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 26, 1996
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 20191-3436
(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. 8,082,159 shares
of common stock having a par value of $0.10 per share were outstanding at
September 26, 1996.
DYNCORP
INDEX
PART I. FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
September 26, 1996 and December 31, 1995
Consolidated Condensed Statements of Operations -
Three and Nine Months Ended September 26, 1996
and September 28, 1995
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 26, 1996
and September 28, 1995
Consolidated Statement of Permanent Stockholders' Equity
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 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 26, 1996 AND DECEMBER 31, 1995
(Dollars in Thousands)
September 26,
1996 December 31,
Unaudited 1995
Assets
Current Assets:
Cash and short-term investments $ 17,794 $ 31,151
Accounts receivable and contracts in process (Note 3) 181,345 179,706
Inventories of purchased products and supplies,
at lower of cost (first-in, first-out) or market 1,031 1,383
Other current assets 8,489 8,095
Total current assets 208,659 220,335
Property and Equipment (net of accumulated
depreciation and amortization of $22,412 in 1996
and $22,600 in 1995) 19,241 19,028
Intangible Assets (net of accumulated amortization
of $41,193 in 1996 and $39,598 in 1995) (Note 4) 50,595 50,689
Other Assets (Notes 3 and 12) 81,008 85,438
Total Assets $ 359,503 $ 375,490
See accompanying notes to consolidated condensed financial statements.
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 26, 1996 AND DECEMBER 31, 1995
(Dollars in Thousands Except Per Share Amounts)
September 26,
1996 December 31,
Unaudited 1995
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable and current portion of
long-term debt (Note 5) $ 100,748 $ 1,260
Accounts payable 36,027 38,007
Advances on contracts in process 2,214 4,814
Accrued taxes 1,689 11,374
Accrued liabilities 93,806 100,152
Total current liabilities 234,484 155,607
Long-Term Debt 3,696 104,112
Other Liabilities and Deferred Credits (Note 12) 89,282 89,909
Contingencies and Litigation (Note 12) - -
Temporary Equity:
Redeemable Common Stock -
ESOP Shares, 3,520,034 shares issued at $22.35
and 2,607,199 at $19.00 in 1996 and 3,535,192
at $18.10 and 2,516,802 at $14.50 in 1995, subject
to restrictions 128,209 100,481
Management Investors, 21,287 shares issued at $109.64,
256,196 at $18.10 and 1,804,595 at $14.50 in 1995,
subject to restrictions (Note 6) - 33,138
Other, 125,714 shares issued at $22.35 and $18.10 in
1996 and 1995, respectively 2,810 2,275
Permanent Stockholders' Equity:
Preferred Stock, Class C 18% cumulative, convertible,
$24.25 liquidation value (liquidation value including
unrecorded dividends is $13,538 in 1996 and $11,863
in 1995), 123,711 shares authorized, issued and
outstanding (Note 2) 3,000 3,000
Common Stock, par value ten cents per share, authorized
20,000,000 shares; issued 3,345,744 shares in 1996
and 1,588,587 shares in 1995 (Note 6) 335 159
Common Stock Warrants 11,139 11,305
Paid-in Surplus 148,244 148,202
Reclassification to temporary equity for redemption
value greater than par value (Note 6) (130,394) (135,223)
Deficit (105,988) (115,888)
Common Stock Held in Treasury, at cost; 1,516,492
shares and 173,988 warrants in 1996 and 1,235,509
shares and 173,988 warrants in 1995 (25,314) (21,084)
Unearned ESOP Shares - (503)
Total Liabilities and Stockholders' Equity $359,503 $375,490
See accompanying notes to consolidated condensed financial statements.
<TABLE>
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
UNAUDITED
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Information and Engineering Technology $ 63,882 $ 68,884 $201,383 $199,747
Aerospace Technology 97,686 81,953 277,065 233,583
Enterprise Management 85,400 93,755 259,876 232,838
Total revenues 246,968 244,592 738,324 666,168
Costs and expenses:
Cost of services 233,817 234,781 700,761 638,691
Selling and corporate administrative 4,504 5,674 13,315 14,982
Interest income (336) (982) (1,312) (2,895)
Interest expense 2,548 3,558 7,644 12,076
Other 470 441 1,321 1,473
Total costs and expenses 241,003 243,472 721,729 664,327
Earnings from continuing operations before income
taxes, minority interest and extraordinary item 5,965 1,120 16,595 1,841
Provision (benefit) for income taxes (Note 7) 2,357 (2,797) 6,570 (2,252)
Earnings from continuing operations before minority
interest and extraordinary item 3,608 3,917 10,025 4,093
Minority interest 367 286 990 943
Earnings from continuing operations before
extraordinary item 3,241 3,631 9,035 3,150
Earnings (loss) from discontinued operations,
net of income taxes (Note 7) - 252 865 (15)
Earnings (loss) before extraordinary item 3,241 3,883 9,900 3,135
Extraordinary loss from early extinguishment of
debt, net of tax benefit of $1,914 and $2,003 - (2,656) - (2,783)
Net earnings $ 3,241 $ 1,227 $ 9,900 $ 352
Preferred Class C dividends not declared or
recorded (Note 2) (583) (489) (1,675) (1,404)
Common stockholders' share of earnings (loss) $ 2,658 $ 738 $ 8,225 $ (1,052)
Weighted average number of common shares outstanding
and dilutive common stock equivalents (Note 9):
Primary and fully diluted 11,686,090 12,067,303 11,724,925 11,732,306
Earnings (loss) per common share - primary and fully diluted:
Continuing operations before extraordinary item $ 0.23 $ 0.26 $ 0.63 $ 0.15
Discontinued operations - 0.02 0.07 0.00
Extraordinary item - (0.22) - (0.24)
Common stockholders' share of earnings (loss) $ 0.23 $ 0.06 $ 0.70 $ (0.09)
See accompanying notes to consolidated condensed financial statements.
</TABLE>
DYNCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited
Nine Months Ended
Sept. 26, Sept. 28,
1996 1995
Cash Flows from Operating Activities:
Net earnings $ 9,900 $ 352
Adjustments to reconcile net loss from operations
to net cash used:
Depreciation and amortization 6,167 9,028
(Gain) loss from discontinued operations (865) 15
Payment of income taxes on gain on sale of discontinued
operations (13,990) -
Loss on repurchase of debentures - 2,783
Other (1,417) (1,238)
Changes in current assets and liabilities, net of acquisitions:
Increase in current assets except cash, short-term
investments and notes receivable (340) (13,623)
Decrease in current liabilities except notes payable,
current portion of long-term debt and accrual for stock
repurchases (1,578) (7,626)
Cash used by continuing operations (2,123) (10,309)
Cash used by discontinued operations - (3,042)
Cash used by operating activities (2,123) (13,351)
Cash Flows from Investing Activities:
Sale of property and equipment 636 16,513
Purchase of property and equipment (3,972) (3,724)
Assets and liabilities of acquired business (excluding
cash acquired) (Note 4) (1,805) -
Proceeds from notes receivable 2 9,900
Proceeds from sale of discontinued operations - 134,500
Decrease (increase) in cash on deposit for letters of
credit (Note 3) 6,244 (1,791)
(Increase) decrease in investment in unconsolidated
subsidiaries (511) -
Investment activities of discontinued operations - (15,434)
Other (250) (611)
Cash provided by investing activities 344 139,353
Cash Flows from Financing Activities:
Treasury stock purchased (9,791) (4,414)
Payment on indebtedness (1,003) (20,310)
Stock released to Employee Stock Ownership Plan (Note 10) 503 12,750
Repurchase of debentures - (102,278)
Deferred financing expenses (Note 11) (1,304) -
Financing activities of discontinued operations - (228)
Other 17 (717)
Cash used from financing activities (11,578) (115,197)
Net (Decrease) Increase in Cash and Short-term Investments (13,357) 10,805
Cash and Short-term Investments at Beginning of the Period 31,151 7,738
Cash and Short-term Investments at End of the Period $ 17,794 $ 18,543
Supplemental Cash Flow Information:
Cash paid for income taxes $ 17,307 $ 1,530
Cash paid for interest $ 7,594 $ 18,840
See accompanying notes to consolidated condensed financial statements.
<TABLE>
DynCorp and Subsidiaries
Consolidated Statements of Permanent Stockholders' Equity
(Dollars in thousands)
Unaudited
<CAPTION>
Reclassification
to Temporary
Equity for
Redemption
Common Value Greater Unearned
Preferred Common Stock Paid-in than Treasury ESOP
Stock Stock Warrants Surplus Par Value Deficit Stock Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 3,000 $ 159 $11,305 $148,202 $(135,223) $(115,888) $ (21,084) $ (503)
Stock issued under
Restricted Stock Plan
and accrued compensation (37) 37
Treasury stock purchases 28 (97) 4,129 (4,230)
Warrants exercised (166) 176
Payment received on ESOP note 503
Net earnings 9,900
Reclassification to
Permanent Equity (Note 6) 148 27,890
Adjustment of shares
to fair value (27,227)
Balance, September 26, 1996 $ 3,000 $ 335 $11,139 $148,244 $(130,394) $(105,988) $ (25,314) $ -
</TABLE>
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/A. In the opinion of the Company, the unaudited consolidated condensed
financial statements included herein reflect all adjustments 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 26, 1996, $10,538,000 of Class C Preferred Stock cumulative
dividends have not been declared or recorded.
3. At September 26, 1996, $112,593,000 of accounts receivable are restricted
as collateral for the Contract Receivable Collateralized Notes, Series
1992-1. Additionally, $3,000,000 of cash is restricted as collateral for
the Notes and has been included in Other Assets on the balance sheet at
September 26, 1996.
At December 31, 1995, $6,244,000 of restricted cash was on deposit to
secure various letters of credit and was classified as Other Assets on the
balance sheet. At September 26, 1996, these letters of credit had expired
or been replaced by letters of credit with no collateral requirements and
the funds were subsequently released.
Accounts receivable are net of an allowance for doubtful accounts of
$115,000 in 1996 and $8,800 in 1995.
4. In June, 1996, the Company acquired all the outstanding stock of Data
Management Design, Inc. (DMDI) for $2,400,000. DMDI provides automated
workflow and image processing solutions to federal agencies and the private
sector. The acquisition has been accounted for as a purchase and
$1,500,000 of goodwill, which will be amortized over 15 years, has been
recorded based on the initial allocation of the purchase price.
5. Under the terms of the placement of the Contract Receivable Collateralized
Notes, Series 1992-1, beginning on February 28, 1997, cash receipts from
the collection of receivables must be used to pay administrative fees,
interest due on the notes and principal on notes called for redemption, if
any. The entire $100,000,000 matures July 30, 1997, and has been
classified as current notes payable on the balance sheet at September 26,
1996. The Company is currently evaluating various proposals for
refinancing of the debt.
6. In May, 1996, the Securities and Exchange Commission approved the
registration of approximately 11,969,000 shares of the Company's common
stock (most of which had been previously issued) for trading on an internal
market and contribution to various employee benefit plans. Trading on the
internal market commenced in June, 1996. Under the terms of the
Stockholders' Agreement, upon the establishment of an internal market, the
Company's obligation to repurchase any outstanding management or restricted
stock shares ceases. Therefore, the management investor shares have been
reclassified from Temporary Equity (at the redemption value) to Permanent
Equity (at par value) as of September 26, 1996.
7. The provision for income taxes for the quarter and nine months of 1996 is
based on an estimated annual effective rate, excluding expenses not
deductible for income tax purposes. The provision for the third quarter
and nine months of 1995 was computed on the same basis and, in addition,
includes the tax provision of a majority owned subsidiary required to file
a separate return. Additionally, in the third quarter of 1995, a federal
tax benefit was recorded to reverse tax valuation reserves for deferred
taxes which offset a portion of the tax on the gain on the sale of
discontinued operations.
The income tax provision or benefit for the items shown net of tax (i.e.,
discontinued operations and extraordinary item) is calculated in the same
manner as that of continuing operations.
8. During 1995, the Company sold all its subsidiaries engaged in commercial
aircraft maintenance and ground handling activities, i.e., the Commercial
Aviation Business. At December 31, 1995, certain contingencies existed
regarding the final sales prices of the maintenance business and the ground
handling business. In the second quarter, the Company recorded a gain of
$1,442,000, net of income taxes of $577,000, related to the resolution of
some of these outstanding issues as well as the adjustment of other
estimated reserves recorded at disposition.
9. The weighted average number of common shares outstanding includes issued
shares or shares issuable under the Restricted Stock Plan, less shares held
in treasury and any unallocated ESOP shares. Unexercised warrants and
stock options have been included as share equivalents using the treasury
stock method for those periods in which the Company reported net earnings;
however, they have been excluded from the computation of loss per share in
those periods in which the Company reported losses, as their inclusion
would be antidilutive.
10. During nine months ended September 26, 1996, the Company contributed
$10,250,000 in cash to the Employee Stock Ownership Plan (the ESOP).
The ESOP has thus far expended $2,574,000 of the aforementioned
contribution to purchase approximately 153,000 shares of the Company's
common stock through the newly established internal market (see Note 5)
and to acquire shares put for redemption by retired and terminated
participants. It is the Company's intention for the ESOP to completely
satisfy its future stock purchase requirements by way of the internal
market or direct purchase and shares put by retired and terminated
participants and not through the issue of new shares by the Company.
Additionally, in March, 1996, the ESOP paid the balance of the note
outstanding at December 31, 1995, plus accrued interest. Upon payment of
the note, 33,764 shares of common stock were released to the ESOP.
11. In March 1996, the Company amended and restated its existing $20,000,000
line of credit with Citicorp North America, Inc. to provide for a
$50,000,000 revolving credit facility which will provide funds for
acquisitions, working capital and capital expenditures. The facility
matures in four years, with no payments required until the end of the
second year. The credit agreement contains the customary restrictive
covenants for such a loan; management does not believe that any of the
covenants will be unduly restrictive. As of September 26, 1996, the
Company had incurred $1,304,000 of deferred debt expense related to the
amended credit facility, which will be amortized over four years.
12. The Company and its subsidiaries and affiliates are involved in various
claims and lawsuits, including contract disputes and claims based on
allegations of negligence and other tortious conduct. The Company is
also potentially liable for certain personal injury, tax, environmental
and contract dispute issues related to the prior operations of divested
businesses. In 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 amount of possible damages currently claimed by
the various plaintiffs for these items, a portion of which is expected
to be covered by insurance, aggregates approximately $112,000,000
(including compensatory and possible punitive damages and penalties).
This amount includes estimates for claims which have been filed without
specified dollar amounts or for amounts which are in excess of
recoveries customarily associated with the stated causes of action; it
does not include any estimate for claims which may have been incurred
but which 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. These issues are described in
the Company's latest report on Form 10-K/A. In management's opinion,
there has been no material changes on the status of these issues since
December 31, 1995.
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, 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 position 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 an individual future reporting
period.
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. In
addition, the Company is occasionally the subject of investigations by the
Department of Justice and other investigative organizations, resulting from
employee and other allegations regarding business practices. In
management's opinion, there are no outstanding issues of this nature at
September 26, 1996 that will have a material adverse effect on the
Company's consolidated financial position, results of operations or
liquidity.
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 1995 Form 10-K/A filed on May 10, 1996.
Working capital at September 26, 1996 was negative $25.8 million compared to
$64.7 million at December 31, 1995, a decrease of $90.5 million. This decrease
is due to the classification of the $100.0 million Contract Receivable
Collateralized Notes, which mature July 30, 1997, as current notes payable.
At September 26, 1996, $112.6 million of accounts receivable are restricted as
collateral for the Contract Receivable Collateralized Notes.
At September 26, 1996, the Company had $50 million available under its
revolving credit facility.
Cash used by continuing operations was $2.1 million for the first nine months
of 1996 as compared to $10.3 million in 1995. Excluding the payments of
federal and state income taxes related to the gain on the sale of discontinued
operations, operations provided cash of $11.9 million in 1996 compared to cash
used of $13.4 million in 1995. The substantial increase in earnings was offset
by additional working capital requirements resulting from increased revenues.
Cash provided by investing activities was $0.3 million for the first nine
months of 1996 as compared to $139.4 million in 1995. In 1996, the acquisition
of a business and the purchase of property and equipment amounted to $5.8
million which was offset by a decrease in the amount of cash required to be on
deposit for letters of credit. The $139.4 million of cash provided in 1995 was
principally due to the proceeds from the sale of discontinued operations and
also to the sale/leaseback of the Corporate headquarters building.
Financing activities used cash of $11.6 million in the first nine months of 1996
compared to $115.2 million in the comparable period in 1995. Cash used in 1996
consisted of $9.8 million for the purchase of common stock, $1.3 million of
financing expenses in connection with amending the revolving facility and $1.0
million for payments on indebtedness. The $115.2 million of cash used in 1995
was principally for the repurchase of the Company's 16% Junior Subordinated
Debentures, payoff of the mortgage on the Corporate headquarters building, and
the purchase of treasury stock.
At September 26, 1996, backlog (including option years on government contracts)
was $3.202 billion compared to $2.887 billion at December 31, 1995.
Results of Operations
Revenues
Revenues for the third quarter and nine months of 1996 were $247.0 million and
$738.3 million, up $2.4 million and $72.2 million over comparable periods in
1995. Revenue for the third quarter of 1996 for Information and Engineering
Technology (I&ET) and Enterprise Management (EM) were $63.9 million and $85.4
million, down $5.0 million and $8.4 million, respectively, over the same
quarter in 1995; while revenue for the nine months of 1996 for I&ET was $201.4
million, up $1.6 million over the same period in 1995 and EM's revenue was
$259.9 million, up $27.0 million. Aerospace Technology's (AT) 1996 third
quarter and nine months revenues were $97.7 million and $277.1 million,
increasing $15.7 million and $43.5 million, respectively, over comparable
periods in 1995.
In I&ET, increases in revenue in the third quarter attributable to an
acquisition in June, 1996, and to a contract which was being phased in during
the third quarter of 1995 but which was fully operational by the third quarter
of 1996, were offset by the decrease in revenue due to the completion and phase
out of a large contract with the Postal Service. I&ET's revenues for the nine
months were affected by the factors noted previously, however, additional
increases in revenue attributable to contracts which were not operational
during the entire nine month period in 1995 and increased level of effort on
existing contracts more than offset revenue decreases.
The decrease in EM's revenues for the third quarter of 1996 is primarily
attributable to contract losses, phaseouts and reduced level of effort on
existing contracts, however, for the nine months, revenues from contract wins
significantly offset these losses. Additionally, phase-in of a large
Department of Energy subcontract began in the third quarter of 1996 and will
contribute significantly to future period revenues.
The increase in AT's 1996 revenues for both the quarter and nine months was
primarily the result of increased level of effort on existing contracts and new
contract awards for the Bosnian peacekeeping initiative.
Cost of Services/Gross Margins
Cost of services for the third quarter of 1996 was 94.7% of revenue compared to
96.0% for the same period in 1995, and for the nine months of 1996, cost of
services was 94.9% compared to 95.9% in 1995. This resulted in gross margins
of $13.2 million (5.3%) for the third quarter of 1996 compared to $9.8 million
(4.0%) for the third quarter of 1995 and $37.6 million (5.1%) and $27.5 million
(4.1%) for the nine months of 1996 and 1995, respectively. The same factors
which contributed to the variances in revenue affected the gross margins. In
addition, greater absorption of overhead costs resulting from the increased
revenues and improved contract performance and efficiency on some contracts
which were under-performing in 1995 also contributed to the improved gross
margins for both 1996 periods.
Selling and corporate administrative expense for the third quarter and nine
months of 1996 was down to 1.8% of revenue compared to 2.3% and 2.2% of revenue
for comparable periods in 1995. This decrease in selling and corporate
administrative expense as a percentage of revenue was due primarily to the
increase in revenues, although there was also a decline in the overall 1996
amounts as a result of reduced bid and proposal expense and savings realized
from restructuring actions.
Interest income in the third quarter and nine months of 1996 was down from the
comparable periods in 1995 primarily because of cessation of interest accruals
on the 17% Cummings Point Industries, Inc. note receivable which was paid in
August 1995.
Interest expense in the third quarter and nine months of 1996 was down from the
comparable periods in 1995 primarily because of the retirement in 1995 of all
the 16% Junior Subordinated Debentures.
Other expense consists of the following major items (in thousands):
Three Months Ended Nine Months Ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
1996 1995 1996 1995
Amortization of costs in excess
of net assets acquired $ 402 $ 456 $1,157 $1,368
Provision for nonrecovery of
receivables - - 106 -
Miscellaneous 68 (15) 58 105
$ 470 $ 441 $1,321 $1,473
The provision for income taxes for the quarter and nine months of 1996 is based
on an estimated annual effective rate, excluding expenses not deductible for
income tax purposes. The provision for the third quarter and nine months of
1995 was computed on the same basis and, in addition, includes the tax
provision of a majority owned subsidiary required to file a separate return.
Additionally, in the third quarter of 1995, a federal tax benefit was recorded
to reverse tax valuation reserves for deferred taxes which offset a portion of
the tax on the gain on the sale of discontinued operations.
The income tax provision or benefit for the items shown net of tax (i.e.,
discontinued operations and extraordinary item) is calculated in the same
manner as that of continuing operations.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
This item is incorporated herein by reference to Note 12 to the Consolidated
Condensed Financial Statements included elsewhere in this quarterly Report on
Form 10-Q.
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.
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 7, 1996 T. E. Blanchard
T. E. Blanchard
Senior Vice President
and Chief Financial Officer
Date: November 7, 1996 G. A. Dunn
G. A. Dunn
Vice President and Controller
<TABLE>
DYNCORP AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
1996 1995 1996 1995
PRIMARY AND FULLY DILUTED(1)
<S> <C> <C> <C> <C>
Earnings:
Earnings from continuing operations
before extraordinary item $ 3,241 $ 3,631 $ 9,035 $ 3,150
Discontinued operations - 252 865 (15)
Extraordinary item - (2,656) - (2,783)
Net earnings 3,241 1,227 9,900 352
Preferred stock Class C dividends not declared
or recorded (583) (489) (1,675) (1,404)
Common stockholders' share of earnings (loss) $ 2,658 $ 738 $ 8,225 $ (1,052)
Shares:
Weighted average common shares outstanding 8,415,946 8,761,946 8,464,517 8,406,362
Common stock issuable upon exercise of warrants 3,235,658 3,305,357 3,248,117 3,325,944
Common stock issuable upon exercise of
stock options 34,486 - 12,291 -
11,686,090 12,067,303 11,724,925 11,732,306
Earnings (loss) from continuing operations
before extraordinary item $ 0.23 $ 0.26 $ 0.63 $ 0.15
Discontinued operations - 0.02 0.07 0.00
Extraordinary item - (0.22) - (0.24)
Common stockholders' share of earnings (loss) $ 0.23 $ 0.06 $ 0.70 $ (0.09)
<FN>
(1) The Class C Preferred stock is considered antidilutive and therefore has
not been included in the calculation of earnings per share.
</FN>
</TABLE>
<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> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-26-1996
<CASH> 17,794
<SECURITIES> 0
<RECEIVABLES> 181,460
<ALLOWANCES> 115
<INVENTORY> 1,031
<CURRENT-ASSETS> 208,659
<PP&E> 41,653
<DEPRECIATION> 22,412
<TOTAL-ASSETS> 359,503
<CURRENT-LIABILITIES> 234,484
<BONDS> 3,696
0
3,000
<COMMON> 335
<OTHER-SE> (102,313)
<TOTAL-LIABILITY-AND-EQUITY> 359,503
<SALES> 738,324
<TOTAL-REVENUES> 738,324
<CGS> 0
<TOTAL-COSTS> 700,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,644
<INCOME-PRETAX> 16,595
<INCOME-TAX> 6,570
<INCOME-CONTINUING> 9,035
<DISCONTINUED> (865)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,900
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
</TABLE>
