0                  10.6
        Core and  developed technology............         5 years                        6.1                   7.6
        Contracts acquired........................         up to 10 years                 0.6                   8.4
        Assembled workforce.......................         7 years                        5.6                   6.5
        Patent....................................         17 years                       5.9                   6.3
                                                                                       ------                ------
        Total net intangibles.....................                                     $181.7                $149.2
</TABLE>
Intangible  assets are being  amortized using the  straight-line  method for the
periods noted above. Intangible asset amortization expense was $16,964, $12,597,
and $3,076 in 2000, 1999, and 1998, respectively.  Intangible asset amortization
expense for 1999 includes $1.2 million acceleration of goodwill amortization due
to impairment.  Intangible asset accumulated amortization of $66,193 and $55,755
has been recorded through December 28, 2000 and December 30, 1999, 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  will 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
market risk exposures from  fluctuations  in interest rates on its floating rate
debt and foreign  exchange rates as warranted.  The Company manages its exposure
to  this  market  risk  through  the  monitoring  of  its  available   financing
alternatives  including,  in  certain  circumstances,   the  use  of  derivative
financial  instruments.  The  Company  has  managed  its  exposure to changes in
interest  rates by  effectively  capping  at 7.5% the  base  interest  rate on a
notional amount of $100.0 million of its LIBOR indexed debt until February 2002.
In December 2000, the Company entered into a two year and 28-day swap agreement,
wherein the Company pays  approximately  6.2% annualized  interest on a notional
amount of $35.0  million on a quarterly  basis  beginning on January 4, 2001 and
ending on January 6, 2003.  The objective of this  transaction is to  neutralize
the cash flow  variability for the  hedged debt.  The  Company  does not hold or
issue derivative financial instruments for trading purposes.

Recently Issued Accounting Standards:

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities,"  which  was  amended  by SFAS  No.  138,
"Accounting  for Certain  Derivative  Instruments  and Hedging  Activities  - an
Amendment of FASB  Statement  No. 133." SFAS 133  requires  that all  derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current  earnings or other
comprehensive income based on the guidelines stipulated in SFAS 133. The Company
adopted the  provisions of SFAS 133 and 138 on January 1, 2001.  Because of  the
Company's  limited 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.

In September  2000,  the FASB issued SFAS No. 140,  which replaces SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of Liabilities,"  and rescinds SFAS No. 127,  "Deferral of the Effective Date of
Certain  Provisions  of FASB  Statement  No.  125." SFAS 140 revises  SFAS 125's
standards for accounting for  securitizations  and other  transfers of financial
assets and collateral and requires certain disclosures, but it carries over most
of the SFAS 125's provisions without reconsideration.  SFAS 140 is effective for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring  after  March 31, 2001 and for  recognition  and  reclassification  of
collateral  and for  disclosures  relating to  securitization  transactions  and
collateral  for fiscal years ending after  December 15, 2000.  SFAS 140 is to be
applied prospectively with certain exceptions.  SFAS 140 is not expected to have
a  material  impact on the  Company's  consolidated  results  of  operations  or
financial position.

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.
<PAGE>
Investing and financing activities include the following:
<TABLE>
<CAPTION>
                                                                        2000            1999            1998
                                                                        ----            ----            ----
<S>                                                                 <C>           <C>               <C>
Acquisitions of businesses:
   Assets acquired                                                  $  4,403      $  212,642        $ 11,185
   Liabilities assumed                                                (2,783)        (45,138)           (946)
   Cash acquired                                                           -              36               -
                                                                    --------      ----------        --------
   Net cash                                                         $  1,620      $  167,540        $ 10,239
                                                                    --------      ----------        --------
</TABLE>
In 2000, the Company  acquired certain assets and liabilities of a company which
developed  and  marketed  proprietary  decision-support  software  and  provided
related  consulting  services to evaluate and profile  performance  of providers
engaged in healthcare.  The Company also acquired GTE Information Systems LLC in
1999 and FMAS Corporation in 1998. The purchase price of these  acquisitions has
been allocated to the assets acquired and liabilities assumed based on estimated
fair value at the date of acquisition, under the purchase method of accounting.

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 year ended  December 28,
2000, other than net income.  Translation  adjustment of  $(0.01) million is the
only component of comprehensive income for the year  ended  December  30,  1999,
other than net income.

Reclassifications:

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 values
of the  Company's  Senior  Secured  Credit  Agreement  Loans,  Revolving  Credit
Facility,  and the 15%  Subordinated  Notes  approximated  their fair  values at
December 28, 2000.  The fair value of the  Company's 9 1/2% Senior  Subordinated
Notes, based on the current rate as if the issue date was December 28, 2000, was
$81.0  million,  as compared to a book value of $99.6 million as of December 28,
2000. The fair value of the Company's 9 1/2% Senior Subordinated 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.  For the  remaining
long-term  debt (see Note 4) and other  liabilities  and deferred  credits,  the
carrying amounts approximate the fair values.

(3)   Accounts Receivable and Contracts in Process, Net

The  components of accounts  receivable and contracts in process were as follows
for the years ending December 28, 2000 and December 30, 1999:
<TABLE>
<CAPTION>
                                                                                         2000                 1999
                                                                                         ----                 ----
    <S>                                                                                <C>                 <C>
    U.S. Government:
      Billed and billable                                                              $254,731            $238,709
      Recoverable costs and accrued profit on progress
        completed but not billed                                                         25,801              47,885
      Retainage due upon completion of contract                                           2,006               2,769
                                                                                       --------            --------
                                                                                        282,538             289,363
                                                                                       --------            --------
    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 $4,071 in 2000 and $3,156 in 1999)                                            47,890              52,063
      Recoverable costs and accrued profit on progress completed
        but not billed                                                                    3,926              15,985
                                                                                       --------            --------
                                                                                         51,816              68,048
                                                                                       --------            --------
                                                                                       $334,354            $357,411
                                                                                       ========            ========
</TABLE>
<PAGE>
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 28, 2000 will be collected  within one
year except for approximately $2,965.

(4)   Long-term Debt

At December 28, 2000 and December 30, 1999, long-term debt consisted of:
<TABLE>
<CAPTION>
                                                                                     2000             1999
                                                                                     ----             ----
    <S>                                                                            <C>             <C>
    Senior Secured Credit Agreement - Term A Loan                                  $ 70,000        $100,000
    Senior Secured Credit Agreement - Term B Loan                                    76,900         100,000
    Senior Secured Credit Agreement - Revolving Credit Facility                           -           6,970
    15% Subordinated Notes                                                           37,349          33,952
    9 1/2% Senior Subordinated Notes                                                 99,627          99,584
    8% Mortgage payable                                                                   -           2,575
    Notes payable                                                                       137             105
                                                                                   --------        --------
                                                                                    284,013         343,186
    Less current portion                                                                124           8,242
                                                                                   --------        --------
                                                                                   $283,889        $334,944
                                                                                   ========        ========
    Debt maturities as of December 28, 2000, were as follows:

          2001                                                                     $    124
          2002                                                                       20,013
          2003                                                                       25,000
          2004                                                                       25,000
          2005                                                                       29,400
          Thereafter                                                                184,476
                                                                                   --------
                                                                                   $284,013
                                                                                   ========
</TABLE>
On December 10, 1999, the Company and its wholly owned  subsidiary,  Dyn Funding
Corporation,  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 costs.

On December 28, 2000,  the Company  voluntarily  repaid $30.0  million of Term A
Loans,  prepaying all scheduled principal installments due in 2001 and partially
prepaying  the  scheduled  principal  installment  due in  February  2002.  As a
consequence  of  this  prepayment,  the  Term A  Loans  are to be  repaid  in an
installment  of  $1.3  million  in  February  2002  and  then  eleven  quarterly
installments  of $6.3  million  beginning  in May 2002.  On March 7,  2000,  the
Company voluntarily repaid $7.1 million of Term B Loans, prepaying all scheduled
principal payments of Term B Loans from February 2001 through December 2004, and
partially  prepaying the scheduled  principal  payment due in February  2005. On
December 28, 2000, the Company voluntarily repaid $15.0 million of Term B Loans,
prepaying the  remaining  scheduled  principal  payment due in February 2005 and
partially  prepaying  the  scheduled  principal  payment  due in May 2005.  As a
consequence  of these  prepayments,  the  Term B Loans  are to be  repaid  in an
installment of $5.7 million in May 2005 and then six quarterly  installments  of
$11.9 million beginning in August 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  28, 2000 and December 30,
1999,  $0 million  and $7.0  million of  borrowings  and $9.5  million  and $7.4
million of letters of credit were outstanding, respectively, under the revolving
<PAGE>
line of credit.  The  amount  available  was $80.5  million  and $75.6  million,
respectively, as of December 28, 2000 and December 30, 1999.

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  ("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
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.  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  Subordinated  Notes. On December 28, 2000, the Company paid $3.2 million
cash interest on the Subordinated 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 Subordinated 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 2002 to 100.0% in 2005 and thereafter.  In addition,
the  Company  may redeem up to 35.0% of the  aggregate  principal  amount of the
Senior  Subordinated  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 Subordinated Notes remains  outstanding.
The Senior  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.

The  Credit  Agreement  and  indentures  for the  Subordinated  Notes and Senior
Subordinated Notes contain customary  restrictions on the ability of the Company
to undertake certain activities,  such as the incurrence 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 headquarters property of Technology Applications,  Inc.
("TAI") on November 12, 1993, in  conjunction  with its  acquisition of TAI, and
assumed a mortgage on the property of $3.3 million bearing  interest at 8.0% per
annum.  On February 29, 2000, the Company sold the property for $10.5 million in
cash and  simultaneously  entered into a lease  agreement for the property.  The
8.0% mortgage was repaid with proceeds from the sale of the property .

Deferred debt issuance costs are being  amortized  using the effective  interest
rate  method over the term of the  related  debt.  At  December  28,  2000,  and
December 30, 1999,  unamortized  deferred debt  issuance  costs were $10,071 and
$12,113,  respectively  and  amortization  for 2000,  1999 and 1998 was  $2,300,
$1,210,  and $721,  respectively.  Amortization  of debt issue discount was $43,
$39, and $36 in 2000, 1999 and 1998, respectively.

Cash paid for interest was $31,458 for 2000,  $16,209 for 1999,  and $13,454 for
1998.

(5)   Accrued Expenses

At December 28, 2000 and December 30, 1999,  accrued  expenses  consisted of the
following:
<TABLE>
<CAPTION>
                                                                                        2000           1999
                                                                                        ----           ----
    <S>                                                                             <C>            <C>
    Salaries and wages                                                              $ 79,216       $ 73,028
    Insurance                                                                         25,298         24,147
    Interest                                                                           7,279          4,313
    Payroll and miscellaneous taxes                                                   19,925         12,051
    Accrued contingent liabilities and operating reserves
      (see Note 18)                                                                   21,944         10,105
    Other                                                                              6,157          7,630
                                                                                    --------       --------
                                                                                    $159,819       $131,274
                                                                                    ========       ========
</TABLE>
(6)   Employee Stock Ownership Plan

In September  1988, the Company  established  an Employee  Stock  Ownership Plan
("ESOP").  The Company  borrowed $100.0 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
<PAGE>
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,  were 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. In 2000, the ESOP utilized 2000
contributions and loans to make the required  principal and interest payments on
the  aforementioned  notes, pay administrative  fees,  purchase 27,490 shares of
stock on the  internal  market and  purchase  25,175  shares of stock from other
stockholders.  At  December  28,  2000,  there were no unpaid  balances on these
subsequent loans.  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 28, 2000, the ESOP owned 7,504,653 shares.  The  Company  recognizes
compensation expense each year based on the cash contribution  for the year.  In
2000,  1999,  and 1998, cash contributions  to the ESOP were  $13,350,  $13,220,
and $12,600, respectively.  These amounts were  charged to Cost of Services  and
Corporate General and Administrative Expenses.

Effective  January 1, 2001, the Company  established two new plans:  the Savings
and  Retirement   Plan  and  the  Capital   Accumulation   and  Retirement  Plan
(collectively,  the "Savings Plans"). At the same time, the ESOP was merged into
the two plans.  The  Company  stock  accounts of  participants  in the ESOP were
transferred  to  one  or the  other  of the  Savings  Plans,  and  Savings Plans
participants  have the same distribution and put rights for these ESOP shares as
they had in the ESOP.  See Note 11 for  discussion of the Savings Plans.

(7)   Redeemable Common Stock

Common stock which is redeemable has been  reflected as Temporary  Equity at the
redemption value at each balance sheet date and consists of the following:
<TABLE>
<CAPTION>
                                                    Balance at                                       Balance at
                                     Redemption    December 28,                       Redemption     December 30,
                           Shares       Value          2000               Shares         Value           1999
                         ----------  ----------    ------------         ----------    ----------     ------------
<S>                       <C>            <C>           <C>               <C>              <C>           <C>
ESOP Shares               3,313,729      $35.25      $  116,809          3,313,729        $27.50        $  91,128
                          4,190,924      $29.00         121,537          4,037,208        $22.75           91,846
                          ---------                  ----------          ---------                      ---------
                          7,504,653                  $  238,346          7,350,937                      $ 182,974
                          =========                  ==========          =========                      =========
Other Redeemable
  Common Stock              426,217      $18.73      $    7,984            426,217        $14.41        $   6,142
                          =========                  ==========          =========                      =========
</TABLE>
ESOP Shares

In accordance with ERISA regulations and the ESOP documents,  the ESOP Trust may
purchase  and 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 investors,  including 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 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", as determined by the
trustee was $35.25 per share as of December  28,  2000.  The  additional  shares
obtained by the ESOP in 1994 through 2000 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 as determined by the
trustee was $29.00 per share as of December 28, 2000. 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 or the  Company
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 $35.25 and $29.00 per share as of December  28,  2000,  the  estimated
maximum  contingent  liability to repurchase  shares from the ESOP  participants
upon death,  disability,  retirement and  termination is as follows:  $12,018 in
2001,  $15,467 in 2002,  $17,772 in 2003,  $19,095 in 2004, $18,810 in 2005, and
$155,184  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.  As explained  above in Note 6, the ESOP was merged into the Savings
and Retirement Plan and the Capital  Accumulation  and Retirement Plan effective
January 1, 2001.  All rights and  obligations  of the ESOP and its  participants
remain intact in the new plans.

Other Redeemable Common Stock

On  December  10,1999,  the  Company  entered  into an  agreement  with  various
financial institutions for the sale of 426,217 shares of the Company's stock and
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
<PAGE>
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 22.0% for the first quarter after the put is not honored up
to 52.0% during the sixteenth quarter. The annual accretion in the fair value of
these shares is reflected  as a reduction of common  stockholders'  share of net
earnings on the consolidated statements of operations.

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 28, 2000:
<TABLE>
<CAPTION>
                                                                        Redeemable Common Stock
                                                                 -------------------------------------
                                                                     Other          ESOP         Total
                                                                     -----          ----         -----
<S>                                                                 <C>         <C>           <C>
Balance, December 31, 1997                                          $3,017      $151,823      $154,840
   Shares purchased by ESOP                                              -         1,482         1,482
   Shares released from collateral                                       -         5,932         5,798
   ESOP diversification (a)                                              -        (4,074)       (4,074)
   Adjustment of shares to fair market value                            32        25,649        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
  Shares purchased by ESOP                                               -           568           568
  Shares purchased on the Internal Market                                -           612           612
  Shares released from collateral                                        -         2,958         2,958
  Shares pledged as collateral                                           -          (300)         (300)
  ESOP diversification (a)                                               -        (3,838)       (3,838)
  Adjustment of shares to fair market value                          1,842        55,372        57,214
                                                                    ------      --------      --------
Balance, December 28, 2000                                          $7,984      $238,346      $246,330
                                                                    ======      ========      ========
<FN>
(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.
</FN>
</TABLE>
(8)   Common Stock

At December  28,  2000,  common stock  includes  those shares  issued to outside
investors,  officers and directors,  current and former employees, the ESOP, 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.

(9)   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 (as defined in the Plan) 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
<PAGE>
of the specified periods as set forth in the Plan.

(10)   Acquisitions

In September  2000,  the Company  purchased for $2.5 million  certain assets and
liabilities   of  a   company   which   developed   and   marketed   proprietary
decision-support  software and provides related consulting  services to evaluate
and profile  performance  of healthcare  providers.  The purchase price has been
allocated to the assets  acquired and  liabilities  assumed based on preliminary
estimated fair value at the date of  acquisition,  under the purchase  method of
accounting.  Goodwill, net of  accumulated  amortization,  associated  with this
purchase is $2.9 million as of December 28, 2000.

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.  On  December  13,  1999,  the  name  of  GTE
Information Systems LLC 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.  In 2000, the Company
finalized the purchase  accounting  related to the  evaluation of the  estimated
future cash flows of contracts and other assets  acquired  from  GTE Information
Systems LLC. Based on these evaluations,  the Company increased certain reserves
by $70.1 million.  The Company wrote off $19.4 million of assets and expenses to
these reserves during 2000.  These changes resulted in increases to goodwill and
deferred  tax  assets of  $45.9  million and $24.2  million,  respectively.  The
purchase price was allocated to the assets acquired and the liabilities  assumed
based on estimated fair value at the date of acquisition.  At December 28, 2000,
$110.5 million of goodwill,  net of accumulated amortization, is  recorded based
on the allocation of the purchase price and is being amortized over 30 years.

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.
<TABLE>
<CAPTION>
                                                               1999                         1998
                                                               ----                         ----
                                                            (unaudited)                  (unaudited)
<S>                                                         <C>                          <C>
Revenue                                                     $1,560,971                   $1,457,870
Net earnings                                                     4,251                        3,219
Basic earnings per share                                         $0.42                        $0.31
Diluted earnings per share                                       $0.41                        $0.31
</TABLE>
(11)   Savings Plans

In 2000,  the Company  had a Savings  and  Retirement  Plan  ("SARP")  which was
intended to qualify under section  401(k) of the Internal  Revenue Code ("IRC").
The plan allowed eligible employees to defer 1.0% to 15.0% of their compensation
on a pretax basis for contribution to their SARP accounts.  In 1996, the Company
began matching  100.0% of the first 1.0% of employee  deferrals and 25.0% of the
next 4.0% of employee  contributions,  provided  the employee  contribution  was
invested  in  Company  stock  funds.  Matching  contributions  are  invested  in
additional  shares of the Company's  common stock.  As of December 28, 2000, the
SARP held  1,039,376  shares.  The Company has  expensed  approximately  $2,617,
$1,937,  and $1,624,  in 2000,  1999, and 1998,  respectively,  related to these
matching contributions.

Effective  January 1, 2001, the Company revised its SARP to establish two plans:
the Savings and Retirement Plan and the Capital Accumulation and Retirement Plan
("Savings  Plans"),  which are intended to qualify under  section  401(k) of the
IRC. At the same time, the ESOP was merged into the two plans. The Company stock
accounts of participants in the ESOP were transferred to one or the other of the
Savings Plans, and Savings Plan  participants have the same distribution and put
rights  for  these  ESOP  shares  as they  had in the  ESOP.  Substantially  all
employees participate in one of the two Savings Plans.

Under the revised  Savings and Retirement  Plan, the Company may make a match of
up to 50.0% of the first 8.0% of employee  salary  deferrals  and an  additional
match  of 50.0% of the  first  3.0% of such  salary  deferrals  invested  in the
Company  stock  investment  funds;  the  Company  may also make a  discretionary
contribution  of 1.0% of  compensation  on behalf of  participants.  All Company
contributions  are  invested  in the  company  stock  investment  fund  for such
participants.  Under the Capital  Accumulation  and Retirement Plan, the initial
Company  match is  25.0%  of up to 8.0% of  employee  salary  deferrals  and the
Company may make an  additional  match of 50.0% of the first 3.0% of such salary
deferrals  invested in the Company stock  investment  fund. The Company may also
make  a  discretionary  contribution  of  2.0%  of  compensation.   All  Company
contributions,  other than those used to pay administrative  expenses are either
in the form of  Company  stock or must be used by the  Savings  Plans to acquire
Company stock.

(12)   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
<PAGE>
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:
<TABLE>
<CAPTION>
                                                                          Fiscal Years Ended
                                                         2000                1999                1998
                                                         ----                ----                ----
         <S>                                         <C>                 <C>                 <C>
         Domestic operations                         $ 20,132            $ 15,936            $ 26,909
         Foreign operations                              (397)               (729)               (214)
                                                     --------            --------             -------
                                                     $ 19,735            $ 15,207            $ 26,695
                                                     ========            ========            ========
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
                                                                    Fiscal Years Ended
                                                         2000                1999                1998
                                                         ----                ----                ----
         <S>                                        <C>                   <C>               <C>
         Current:
           Federal                                  $  14,254           $   1,577            $  7,616
           Foreign                                      1,700                 120                  22
           State                                          471                 636                 458
                                                    ---------           ---------            --------
                                                       16,425               2,333               8,096
                                                    ---------           ---------            --------
         Deferred:
           Federal                                    (10,369)              4,461               2,933
           Foreign                                          -                   -              (1,470)
           State                                         (486)             (2,167)                298
                                                    ---------           ---------            --------
                                                      (10,855)              2,294               1,761
                                                    ----------          ---------            --------
         Valuation Allowance:
           Federal                                          -                   -                   -
           State                                          756                  22                (298)
                                                    ---------           ---------            --------
                                                          756                  22                (298)
                                                    ---------           ---------            --------
                Total                               $   6,326           $   4,649            $  9,559
                                                    =========           =========            ========
</TABLE>
The components of deferred taxes are as follows:
<TABLE>
<CAPTION>
                                                    December 28,        December 30,
                                                        2000               1999
                                                        ----               ----
<S>                                                  <C>                <C>
Deferred tax (liabilities) assets:
  Employee benefits                                  $   (902)         $   (1,933)
  Contracts revenue recognition                       (11,480)            (17,739)
  Other, net                                             (847)               (653)
                                                     --------          ----------
    Total deferred tax liabilities                    (13,229)            (20,325)
                                                     --------          ----------
Deferred tax assets (liabilities):
  Deferred compensation                                 1,085                 922
  Operating reserves and other accruals                14,144              13,572
  Depreciation and amortization                         1,420              (1,118)
  Increase due to federal rate change                     335                 335
  Benefit of state tax on temporary
    differences and state net operating
    loss carryforwards                                  5,514               5,028
                                                     --------          ----------
     Total deferred tax assets                         22,498              18,739
                                                     --------          ----------
 Total temporary differences
    before valuation allowances                         9,269              (1,586)
  Valuation allowances:
    State                                              (5,514)             (4,758)
                                                     --------          ----------
      Total temporary differences
      affecting tax provision                           3,755              (6,344)

  "Safe harbor" leases                                 (4,035)             (4,632)
  Acquired contingent reserves                         26,899               9,946
                                                     --------          ----------
Net deferred tax asset (liability)                   $ 26,619          $   (1,030)
                                                     ========          ==========
</TABLE>
<PAGE>
No valuation  allowance  was  required for the  Company's   federal deferred tax
assets at December 28, 2000 and December 30, 1999.  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 asset(liability)  includes current deferred tax assets of $15,639 and $3,517
as of December 28, 2000 and December 30, 1999, 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 1996.

Cash paid for income taxes was $5,514 for 2000,  $4,942 for 1999, and $7,338 for
1998.

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:
<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended
                                                                     2000           1999          1998
                                                                    -------        -------       -------
    <S>                                                           <C>            <C>          <C>
    Expected federal income tax provision                         $ 6,907        $ 5,322       $ 9,343
    Minority interest not included in tax provision                  (831)          (446)         (277)
    State and local income taxes, net of
      federal income tax benefit (provision)                          482         (1,637)          297
    Nondeductible amortization of intangibles
      and other costs                                               1,235          1,173           724
    Foreign income tax provision (benefit)                          1,700            120        (1,448)
    Foreign and fuel tax credits                                   (2,614)           (54)          (27)
    Other, net                                                       (553)           171           947
                                                                  -------        -------       -------
           Tax provision                                          $ 6,326        $ 4,649       $ 9,559
                                                                  =======        =======       =======
</TABLE>
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
                             ----------                    ----------------
                                 2000                          $    705
                                 2001                               592
                                 2002                             3,482
                                 2003                               743
                                 2004                             2,506
                         Through 2019                            68,096
                                                               --------
                                                               $ 76,124
                                                               ========
(13)   Pension and Postretirement Benefits Plans

Multiemployer Pension Plan
--------------------------
Union  employees  who are not  participants  in the ESOP or  Savings  Plans  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 2000, 1999, and 1998, the Company expensed $4,481,  $4,241,
and $3,782, 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 Pension Plans
-----------------------------------------------
On December 11, 1999, the Company's subsidiary,  DIS, 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's  employees.
The benefits to be paid under this plan are generally based on years of credited
service and average final earnings. DIS'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 DIS'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.
<PAGE>
Postretirement Benefit Plan
---------------------------
On December 11,  1999,  a majority of DIS's  employees  became  covered  under a
postretirement  healthcare and life insurance benefit plan sponsored by DIS. The
determination  of benefit cost for the  postretirement  health plan is generally
based on comprehensive hospital, medical and surgical benefit plan provisions.


The following is a reconciliation of the benefit  obligations,  plan assets, and
funded status of the Company's  Defined  Benefit Pension and Union Pension Plans
and Postretirement Benefit Plan:
<TABLE>
<CAPTION>
Change in Benefit Obligation                               Pension Benefits              Postretirement Benefits
                                                           ----------------              -----------------------
                                                         2000            1999            2000              1999
                                                         ----            ----            ----              ----
<S>                                                     <C>              <C>             <C>                <C>
Benefit obligation at beginning of year                 $ 44,553         $      -        $ 21,608           $      -
Service cost                                               2,953              153             188                 10
Interest cost                                              3,642              173           1,631                 84
Actuarial (gain) loss                                    (3,803)                -             779                  -
Participant contributions                                      -                -              96                  5
Acquisitions                                                   -           44,281               -             21,593
Benefits paid                                            (9,808)             (54)         (1,670)               (84)
                                                        --------         --------        --------           --------
Benefit obligation at end of year                       $ 37,537         $ 44,553        $ 22,632           $ 21,608

Change in Plan Assets                                      Pension Benefits              Postretirement Benefits
                                                           ----------------              -----------------------
                                                         2000            1999            2000              1999
                                                         ----            ----            ----              ----
Fair value of assets at beginning of year               $ 57,604         $      -        $ 12,090           $      -
Actual return on plan assets                               2,743              258               -                 41
Unrecognized net actuarial (loss) gain                   (1,605)                -           1,545                  -
Acquisitions                                                   -           57,400               -             12,049
Employer contributions                                         -                -         (3,495)                 79
Employee contributions                                         -                -              96                  5
Benefits paid                                            (9,808)             (54)         (1,670)               (84)
                                                        --------         --------        --------           --------
Fair value of assets at end of year                     $ 48,934         $ 57,604        $  8,566           $ 12,090

Funded Status Reconciliation                               Pension Benefits              Postretirement Benefits
                                                           ----------------              -----------------------
                                                         2000            1999            2000              1999
                                                         ----            ----            ----              ----
Funded status                                            $13,003         $ 13,051       $(15,611)          $ (9,518)
Unrecognized net actuarial (loss) gain                   (1,605)                -           1,545                  -
                                                         -------         --------       ---------          ---------
Net prepaid (unfunded) benefit cost                      $11,398         $ 13,501       $(14,066)          $ (9,518)


Assumptions                                                Pension Benefits              Postretirement Benefits
                                                           ----------------              -----------------------
                                                         2000            1999            2000              1999
                                                         ----            ----            ----              ----
Discount rate                                              7.50%            7.75%           7.50%              7.75%
Varying rates of increase in
     Compensation levels based on age                      5.00%            5.00%               -                  -
Expected weighted-average long-term
     rate of return on assets                              9.00%            9.00%           6.75%              6.75%
Assumed health care cost trend rate:
     Post-65 claim group                                       -                -           6.50%              6.50%
     Pre-65 claim group                                        -                -           6.50%              6.50%
</TABLE>
Net  periodic  pension  cost  and  postretirement  benefit  costs  included  the
following:
<TABLE>
<CAPTION>
                                                            Pension Benefits              Postretirement Benefits
                                                            ----------------              -----------------------
                                                            2000             1999            2000              1999
                                                            ----             ----            ----              ----
<S>                                                       <C>                <C>            <C>                  <C>
Service cost                                              $ 2,953            $ 153          $  188               $ 10
Interest cost                                               3,642              173           1,631                 84
Expected return on plan assets                            (4,941)            (258)           (765)               (41)
                                                          -------            -----          ------               ----
Net periodic pension cost                                 $ 1,654            $  68          $1,054               $ 53
</TABLE>
For the postretirement benefit plan the health care cost trend rates are assumed
to decline  gradually  by 0.25% until the  ultimate  rate of 5.50% is reached in
2004 for  post-65  and  pre-65  claim  groups  and  will  remain  at that  level
thereafter.  Assumed  health care cost trend rates have a significant  effect on
<PAGE>
the amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
                                                 1-Percentage-Point        1-Percentage-Point
                                                      Increase                  Decrease
                                                      --------                  --------
<S>                                                    <C>                     <C>
Effect on total of service and
     interest cost components                          $   80                  $   (71)
Effect on accumulated
     Postretirement benefit obligation                 $1,230                  $(1,093)
</TABLE>
(14)   Net Earnings Per Common Share

Basic  earnings  per  common  share  ("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:
<TABLE>
<CAPTION>
                                                                                   2000           1999          1998
                                                                                   ----           ----          ----
<S>                                                                              <C>            <C>           <C>
Weighted-average shares outstanding for basic EPS                                10,477         10,044        10,242
   Effect of dilutive securities:
      Warrants                                                                        -              -           131
      Stock options                                                                 227            229           141
                                                                                 ------         ------        ------
Weighted-average shares outstanding for diluted EPS                              10,704         10,273        10,514
                                                                                 ======         ======        ======
</TABLE>
(15)   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.  In 2000, the
chief  executive  officer was awarded 25,000 shares of the Company's stock under
the Company's  Long-Term  Incentive Stock Plan,  which will vest entirely and be
distributable  at such time as, but only in the event that,  the price of common
stock exceeds $40.00 per share by a date no later than December 31, 2002.

(16)   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  non-qualified  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. Following an action by the Compensation Committee in February
2001,  options  granted  during 1999 and 2000 will  generally  vest based on the
market  price for the  Company's  common stock over a six-year  period.  Options
which do not vest  during  the first six 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 a non-qualified  Stock Option Plan in 1995,  whereby options
could be granted to officers,  directors,  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 four 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.
<PAGE>
Stock option activity was as follows:
<TABLE>
<CAPTION>
                                                                2000                  1999              1998
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                   <C>                <C>
Outstanding, January 1                                     1,603,150             1,238,600            878,000
Granted                                                      447,000               468,750            389,500
Exercised                                                    (95,813)               (5,400)           (16,900)
Canceled or terminated                                      (329,337)              (98,800)           (12,000)
-------------------------------------------------------------------------------------------------------------
Outstanding, December 28, 30, and 31                       1,625,000             1,603,150          1,238,600
Exercisable                                                  643,100               564,920            365,360

Average price
     Outstanding, beginning of year                           $20.29                $18.69             $17.05
     Granted                                                   23.50                 24.38              22.13
     Exercised                                                 17.04                 17.26              14.90
     Canceled or terminated                                    22.95                 19.82              16.17
     Outstanding, end of year                                  20.82                 20.29              18.69
</TABLE>
Weighted average grant date fair value of options was $23.88, $24.38, and $22.12
for 2000, 1999, and 1998, respectively.

The following table summarizes  information  about stock options  outstanding at
December 28, 2000:
<TABLE>
<CAPTION>
                                                                                            Weighted-Average
Range of                                        Number         Weighted-Average                    Remaining
Prices                                     Outstanding           Exercise Price             Contractual Life
------------------------------------------------------------------------------------------------------------
<S>                                            <C>                       <C>                            <C>
$14.50 - 19.00                                 611,600                   $16.81                         2.15
20.00 - 23.25                                  281,000                    21.57                         6.52
23.50 - 24.50                                  732,400                    23.88                         9.06
</TABLE>
The following table summarizes  information  about stock options  exercisable at
December 28, 2000:
<TABLE>
<CAPTION>
Range of                                                          Number                    Weighted-Average
Prices                                                       Exercisable                      Exercise Price
------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                                  <C>
$14.50 - 19.00                                                   516,600                              $16.62
20.00 - 23.25                                                    126,500                               21.39
</TABLE>
There  were no  exercisable  shares  in the  $23.50 - $24.50  range of  exercise
prices.

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:
<TABLE>
<CAPTION>
Fiscal Years Ended                                              2000                  1999              1998
------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>              <C>
Common stockholders' share of
net earnings
     As reported                                              $8,052                $5,895           $15,055
     Pro forma                                                 7,451                 5,186            14,900
Basic earnings per share
     As reported                                                0.77                  0.59              1.47
     Pro forma                                                  0.71                  0.52              1.45
Diluted earnings per share
     As reported                                                0.75                  0.57              1.43
     Pro forma                                                  0.70                  0.50              1.42
</TABLE>
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 5.9%, 5.2%, and 4.6%, for 2000, 1999, and
1998, respectively.
<PAGE>
(17)   Leases

Future  minimum  lease  payments  required  under  operating  leases  that  have
remaining  noncancellable lease terms in excess of one year at December 28, 2000
are summarized below:

    Fiscal Years Ending,
    ====================
    2001                                          $  37,249
    2002                                             35,963
    2003                                             34,562
    2004                                             25,277
    2005                                             19,568
    Thereafter                                       68,022
                                                  ---------
    Total minimum lease payments                  $ 220,641
                                                  =========

Net rent expense for leases of $42,426,  $34,769,  and  $31,138 for 2000,  1999,
and 1998,  respectively,  has been  charged to Cost of  Services  and  Corporate
General and Administrative Expense.

(18)   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 tortuous  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   $17.2  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-2000  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  lawsuits  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.

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. 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.
<PAGE>
(b)   General Litigation

In  December  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.In October 2000, the United States District
Court for the  District of  Columbia  granted  summary  judgment in favor of the
Company  and its  subsidiary.  The former  teaming  partner  has  appealed.  The
resolution  of this  matter is not  expected  to have a  material  impact on the
Company's results of operations or financial condition.

In  September,   2000,  the  Company  became  aware  of  significant  errors  in
pre-acquisition estimates of the cost to complete a major telephone installation
and operation  contract that was undertaken in 1998 by GTE  Information  Systems
LLC, now known as DynCorp  Information Systems LLC, a wholly owned subsidiary of
the Company. The Company acquired GTE Information Systems LLC from Contel, Inc.,
a subsidiary of GTE,  Inc., in December 1999 . As a consequence of these errors,
the  Company  recorded a loss  reserve  for the  contract in the amount of $73.0
million,  which has a remaining  balance of $56.1  million at December 28, 2000.
Under applicable  purchase  accounting rules this loss has been recorded as part
of the purchase price of GTE  Information  Systems LLC. The Company has notified
GTE  Corporation  of the  circumstance  and has  indicated  that a claim will be
forthcoming.  The Company is currently in discussions with the government agency
customer regarding certain changes to the telephone system contract. The Company
believes that the current  reserve is  sufficient to cover any further  material
loss in connection with the completion of the telephone contract.

Regarding   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 $17.2 million discussed above. The
estimated  probable liability for these issues is approximately $9.5 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 $9.5 million at December 28, 2000 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. A
majority of the audits have been  completed on the Company's  incurred  contract
costs  through 1998.  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  28,  2000 that will have a material  adverse  effect on the
Company's consolidated financial condition, results of operations, or liquidity.

(19)   Business Segments

The Company has three reportable  segments,  DynCorp Technical Services ("DTS"),
DynCorp Information and Enterprise Technology ("DI&ET"), and DynCorp Information
Systems LLC ("DIS").  These three  reportable  segments are  strategic  business
units that provide distinctly different services to a variety of customers.  DTS
provides a myriad of specialized technical services including aviation services,
range technical services, base operations, and logistics support. DI&ET provides
a wide range of information  technology services and other professional services
<PAGE>
including  network  and  communications   engineering,   government  operational
outsourcing,  healthcare  information and technology services,  and security and
intelligence programs. 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 98.0%,  93.0%,  and 95.0% of its revenues from contracts and
subcontracts  with the U.S.  Government in 2000,  1999, and 1998,  respectively.
Prime contracts  comprised  79.0% of revenue in 2000,  75.0% of revenue in 1999,
and 72.0% of revenue in 1998.  Prime  contracts  with the  Department of Defense
("DoD")  represented 44.0 % of revenue in 2000, and 40.0% of revenue in 1999 and
1998,  respectively.  In 2000,  the Company's  second  largest  customer was the
Department of State,  comprising 11.0% of revenue.  No other customer  accounted
for more than 10.0% of revenues in any year.

Revenue,  operating  profit,  identifiable  assets,  capital  expenditures,  and
depreciation and amortization by segment are presented below:
<TABLE>
<CAPTION>
                                                                         Fiscal Years Ended
                                                                   2000           1999 (c)        1998 (c)
                                                                   ----           -------         -------
    <S>                                                       <C>              <C>             <C>
    Revenue
    -------
       DTS                                                    $   909,601      $   695,499     $   600,618
       DI&ET                                                      671,380          635,881         633,089
       DIS                                                        228,128           13,901               -
                                                              -----------        ---------     -----------
                                                              $ 1,809,109      $ 1,345,281     $ 1,233,707
                                                              ===========      ===========     ===========
    Operating Profit
    ----------------
       DTS                                                    $    42,442      $    31,523     $    26,525
       DI&ET                                                       40,302           30,575          31,138
       DIS                                                         17,809              989               -
                                                              -----------      -----------     -----------
                                                                  100,553           63,087          57,663
                                                              -----------      -----------     -----------
       Corporate general and administrative                        29,350           21,741          18,630
       Interest expense                                            41,408           18,943          14,144
       Interest income                                             (1,471)          (1,393)         (1,600)
       Goodwill amortization (a)                                    4,608            2,958           1,575
       Amortization of other intangibles of acquired companies (b) 10,754            8,461           1,336
       Costs associated with divested businesses                      148              286             530
       Minority interest included in operating profit              (3,515)          (2,968)         (2,081)
       Other miscellaneous                                           (464)            (148)         (1,566)
                                                              -----------      -----------     -----------
       Earnings from continuing operations
          before income taxes, minority interest, and
          extraordinary item                                  $    19,735      $    15,207     $    26,695
                                                              ===========      ===========     ===========

                                                                     Fiscal Years Ended
                                                                  2000              1999
                                                                  ----              ----
    Identifiable Assets
    -------------------
       DTS                                                    $   194,889      $   173,629
       DI&ET                                                      172,548          205,798
       DIS                                                        230,544          206,083
       Corporate                                                   46,360           54,163
                                                              -----------      -----------
                                                              $   644,341      $   639,673
                                                              ===========      ===========
<FN>
(a) 1999 includes write-off of the unamortized goodwill balance of an impaired investment.
(b) 1999 includes write-off of in-process research and development.
(c) Data has been restated to give recognition to the current reportable segment structure.
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended
                                                                     2000             1999            1998
                                                                     ----             ----            ----
    <S>                                                        <C>              <C>               <C>
    Capital Expenditures
    --------------------
       DTS                                                     $    2,704       $    2,519        $  1,129
       DI&ET                                                        4,631            8,266           2,064
       DIS                                                         13,169              872               -
       Corporate                                                    2,273            2,221           1,604
                                                               ----------       ----------        --------
                                                               $   22,777       $   13,878        $  4,797
                                                               ==========       ==========        ========
<PAGE>

                                                                             Fiscal Years Ended
                                                                     2000             1999            1998
                                                                     ----             ----            ----
    Depreciation and Amortization
    -----------------------------
       DTS                                                     $    1,345       $    2,132        $  1,349
       DI&ET                                                        4,600            6,641           5,651
       DIS                                                         14,687              860               -
       Corporate                                                    6,862            3,939           1,825
                                                               ----------       ----------         -------
                                                               $   27,494       $   13,572        $  8,825
                                                               ==========       ==========        ========
</TABLE>
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:
<TABLE>
<CAPTION>
                                                                                 Fiscal Years Ended
                                                                     2000             1999            1998
                                                                     ----             ----            ----
<S>                                                              <C>              <C>           <C>
Equity Investees' Earnings
--------------------------
       DTS                                                       $    667         $    362      $    1,563

                                                                                 Fiscal Years Ended
                                                                     2000             1999            1998
                                                                     ----             ----            ----
Investment in Equity Investees
------------------------------
       DTS                                                       $  3,695         $  2,490      $    4,136
       DI&ET                                                           25                -               -
                                                                 --------         --------      ----------
                                                                 $  3,720         $  2,490      $    4,136
                                                                 ========         ========      ==========
</TABLE>
(20)  Quarterly Financial Data (Unaudited)

A summary of quarterly financial data for 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
                                                          2000 Quarters(a)                           1999 Quarters
                                               -------------------------------------    --------------------------------------

                                                            (unaudited)                              (unaudited)
                                                            -----------                              -----------
                                               First      Second     Third    Fourth    First    Second    Third     Fourth(b)
                                               -----      ------     -----    ------    -----    ------    -----     ---------
<S>                                           <C>        <C>       <C>       <C>       <C>       <C>       <C>        <C>
Revenues                                      $428,500   $445,302  $467,673  $467,634  $311,886  $321,262  $334,635   $377,498
Gross profit                                    21,150     25,024    26,878    30,800    16,517    17,442    16,281     14,802
Earnings (loss) from continuing operations
   before income taxes, minority interest
   and extraordinary item                        1,397      4,310     5,804     8,224     7,588     5,490     6,532     (4,403)
Minority interest                                  577        635       625     1,678     1,103       205       590      1,070
Net earnings (loss)                                476      2,131     3,004     4,283     3,891     3,312     3,636     (4,850)
Net Earnings (loss) per common share:
     Basic earnings (loss) per share          $   0.01   $   0.16  $   0.24  $   0.36  $   0.38  $   0.33  $   0.37   $  (0.49)
    Diluted earnings (loss) per share         $   0.01   $   0.16  $   0.24  $   0.34  $   0.38  $   0.32  $   0.36   $  (0.49)
<FN>
(a) 2000 includes a full year of  amortization  of DIS goodwill and  intangibles
(b) 1999 Fourth Quarter includes:
    - In-process research and development write-off and 20 days of  amortization
      of DIS goodwill and other intangibles
</FN>
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

     None
<PAGE>
                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

     The directors and executive officers of the Company,  including  presidents
of principal business units, are:
<TABLE>
<CAPTION>
Name                                     Age     Position
----                                     ---     --------
<S>                                      <C>     <C>
Dan R. Bannister                         70      Director and Chairman of the Board
T. Eugene Blanchard                      70      Director
Michael P. C. Carns                      63      Director
Russell E. Dougherty                     80      Director
Paul G. Kaminski                         58      Director
Paul V. Lombardi                         59      Director, President and Chief Executive Officer *
Dudley C. Mecum II                       66      Director
David L. Reichardt                       58      Director, Senior Vice President and General Counsel*
H. Brian Thompson                        62      Director
Herbert S. Winokur, Jr.                  57      Director and Chairman of the Executive Committee
Stephen J. Cannon                        46      President of principal business unit *
Joseph L. Cunningham                     53      President of principal business unit *
John J. Fitzgerald                       47      Vice President and Controller *
Patrick C. FitzPatrick                   61      Senior Vice President and Chief Financial Officer *
Venkat R. Gopalan                        39      Vice President, Management Information Systems
Paul T. Graham                           34      Vice President and Treasurer *
H. Montgomery Hougen                     65      Vice President and Secretary and Deputy General Counsel
Marshall S. Mandell                      58      Senior Vice President, Corporate Development *
James P. McCoy                           57      President of principal business unit *
W. Ben Medley                            54      President of principal business unit *
Ruth Morrel                              46      Vice President, Law and Compliance
Charlene A. Wheeless                     36      Vice President, Corporate Communications
Robert G. Wilson                         59      Vice President and General Auditor
<FN>
*    Officers  designated  by an  asterisk  are deemed to be  "officers"  for  purposes  of Rule  16a-1(f),  as
     promulgated in Release No. 34-28869.
</FN>
</TABLE>

                                    DIRECTORS
Dan R. Bannister                                            Director  since 1985
Mr.  Bannister, age 70, 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  and Chairman of
the  Northern  Virginia  Roundtable.  His current term as a  director expires in
2001.

T. Eugene Blanchard                                          Director since 1988
Mr. Blanchard,  age 70, 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 Administrative Committee of the Company's Savings and
Retirement Plan and Capital Accumulation  and Savings  Plan. He is a director of
Landmark Systems Corporation.  His current term as a director expires in 2003.

Michael P. C. Carns                                 Director since November 2000
General Carns,  age  63,  was  the  President and  Director  of  the  Center for
International  Political  Economy  from 1995 to 2000. He is a  retired  General,
United States Air Force,  who  served as Vice Chief of Staff,  United States Air
Force and as Director of the Joint Staff, Joint Chiefs of Staff.  He is a member
of the  Defense  Science  Board and the  Board of  Advisors,  National  Security
Agency.  He is a director of Engineered Support Systems Inc. His current term as
a director expires in 2002.

Russell E.  Dougherty                                       Director  since 1989
General Dougherty, age 80, 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 2001.

Paul G.  Kaminski                                           Director  since 1997
Dr.  Kaminski, age  58,  also served as a director of the Company from  1988  to
1994.  He is  President  and  Chief  Executive  Officer  of  Technovation,  Inc.
<PAGE>
(consulting)  and a General  Partner of Global Technology  Partners  (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 1985 to 1994. He is a director of Anteon
Corporation;  Condor Systems,  Inc.; General Dynamics Corporation,  and Veridian
Corporation.  His current term as a director expires in 2001.

Paul V.  Lombardi                                          Director  since  1994
Mr. Lombardi, age 59, 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. and  Chairman of the  Professional  Services Council
(services industry trade association). His current term as a director expires in
2003.

Dudley C. Mecum II                                           Director since 1988
Mr.  Mecum,  age 66, 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.; and Suburban Propane Partners LLP.  His current
term as a director expires in 2003.

David L.  Reichardt                                         Director  since 1988
Mr.  Reichardt,  age 58, 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 62,  is  President  of  Universal   Telecommunications,  Inc.
(private investment and  advisory firm).  He was  Chairman and  Chief  Executive
Officer of Global TeleSystems Group, Inc. from 1999 to 2000. He was Chairman and
Chief Executive  Officer of LCI  International  Inc.  from  1991 to  1998,  Vice
Chairman of Qwest Communications International Inc. from June to  December 1998,
and Chairman of Telecom Eireann in 1999.  From 1981 to 1990,  he  was  Executive
Vice President, MCI Communications Corporation.  He is a director of Bell Canada
International  Inc.,  Williams  Communications  Group,  Inc.,  Arraycomm,  Inc.,
I.C.L., Ltd., and a member of the management committee of Paging Brazil  Holding
Company, LLC.   He is  Co-Chair  for  the  Americas  of the  Global  Information
Infrastructure Commission.  His current term as a director expires in 2002.

Herbert S. Winokur, Jr.                                      Director since 1988
Mr. Winokur, age 57, 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 CCC  Information  Services Group,  Inc.; ENRON
Corporation;  Mrs. Fields Holdings,  Inc.; and NATCO Group Inc. His current term
ss 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 the following  corporate officers and
presidents of principal business units:

Stephen J. Cannon,  age 46, President,  DynCorp International LLC, has served in
that capacity since  January 2001.  He  was  Senior  Vice  President of  DynCorp
Technical Services, Inc. from 1993 to 2000.

Joseph L  Cunningham,  age  53,  President,  DynCorp  Information  &  Enterprise
Technology,  Inc.,  has served in that capacity since June, 2000.  He was Senior
Vice President,  DynCorp Information & Enterprise Technology,  Inc. from 1998 to
2000; Vice President, Professional  Services Group, Northrop Grumman Corporation
in 1998; and Director, Professional Services Group, Northrop Grumman Corporation
from 1996 to 1998.

John J.  Fitzgerald,  age 47, 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 61,  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.
<PAGE>
Venkat R. Gopalan,  age 39, Vice President and Chief  Information  Officer,  has
served in that  capacity  since June  2000.  He was  Senior  Director,  Business
Standards Group, DynCorp Information and Enterprise Technology,  Inc., from 1998
to 2000;  and Director,  Standards  Group,  DynCorp  Information  and Enterprise
Technology, Inc., from 1996 to 1998.

Paul T.  Graham,  age 34,  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 65, 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.

Marshall S. Mandell, age 58, 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 57, President of DynCorp Information Systems LLC, has served
in that capacity and as President of the Information Systems business unit since
1999.  He served as Executive  Vice  President of the  Information  & Enterprise
Technology  business unit from 1998 to 1999. He was Senior Vice President of the
Professional  Technical Services business unit of GRC  International,  Inc. from
1995 to 1997.

W. Ben Medley, age 54, President of DynCorp Technical Services  LLP, has  served
in that  capacity  since January 2001.  He was President of BAE SYSTEMS,  Flight
Systems of BAE SYSTEMS North America, Inc. from 1998 to 2001, President, Marconi
Flight Systems, Inc. in 1998, and Vice President,  Aerospace Operations, Tracor,
Inc. from 1996 to 1998.

Ruth Morrel,  age 46, Vice  President,  Law and  Compliance,  has served in that
capacity since 1994. She served as Group General Counsel from 1984 to 1994.

Charlene A. Wheeless,  age 36, 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 59, 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.
<PAGE>
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>
<CAPTION>
                                                           SUMMARY COMPENSATION TABLE

----------------------------------------------------------------------------------------------------------------------
                                                                           Long term compensation
                                           Annual compensation                     awards
----------------------------------------------------------------------------------------------------------------------

                                                              Other
                                                              annual     Restricted        Securities
                                                              compen-      stock           underlying      All other
Name and principal                    Salary       Bonus      sation       award(s)       options/SARs    compensation
   position                  Year      ($)         ($)1)       ($)(2)        ($)               (#)           ($)(4)
     (a)                      (b)      (c)          (d)         (e)          (f)               (g)            (i)
----------------------------------------------------------------------------------------------------------------------

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

Paul V. Lombardi             2000      395,385     278,400      14,173   587,500(3)            30,000          12,496
   President & Chief         1999      370,400      78,800       5,386          --             70,000          11,893
   Executive Officer         1998      342,104     185,300          --          --                 --          14,283

----------------------------------------------------------------------------------------------------------------------
Patrick C. FitzPatrick       2000      283,154     165,300      11,501          --             10,000          13,527
   Senior Vice               1999      272,170      43,300       5,227          --             30,000          14,793
   President & Chief         1998      248,947     129,800          --          --                 --          10,896
   Financial Officer

----------------------------------------------------------------------------------------------------------------------
Marshall S. Mandell          2000      238,154     139,200      11,349          --             10,000           9,475
   Senior Vice               1999      224,446      36,200       4,471          --             30,000           9,144
   President, Business       1998      212,724      87,300          --          --             40,000          10,854
   Development

----------------------------------------------------------------------------------------------------------------------
David L. Reichardt           2000      283,154     165,300      11,349          --             30,000          12,556
   Senior Vice               1999      272,170      43,300       5,371          --             30,000          14,144
   President & General       1998      248,947     204,800          --          --                 --          16,706
   Counsel

----------------------------------------------------------------------------------------------------------------------
Joseph L. Cunningham         2000      187,234     110,900      10,823          --             40,000           6,942
   President, DynCorp        1999      156,971      63,500      10,215          --             15,000           8,067
   Information &             1998       33,333          --          --          --                 --           1,867
   Enterprise Technology,
   Inc.
----------------------------------------------------------------------------------------------------------------------
<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 (e) reflects payments in lieu of reimbursement of insurance costs.
   (3) Mr.  Lombardi was awarded 25,000 shares of restricted  stock,  which will
       vest entirely and be distributable at such time as, but only in the event
       that,  the price of common  stock  exceeds  $40.00 per share by a date no
       later than December 31, 2002. No dividends will be paid on the restricted
       stock.  The shares  shown in column  (f)  constitute  the only  shares of
       restricted stock owned by Mr. Lombardi.
   (4) Column  (i)  includes  respective  individual's  pro  rata  share  of the
       Company's  contribution  to the  former  Employee  Stock  Ownership  Plan
       ("ESOP"),  Company-matching  contributions  to the Savings and Retirement
       Plan  ("SARP"),  and the imputed  income 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                      2000(1)      1999       1998      2000       1999     1998       2000       1999       1998
----------------------------------------------------------------------------------------------------------------------
<S>                         <C>       <C>        <C>       <C>        <C>      <C>        <C>        <C>        <C>
Mr. Lombardi                4,320     4,273      4,435     3,000      2,886    3,000      5,176      4,735      6,848
----------------------------------------------------------------------------------------------------------------------
Mr. FitzPatrick             4,320     4,273      4,435     2,625      2,500    2,338      6,582      8,020      4,122
----------------------------------------------------------------------------------------------------------------------
Mr. Mandell                 4,320     4,273      4,435     2,250      2,143    2,143      2,905      2,728      4,277
----------------------------------------------------------------------------------------------------------------------
Mr. Reichardt               4,320     4,273      4,435     3,281      3,125    3,125      4,955      6,746      9,146
---------------------------------------------------------------------------- -----------------------------------------
Mr. Cunningham              4,320     4,273        993        --         --       --      2,622      3,794        894
----------------------------------------------------------------------------------------------------------------------
<FN>
 (1)   Individual allocations of 2000 ESOP contributions have been estimated.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                        OPTION/SAR GRANTS IN LAST FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------
                                                                                        Potential realizable value
                                                                                          at assumed annual rates
                                                                                              of stock price
                                                                                         appreciation for option
                                             Individual Grants                                     term
---------------------------------------------------------------------------------------------------------------------
                         Number of       Percent of total
                         securities       options/ SARs      Exercise
                         underlying         granted to        or base
                        options/SARs       employees in        price       Expiration
        Name            granted (#)        fiscal year       ($/Share)        date          5% ($)         10% ($)
        (a)                 (b)                (c)              (d)           (e)             (f)             (g)
---------------------------------------------------------------------------------------------------------------------
<S>                        <C>                  <C>            <C>         <C>              <C>            <C>
Mr. Lombardi               30,000               7.0%           23.50       06/20/2010       1,148,445      1,828,770
---------------------------------------------------------------------------------------------------------------------

Mr. FitzPatrick            10,000               2.3%           23.50       06/20/2010         382,815        609,590
---------------------------------------------------------------------------------------------------------------------

Mr. Mandell                10,000               2.3%           23.50       06/20/2010         382,815        609,590
---------------------------------------------------------------------------------------------------------------------

Mr. Reichardt              10,000               2.3%           23.50       06/20/2010         382,815        609,590
---------------------------------------------------------------------------------------------------------------------

Mr. Cunningham             40,000               9.4%           23.50       06/20/2010       1,531,260      2,438,360
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                  AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
                                              AND FY-END OPTION/SAR VALUES
----------------------------------------------------------------------------------------------------------------------
                                                                 Number of securities
                                                                underlying unexercised          Value of unexercised
                                                                options/SARs at fiscal       in-the-money options/SARs
                                                                      year-end (#)              at fiscal year-end ($)
                             Shares
                          acquired on         Value                   Exercisable/                   Exercisable/
         Name              exercise(#)     realized ($)              Unexercisable                  Unexercisable
         (a)                   (b)             (c)                        (d)                           (e)
----------------------------------------------------------------------------------------------------------------------
<S>                            <C>              <C>              <C>            <C>           <C>             <C>
Mr. Lombardi                   --               --               112,000        143,000       1,392,000       687,000
----------------------------------------------------------------------------------------------------------------------
Mr. FitzPatrick                --               --                60,000         80,000         570,000       570,000
----------------------------------------------------------------------------------------------------------------------
Mr. Mandell                    --               --                56,500         66,000         582,250       389,000
----------------------------------------------------------------------------------------------------------------------
Mr. Reichardt                  --               --                85,000         55,000       1,042,500       362,500
----------------------------------------------------------------------------------------------------------------------
Mr. Cunningham                 --               --                 2,500         52,500          13,750       283,750
----------------------------------------------------------------------------------------------------------------------
</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 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, 2001
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.
<PAGE>
                            COMPENSATION OF DIRECTORS

     Mr.  Bannister  receives  an annual fee of  $144,000  to serve as  Chairman
of the Board and member of various Board of Directors 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,  other than Mr. Bannister, 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.

                   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

                      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The following table presents  information as of March 12, 2001,  concerning
the only beneficial owners of five percent or more of the outstanding  shares of
the Company's common stock.
<TABLE>
<CAPTION>
    --------------------------------------------------------------------------------------------------------
                         Name and address of                           Amount & nature of      Percent of
                           beneficial owner                                ownership             shares
    --------------------------------------------------------------------------------------------------------
    <S>                                                                    <C>                    <C>
    DynCorp Savings and Retirement Plan Trust                              6,541,752              62.6%
    c/o  DynCorp                                                           Direct (1)
         11710 Plaza America Drive
         Reston, Virginia  20190
    --------------------------------------------------------------------------------------------------------
    DynCorp Capital Accumulation and Retirement Plan Trust                 1,997,630              19.1%
    c/o  DynCorp                                                           Direct (1)
         11710 Plaza America Drive
         Reston, Virginia  20190
    --------------------------------------------------------------------------------------------------------
<FN>
    (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.
    (2) The Company provides administration for, and regularly contributes funds
        to, the Plans,  which are the Company's  principal  employee  retirement
        benefit plans.
</FN>
</TABLE>
                        SECURITY OWNERSHIP OF MANAGEMENT

     The following  table presents  information as of March 12, 2001  concerning
the  beneficial  ownership of the Company's  common stock by directors and named
executive  officers and all  directors,  officers,  and  presidents of principal
business units as a group.  Shares held indirectly  include those held on behalf
of the individuals in the SARP Trust.
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                         Amount & nature of ownership
--------------------------------------------------------------------------------------------------------------------

                                           Outstanding     Obtainable within                            Percent of
Name and title of beneficial owner           shares           60 days (1)         Total                 shares (2)
--------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                  <C>        <C>        <C>           <C>
D. R. Bannister                                  265,331              165,000      430,331  Direct        }4.2%
Chairman of the Board & Director                  43,221                            43,221  Indirect
--------------------------------------------------------------------------------------------------------------------
T. E. Blanchard(3)                                37,812               83,000      120,812  Direct        }1.5%
Director                                          51,026                            51,026  Indirect
--------------------------------------------------------------------------------------------------------------------
M. P. C. Carns                                        --                   --               Direct          *
Director
--------------------------------------------------------------------------------------------------------------------
J. L. Cunningham                                     547               19,167       19,714  Direct          *
President, DynCorp Information &                     412                               412  Indirect
   Enterprise Technology, Inc.
------------------------------------------------------------------------------------------- ------------------------
R. E. Dougherty                                    4,864                   --        4,864  Direct          *
Director
--------------------------------------------------------------------------------------------------------------------
P. C. FitzPatrick                                  2,080               93,333       95,413  Direct          *
Senior Vice President & Chief                      4,742                             4,742  Indirect
   Financial Officer
--------------------------------------------------------------------------------------------------------------------
P. G. Kaminski                                        --               10,000       10,000  Direct          *
Director
--------------------------------------------------------------------------------------------------------------------
P. V. Lombardi                                     28137              186,667      214,804  Direct        }2.0%
President, Chief Executive Officer &               8,392                             8,392  Indirect
   Director
--------------------------------------------------------------------------------------------------------------------
M. S. Mandell                                      8,653               86,833       95,487  Direct          *
Senior Vice President, Corporate                   3,848                             3,848  Indirect
   Development
--------------------------------------------------------------------------------------------------------------------
D. C. Mecum II                                     2,825                5,000        7,825  Direct          *
Director
--------------------------------------------------------------------------------------------------------------------
D. L. Reichardt                                   23,738              141,361      165,099  Direct          *
Senior Vice President, General Counsel             6,892                             6,892  Indirect
   & Director
--------------------------------------------------------------------------------------------------------------------
H. B. Thompson                                        --                2,500        2,500
Director
--------------------------------------------------------------------------------------------------------------------
H. S. Winokur, Jr.                                18,139                   --       18,139  Direct        }3.8%
Director                                         409,773                           409,773  Indirect
--------------------------------------------------------------------------------------------------------------------

All directors, officers, and                     439,666              941,253    1,380,919  Direct        }17.1%
   presidents of principal business              556,535                           556,535  Indirect
   units as a group
--------------------------------------------------------------------------------------------------------------------
<FN>
   (1) Column reflects  shares  issuable upon exercise of  in-the-money  options
       which will be vested as of the end of such period and estimated shares to
       be issued in March 2001 pursuant to Executive Incentive Plan.
   (2) Reflects  aggregate  direct  and  indirect  shares  as  a  percentage  of
       outstanding  shares plus shares  obtainable  by these  persons  within 60
       days. 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>
</TABLE>
<PAGE>
Item 13.  Certain Relationships and Related Information

     Mr. Blanchard  serves as Chairman of the Administrative  Committees for the
Company's  Savings Plans and was, in 2000, Chairman of Administrative  Committee
for the Employee  Stock Ownership Plan. He is compensated for these duties at an
hourly fee and is reimbursed for expenses.  Total fees in the  amount of $39,190
were paid to Mr. Blanchard in 2000.

                                     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 28,
2000, December 30, 1999 and December 31, 1998.

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  10-K for  1999,  File No.
                     1-3879)
4.1             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. 333-25355)
4.2             Specimen Common Stock Certificate (incorporated by reference  to
                     Registrant's Form 10-K for 1988, File No. 1-3879)
4.3             Article  Fourth of  the  Amended  and  Restated  Certificate  of
                     Incorporation (incorporated  by  reference to  Registrant's
                     Form 10-K/A for 1995, File No. 1-3879)
4.4             Credit Agreement by and among Citicorp USA,Inc.,certain Lenders,
                     the Registrant and Dyn Funding  Corporation, dated December
                     10, 1999  (incorporated by reference to  Registrant's  Form
                     8-K, File No. 1-3879)
4.5             Purchase   Agreement dated as of December 10, 1999 among certain
                     Purchasers and  the Registrant  relating  to    $40,000,000
                     Aggregate Principal Amount of 15% Senior Subordinated Notes
                     due 2007  (incorporated b y reference to  Registrant's Form
                     8-K, filed  December 27, 1999,  File No. 1-3879)
4.6             Registration Rights  Agreement, dated  as of December 10,  1999,
                     among  the  Registrant,  DB  Capital  Investors, L.P.,  The
                     Northwestern  Mutual Life Insurance  Society,  and Wachovia
                     Capital    Investors    (incorporated   by   reference   to
                     Registrant's  Form 8-K, filed  December 27, 1999,  File No.
                     1-3879)
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   (incorporate  by   reference  to
                     Registrant's Form 10-K for 1999, File No. 1-3879)
10.3            Executive   Incentive   Plan   (incorporated  by  reference   to
                     Registrant's Form 10-K for 1999, 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, 1988)
10.5            Amendment  to  Severance  Agreement of  Paul V.  Lombardi,  Vice
                     President,Government Services Group and currently President
                     & Chief  Executive Officer  (incorporated  by  reference to
                     Registrant's Form 10-K for 1993, File No. 1-3879)
<PAGE>
10.6            Amendment to  Severance  Agreement of  Patrick  C.  FitzPatrick,
                     Senior Vice President and Chief Financial Officer  (incorp-
                     orated 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 (filed herewith)
10.10           1995 Long-Term Incentive Stock Plan  (incorporated by  reference
                     to Registrant's Form 10-K for 1999, File No. 1-3879)
10.11           Key Executive Share-Option Compensation  Plan  (incorporated  by
                     reference  to  Registrant's  Form 10-K  for 1999,  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

None filed.
<PAGE>
                                   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 27, 2001                     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 27, 2001
------------------------
P. V. Lombardi                   (Chief Executive Officer)


/S/ P. C. FitzPatrick           Senior Vice President -           March 27, 2001
------------------------
P. C. FitzPatrick                Chief Financial Officer


/S/ D. L. Reichardt             Senior Vice President -           March 27, 2001
------------------------
D. L. Reichardt                  General Counsel and Director


/S/ J. J. Fitzgerald            Vice President                    March 27, 2001
------------------------
J. J. Fitzgerald                 and Controller
                                 (Chief Accounting Officer)

/S/ D. R. Bannister             Director                          March 27, 2001
------------------------

D. R. Bannister

/S/ T. E. Blanchard             Director                          March 27, 2001
------------------------
T. E. Blanchard


/S/ H. S. Winokur, Jr.          Director                          March 27, 2001
------------------------
H. S. Winokur, Jr.


/S/ D. C. Mecum II              Director                          March 27, 2001
------------------------
D. C. Mecum II


/S/ M. P. Carns                 Director                          March 27, 2001
------------------------
M. P. Carns


/S/ R. E. Dougherty             Director                          March 27, 2001
------------------------
R. E. Dougherty


/S/ P. G. Kaminski              Director                          March 27, 2001
------------------------
P. G. Kaminski


/S/ H. B. Thompson              Director                          March 27, 2001
------------------------
H. B. Thompson
<PAGE>
DynCorp and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
For the Fiscal Years Ended, 2000, 1999 and 1998
(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 28, 2000
  Allowance for doubtful accounts             $ 3,156    $  1,487     $  (588) $       16       $ 4,071

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
</TABLE>


<PAGE>