FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3879
DynCorp
(Exact name of registrant as specified in its charter)
Delaware 36-2408747
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Edmund Halley Drive, Reston, VA 22091-3436
(Address of principal executive offices) (Zip Code)
(703) 264-0330
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. 7,341,782 shares of common stock having a par value of
$0.10 per share were outstanding at September 29, 1994.
DYNCORP
INDEX
PART I. FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
September 29, 1994 and December 31, 1993
Consolidated Condensed Statements of Operations -
Three and Nine Months Ended September 29, 1994
and September 30, 1993
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 29, 1994 and September 30, 1993
Notes to Consolidated Condensed Financial Statements
Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Results of Votes of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11 - Computations of Earnings Per Common Share
PART I. FINANCIAL INFORMATION
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 29, 1994 AND DECEMBER 31, 1993
(Dollars in Thousands)
UNAUDITED
ASSETS
September 29, December 31,
1994 1993
Current Assets:
Cash and short-term investments (including
restricted cash of $21,301 in 1994 and
$17,632 in 1993) $ 24,459 $ 22,806
Notes and current portion of long-term receivables 1,236 235
Accounts receivable and contracts in process (net
of allowance for doubtful accounts of $2,620
in 1994 and $1,469 in 1993) (Note 3) 172,429 177,470
Inventories of purchased products and supplies,
at lower of cost (first-in, first-out)
or market 7,308 6,467
Prepaid income taxes 127 127
Other current assets 7,837 6,724
Total current assets 213,396 213,829
Long-Term Receivables 849 274
Property and Equipment (net of accumulated
depreciation and amortization of $42,857
in 1994 and $42,996 in 1993) 59,486 60,948
Intangible Assets (net of accumulated amortization
of $45,239 in 1994 and $43,336 in 1993) (Note 4) 95,401 93,890
Other Assets 12,011 13,515
$381,143 $382,456
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 29, 1994 AND DECEMBER 31, 1993
(Dollars in Thousands)
UNAUDITED
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY
September 29, December 31,
1994 1993
Current Liabilities:
Notes payable and current portion of
long-term debt $ 22,082 $ 3,837
Accounts payable 18,430 25,376
Advances on contracts in process 1,899 2,178
Accrued liabilities 101,273 108,652
Total current liabilities 143,684 140,043
Long-Term Debt 209,239 216,425
Other Liabilities and Deferred Credits 16,283 17,622
Total liabilities 369,206 374,090
Commitments, Contingencies and Litigation (Note 10) - -
Redeemable Common Stock, $17.50 per share redemption
value, 125,714 shares issued and outstanding 2,200 2,200
Stockholders' Equity:
Capital stock, $0.10 par value:
Preferred stock, Class C (Note 2) 3,000 3,000
Common stock 778 502
Common stock warrants (Note 6) 11,752 15,119
Unissued common stock under restricted stock plan 10,076 10,395
Paid-in surplus (Notes 6 and 7) 117,728 95,983
Deficit (112,190) (105,425)
Common stock held in treasury (8,389) (5,840)
Unearned ESOP shares (Note 7) (4,450) -
Cummings Point Industries, Inc. note receivable (8,568) (7,568)
Total stockholders' equity 9,737 6,166
Total Liabilities, Redeemable Common Stock
and Stockholders' Equity $381,143 $382,456
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
UNAUDITED
Three Months Ended Nine Months Ended
Sept. 29,Sept. 30, Sept. 29,Sept. 30,
1994 1993(a) 1994 1993
Revenues $244,928 $239,013 $753,017 $706,140
Costs and expenses:
Cost of services (Note 9) 236,036 230,795 721,552 681,688
Selling and corporate administrative 4,148 3,998 12,692 13,497
Interest income (674) (795) (1,787) (2,109)
Interest expense 6,946 6,372 20,403 19,144
Other (Note 5) 2,158 1,596 5,258 5,436
248,614 241,966 758,118 717,656
Loss before income taxes and
minority interest (3,686) (2,953) (5,101) (11,516)
Provision for income taxes (Note 8) 333 788 877 886
Loss before minority interest (4,019) (3,741) (5,978) (12,402)
Minority Interest (a) 226 113 787 617
Net loss $ (4,245)$ (3,854) $ (6,765)$(13,019)
Weighted average number of common shares
outstanding and dilutive common stock
equivalents:
Primary and fully diluted 7,888,081 5,101,139 6,467,892 5,126,270
Loss per common share - primary
and fully diluted:
Net loss for common stockholders $ (0.59) $ (0.82) $ (1.23) $ (2.73)
(a) 1993 restated to conform to 1994 presentation.
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
UNAUDITED
Nine Months Ended
Sept. 29, Sept. 30,
1994 1993
Cash Flows from Operating Activities:
Net loss $ (6,765) $(13,019)
Adjustments to reconcile net loss from operations
to net cash provided (used) by operating activities:
Depreciation and amortization 13,525 14,215
Pay-in-kind interest on Junior Subordinated
Debentures 11,349 9,730
Restricted Stock Plan 1,228 2,031
Noncash interest income (1,000) (849)
Other (1,447) (1,575)
Changes in current assets and liabilities,
net of acquisitions:
Decrease in current assets except cash,
short-term investments and notes receivable 4,145 9,090
Decrease in current liabilities except notes
payable and current portion of long-term debt (13,791) (7,528)
Cash provided by operating activities 7,244 12,095
Cash Flows from Investing Activities:
Sale of property and equipment 1,428 454
Proceeds received from notes receivable 87 102
Purchase of property and equipment, net of
capitalized leases (4,196) (3,916)
Assets and liabilities of acquired businesses
excluding cash acquired (Notes 4 and 5) (7,812) (1,851)
Other (1,456) (1,040)
Cash used by investing activities (11,949) (6,251)
Cash Flows from Financing Activities:
Treasury stock purchased (2,780) (1,563)
Payment on indebtedness (3,668) (3,232)
Reduction in loans to Employee Stock Ownership
Plan (Note 7) 4,450 12,090
Sale of stock to Employee Stock Ownership Plan (Note 7) 8,200 -
Other note payable - 100
Treasury stock sold 159 46
Other (3) -
Cash provided from financing activities 6,358 7,441
Net Increase in Cash and Short-term Investments 1,653 13,285
Cash and Short-term Investments at Beginning of
the Period 22,806 19,980
Cash and Short-term Investments at End of the Period $ 24,459 $33,265
Supplemental Cash Flow Information:
Cash paid for income taxes $ 439 $ 238
Cash paid for interest $ 10,662 $ 9,164
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. The unaudited consolidated condensed financial statements
included herein have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form
10-K. In the opinion of the Company, the unaudited
consolidated condensed financial statements included herein
reflect all adjustments of a normal recurring nature necessary
to present fairly the financial position, the results of
operations and the cash flows for such interim periods. The
results of operations for such interim periods are not
necessarily indicative of the results for the full year.
2. At September 29, 1994, $6,520,000 of Class C Preferred Stock
cumulative dividends have not been accrued or paid.
3. At September 29, 1994, $21,301,000 of cash and short-term
investments and $104,237,000 of accounts receivable are
restricted as collateral for the Contract Receivable
Collateralized Notes, Series 1992-1.
4. On December 10, 1993, the Company acquired certain assets of
NMI Systems, Inc. ("NMI") and at December 31, 1993 the
allocation period for recording this acquisition remained open,
pending resolution of certain contract issues. Interim
adjustments to the purchase price were recorded during the
first nine months of 1994. Additionally, the Company paid an
aggregate $4.0 million for a 25% interest in each of Composite
Technology, Inc. (CTI) and Gateway Passenger Services, L.P.
Goodwill of $3,107,000 was recorded and will be amortized over
periods up to 40 years.
5. In June, 1994, the Company paid $1.3 million to increase its
holdings in Business Mail Express (BME) from 40% to 50.1%.
Goodwill of $2,582,000 was recorded and will be amortized over
a period not to exceed 40 years. The investment has been
accounted for under the equity method and in the third quarter
$334,000 has been charged to other expense. Provisions in
BME's stockholders' agreement limit the Company's participation
on BME's board of directors upon the occurrence of certain
trigger events and in substance transfers control to the other
shareholders of BME. Due to these uncertainties regarding the
Company's ability to maintain control, the majority owned
subsidiary has not been consolidated.
6. The Company issued warrants to the Class C Preferred
stockholders and to certain common stockholders to purchase a
maximum of 5,891,587 shares of common stock. Each warrant is
exercisable to obtain one share of common stock. The
stockholder may exercise the warrant and pay in cash the
exercise price of $.25 for one share of common stock or may
sell back to the Company a sufficient number of the exercised
shares to equal the value of the warrants to be exercised.
(The shares sold back to the Company were valued at $11.86 per
share.) For the nine months ended September 29, 1994,
1,361,842 warrants were exercised. Rights under the warrants
lapse no later than September 9, 1998.
7. The Company extended the ESOP for the nine months of 1994 by
contributing $12,726,000 in cash which was used by the ESOP to
purchase common shares, make payment on the promissory note
issued to the Company in the second quarter and to pay other
administrative expenses of the ESOP. During 1994, the ESOP
purchased 980,369 common shares; 316,189 shares at $11.86 and
664,180 shares at $13.40 per share. ESOP expense was
$4,151,000 and $12,323,000 for the third quarter and nine
months, respectively. Additionally, a balance of $4,450,000
remains on the promissory note issued to the Company by the
ESOP, representing the fourth quarter's contribution at $13.40
per share. As the note is paid, the shares will be allocated
to the participating employees' accounts. The Company adopted
SOP 93-6, "Accounting for Employee Stock Ownership Plans," and
does not anticipate it will have a material effect on the
comparability of the financial statements.
8. The Company did not recognize any federal income tax benefits
on the losses incurred in the three and nine months ended
September 29, 1994 and September 30, 1993 because of the
uncertainty regarding the level of future taxable income. The
federal tax provision reflected in 1993 and 1994 is that of a
majority owned subsidiary which is required to file a separate
federal return. Additionally, the 1993 provision includes
$51,000 and $150,000 for the three and nine months ended
September 30, related to foreign taxes on foreign source
income.
9. During 1994 the Company revised its estimate of the useful
lives of certain of the Commercial Services' machinery and
equipment to conform to its actual experience with fixed asset
lives. It was determined the useful lives of these assets
ranges from three to ten years as compared to the two to seven
year lives previously utilized. The effect of this change was
to reduce depreciation expense and net loss by approximately
$402,000 and $1,183,000 for the third quarter and nine months
of 1994 or $.05 and $.18 per share respectively.
10. The Company is involved in various claims and lawsuits,
including contract disputes and claims based on allegations
of negligence and other tortious conduct. The Company is
also potentially liable for certain environmental, personal
injury, tax and contract dispute issues related to the prior
operations of divested businesses. In most cases, the
Company has denied, or believes it has a basis to deny,
liability, and in some cases has offsetting claims against
the plaintiffs or third parties. Damages currently claimed
by the various plaintiffs for these items which may not be
covered by insurance aggregate approximately $29,000,000
(including compensatory and possible punitive damages and
penalties).
Also, a former subsidiary, which discontinued its business
activities in 1986, has been named as one of many defendants in
civil lawsuits which have been filed in various state courts
against manufacturers, distributors and installers of asbestos
products. (The subsidiary had discontinued the use of asbestos
products prior to being acquired by the Company.) The Company
has also been named as a defendant in several of these actions.
At the beginning of 1992, 395 claims had been filed and during
the year 1,785 additional claims were filed with 73 claims
being settled. In 1993, 709 additional claims were filed and
1,275 were settled. In the first nine months of 1994, 822 new
claims were filed with 170 claims being settled. Defense has
been tendered to and accepted by the Company's insurance
carriers. The former subsidiary was a nonmanufacturer that
installed or distributed industrial insulation products.
Accordingly, the Company strongly believes that the subsidiary
has substantial defenses against alleged secondary and indirect
liability. The Company has provided a net reserve for the
estimated uninsured legal costs to defend the suits and the
estimated cost of reaching reasonable no-fault liability
settlements of $7,000,000. The amount of the reserve has been
estimated based on the number of claims filed and settled to
date, number of claims outstanding, current estimates of future
filings, trends in costs and settlements, current insurance
policy interpretations and advice of counsel.
The Company is a party to other civil lawsuits which have
arisen in the normal course of business for which potential
liability, including costs of defense, are covered by insurance
policies.
The Company has also been notified of certain proposed tax
adjustments by the IRS relative to the deduction taken by the
Company for expenses incurred in the 1988 merger and a
tentative settlement is under review by Internal Revenue
Service.
The Company has recorded its best estimate of the liability
that will result from these matters. While it is not possible
to predict with certainty the outcome of the 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 presently 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 or consolidated financial position of the
Company.
A majority of the Company's business involves contracting with
departments and agencies of, and prime contractors to, the U.S.
government and as such 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. In management's opinion,
there are no outstanding issues of this nature at September 29,
1994 that will have a material adverse effect on the Company's
consolidated financial position or results of operations.
11. Subsequent Event - On October 31, 1994, the Company acquired
all of the outstanding stock of Cincinnati Bell Information
Systems Federal Inc. (CBIS). CBIS, headquartered in
Fairfax, Virginia provides a full range of information
systems services, primarily to non-DOD agencies of the
federal government. The purchase price has yet to be
determined pending audit of the closing balance sheet. The
acquisition will be accounted for as a purchase. Annual
revenue is expected to be in the $50-60 million range.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of financial condition and results of
operations should be read in conjunction with the 1993 Form 10-K.
Working capital at September 29, 1994 was $69.7 million compared
to $73.8 million at December 31, 1993, a decrease of $4.1 million.
The decrease was primarily attributable to the reclassification
from long-term to current of the $18.4 million mortgage on the
corporate headquarters which was offset by a $14.6 million
reduction in other current liabilities. (The mortgage matures in
March 1995; however, it is the Company's intent to either refinance
the obligation or consummate a sale/lease back arrangement.)
At September 29, 1994, $125.5 million of cash, short-term
investments and accounts receivable is restricted as collateral
for the Contract Receivable Collateralized Notes. The Company's
$5 million line of credit expired September 1, 1994.
Operating activities produced a positive cash flow of $7.2 million
for the nine months of 1994 compared to $12.1 million for the
comparable period in 1993. Excluding the effect of the changes in
current assets and liabilities, operating activities produced a
positive cash flow of $16.9 million in 1994 compared to $10.5
million in 1993. This increase in operating cash flow results
primarily from a decrease in the net loss for the nine months of
1994 compared to 1993. The 1994 net change in current assets and
liabilities resulted in a use of cash of $9.6 million compared to
$1.6 million of cash provided in 1993. This was attributable to
various factors, the largest of which related to the Commercial
Aviation maintenance activities and payment of acquisition related
liabilities.
Funds of $11.9 million were used for investing activities during
the nine months of 1994. The principal use was the payment of
additional consideration related to a December 1993 acquisition
and investments in various companies or partnerships (see Notes 4
and 5 to Notes to Consolidated Condensed Financial Statements).
Additionally, $4.2 million was expended for property and equipment
and $.7 million of contract phase-in costs were deferred and will
be amortized over the duration of the newly awarded contracts.
Financing activities provided funds of $6.4 million, principally
from the sale of stock to the Employee Stock Ownership Plan,
partially offset by payments on indebtedness and the purchase of
treasury stock.
At September 29, 1994, backlog (including option years on
government contracts) was $2.262 billion compared to $2.772
billion at December 31, 1993.
Continuing its Value Improvement Program initiated in 1992, the
Company announced its intent to restructure its government
services operations in order to better serve the customer, enhance
operational efficiencies and address the declining business base
of certain of the existing operating units. Development of a
detailed plan and implementation of the new organization will be
carried out over the latter part of 1994; the restructuring is
expected to be fully in place by year end.
The relocation to the new Miami wide body aircraft maintenance
facility has been completed, however, the existing workload has
proven inadequate to support the facility on a profitable basis.
See additional comments regarding the aircraft maintenance unit
under Results of Operations.
The Company is continuing its efforts with its investment bankers
to replace its high interest rate Junior Subordinated debentures
through the issuance of new debt or stock.
Results of Operations (Dollars in thousands)
Three Months Ended Nine Months Ended
Sept. 29,Sept. 30, Sept. 29,Sept. 30,
1994 1993 Change 1994 1993 Change
Revenues:
Government Services (GS) $205,764 $199,137 3.3% $596,926 $582,691 2.4%
Commercial Services (CS) 39,164 39,876 (1.8%) 156,091 123,449 26.4%
Gross Margin 8,892 8,218 8.2% 31,465 24,452 28.7%
As a percent of revenues 3.6% 3.4% 4.2% 3.5%
Selling and Corporate
Administrative Expenses 4,148 3,998 3.8% 12,692 13,497 (6.0%)
As a percent of revenues 1.7% 1.7% 1.7% 1.9%
Interest Expense (net) 6,272 5,577 12.5% 18,616 17,035 9.3%
Other Expenses 2,158 1,596 35.2% 5,258 5,436 (3.3%)
Tax Provision 333 788 (57.7%) 877 886 (1.0%)
Revenues for the third quarter and nine months of 1994 were $244.9
million and $753.0 million; $5.9 million and $46.9 million greater
than comparable periods in 1993. The increase in Government
Services' revenues was attributable to businesses acquired in the
fourth quarter of 1993 ($11.8 and $33.4 for the third quarter and
nine months, respectively), new contract awards (approximately
$11.6 and $42.1 for the third quarter and nine months,
respectively) and a retroactive adjustment on one contract for
wage increases mandated by the Department of Labor under the
Service Contract Act ($7.0 million for the quarter and year-to-
date). These increases were offset by declines from contracts
lost in recompetition and reduced level of effort on continuing
contracts. Revenues for the third quarter and nine months for the
aircraft maintenance operations were $7.9 million and $60.9
million as compared to 1993 revenues of $9.8 million and $35.9
million. The ground support services operations reported revenues
of $31.3 million and $95.2 million for the third quarter and nine
months, up $1.2 million and $7.7 million over comparable periods
in 1993.
Government Services' gross margin for the third quarter and nine
months of 1994 was up from that of 1993. Increased margins
attributable to acquisitions consummated late in 1993 and new contract
awards were partially offset by increased costs incurred to
phase in newly awarded contracts, lost contracts, reduced level of
effort on existing contracts and increased costs incurred in
support of proposal efforts.
Commercial Services' gross margin was down slightly from the
comparable quarter of 1993. The ground services and fueling
operations realized a 14.2% increase in gross margin for the
quarter despite mounting group health insurance claims and reserves
for legal fees related to a fuel spill at the Phoenix facility
(the matter has been settled). Additionally, declines in
productivity and a shrinking customer base yielded a disappointing
decline of 40.8% in the quarterly gross margin for the aircraft
maintenance unit. Both units ended the nine month period with
margins greater than the comparable period in 1993; ground
services' margin was up 55.0% and maintenance's reflected an
improvement of 35.8% but still had a 5.8% negative margin.
Selected financial data for the aircraft maintenance unit is as
follows (in 000's):
First Twelve Months
Third Quarter Three Quarters Ended Dec. 31,
1994 1993 1994 1993 1993 1992
Revenue $7,853 $9,790 $60,858 $35,939 $57,288 $74,253
Operating Losses $(3,712)$(2,547)$(3,545)$(6,298)$(6,629)$ (428)
The Company is continuing to pursue the possible sale, spinoff or
shut down of all or a portion of the aircraft maintenance unit.
The Company is currently in discussion with a potential business
partner and has also hired an investment advisor to market the
business. Additionally, the Company has implemented actions to
close the Miami, Florida maintenance facility by January 31, 1995
unless discussions currently in progress with potential investors
justify a basis to continue operation. The Company's investment
in the Miami facility, including goodwill, at September 29, 1994,
is approximately $12.0 million. If the facility is ultimately
closed it is likely to result in a significant write-off in the
fourth quarter of 1994.
Selling and corporate and administrative expense as a percent of
revenue was 1.7% for the third quarter of 1994, unchanged from the
same period in 1993. Year-to-date, selling and corporate and
administrative expense is down $.8 million, due largely to the
elimination of the Commercial Services Administrative Group.
Interest income for the three and nine months of 1994 is less than
comparable periods in the prior year due to the recording in 1993
of prior years' interest income (and offsetting bank fee expense)
on cash balances in various operating accounts. This decrease is
partially offset by the compounding of interest at 17% on the
Cummings Point Industries, Inc. note receivable.
Interest expense was $6.9 million and $20.4 million for the 1994
third quarter and nine months, respectively, up slightly from $6.4
million and $19.1 million from comparable periods in 1993.
Increases resulted from the compounding of interest on the 16%
pay-in-kind debentures as well as interest payments on real estate
mortgages assumed in conjunction with an acquisition in the fourth
quarter of 1993.
Other expense consists of the following major items (in
thousands):
Three Months Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29,Sept. 30,
1994 1993 1994 1993
Amortization of costs in
excess of net assets acquired $ 866 $ 774 $2,520 $2,322
Provision for nonrecovery of
receivables 334 81 922 415
ESOP repurchase premium 316 575 936 1,320
Equity in net loss of affiliate 334 - 334 -
Costs, contract losses and
write-offs associated with
acquired businesses - - - 1,485
Other 308 166 546 (106)
$2,158 $1,596 $5,258 $5,436
The increase in Other expense for the third quarter of 1994 over
the same period in 1993, is attributable to losses of a majority
owned, unconsolidated subsidiary, an increase in the provision for
nonrecovery of receivables and credits recorded in 1993 arising
from downward adjustments of nonoperating reserves. The decrease
in Other expense for the nine months ended September 29, 1994 as
compared to the comparable period in 1993 is primarily due to
write-offs recorded in 1993 related to events associated with two
businesses prior to their being acquired by the Company. This
decrease is offset by increases in the provision for nonrecovery
of receivables and losses attributable to equity affiliates and
also by smaller gains in 1994 on the sale or retirement of fixed
assets.
In summary, despite somewhat improved operating results, the
Company continues to be highly leveraged, and its ability to meet
future debt service and working capital requirements is dependent
on increases in earnings and cash flow from operations,
continuation of the ESOP and reduction of its debt, either through
refinancing, a stock offering, or a combination of the two.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
This item is incorporated herein by reference to Note 10 to the
Consolidated Condensed Financial Statements included elsewhere in
this quarterly Report on Form 10-Q.
ITEM 4. Results of Votes of Security Holders
An annual meeting of the Company's stockholders was held
September 13, 1994. The sole item presented was the election of
directors, and three current directors were re-elected to three-
year terms as Class III directors. The voting results are set
forth below. The number of voted shares does not include 3,533,270
shares, allocated to participant accounts in the Company's Employee
Stock Ownership Plan, for which no voting instructions were
received from the appropriate participant and therefore which could
not be voted; such shares were treated as broker nonvotes, which were
present for quorum purposes but had no impact on the vote, because
a majority is calculated on the basis of votes actually cast and
abstentions.
Nominee Votes for Against Abstain
T. Eugene Blanchard 3,588,719 23,800 0
Paul V. Lombardi 3,585,713 26,806 0
Dudley C. Mecum 3,589,298 23,221 0
The following directors continued in office: Dan R. Bannister,
Russell E. Dougherty, James H. Duggan, Paul G. Kaminski, David L.
Reichardt, and Herbert S. Winokur, Jr.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computations of Earnings Per Common Share
(b) Reports on Form 8-K
None filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DYNCORP
Date: November 14, 1994 T. E. Blanchard
T. E. Blanchard
Senior Vice President
and Chief Financial Officer
Date: November 14, 1994 G. A. Dunn
G. A. Dunn
Vice President and Controller
Exhibit 11
DYNCORP AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
Sept. 29,Sept. 30, Sept. 29,Sept. 30,
1994 1993 1994 1993
PRIMARY AND FULLY DILUTED
Earnings:
Net loss $(4,245) $(3,854) $(6,765) $(13,019)
Preferred stock Class C dividends
not accrued or paid 410 344 1,177 988
Net loss for common stockholder $(4,655) $(4,198) $( 7,942) $(14,007)
Shares:
Weighted average common shares
outstanding 7,888,081 5,101,139 6,467,892 5,126,270
Net loss for common stockholders $ (0.59) $(0.82) $ (1.23) $ (2.73)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-29-1994
<CASH> 24,459
<SECURITIES> 0
<RECEIVABLES> 177,134
<ALLOWANCES> 2,620
<INVENTORY> 7,308
<CURRENT-ASSETS> 213,396
<PP&E> 102,343
<DEPRECIATION> 42,857
<TOTAL-ASSETS> 381,143
<CURRENT-LIABILITIES> 143,684
<BONDS> 209,239
<COMMON> 778
0
3,000
<OTHER-SE> 5,959
<TOTAL-LIABILITY-AND-EQUITY> 381,143
<SALES> 753,017
<TOTAL-REVENUES> 753,017
<CGS> 0
<TOTAL-COSTS> 721,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,403
<INCOME-PRETAX> (5,101)
<INCOME-TAX> 877
<INCOME-CONTINUING> (6,765)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,765)
<EPS-PRIMARY> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
